TaxTMI 
TaxTMI 
1995 (11) TMI 129
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....section 143(3) on 31-8-1989, the Assessing Officer added Rs. 3,61,684 by invoking Explanation to section 43(1) by observing as under :-- "During the year assessee has purchased and installed machinery on which he has paid interest of Rs. 3,61,684 to the D.F.C. up to the date of installation and has debited Rs. 3,61,684 in the head "Interest and bank charges". During the course of discussions assessee was asked to informate as to why the interest paid up to the date of installation should not be capitalised as per Explanation to section 43. Assessee vide his letter dated 31-8-1989 stated that the entire interest should be allowed under section 36(1)(ii) and has in his support quoted various judgments. As there is specific provisions in th....
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....s that any amount paid or is payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any period after such asset is first put to use shall not be included and shall be deemed to have not been included in the actual cost of such assets. The appellant's representative argument is that this section only relating to actual cost of the machinery and it has nothing to do with allowing interest which is dealt with in section 36(1)(iii). However from the explanation it is clear that the interest which is paid in connection with the acquisition of an asset is to be treated as part of the actual cost of the asset and that is why for the removal of doubt, this explanation was inserted that whether ....
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....er section 36(1)(iii). As laid down by the Supreme Court in the case of Madhav Prasad Jatia for allowance of a claim for deduction of interest under section 36(1)(iii) all that is necessary is that the money must have been borrowed by the assessee, that it must have been borrowed for the purpose of business and that the assessee must have paid to interest on the borrowed amount. As laid down by the Calcutta High Court in the case of Ritz Continental Hotels Ltd. v. CIT [1978] 114 ITR 554, no deduction under section 36(1)(iii) can be claimed in respect of interest on moneys borrowed for the period prior to commencement of business. As held by the Gujarat High Court in the case of CIT v. Alembic Glass Industries Ltd. [1976] 103 ITR 715, intere....
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....age 1408, Vol. 2 (4th Edition) under the heading 'Exploitation of the asset in the accounting year not essential'. In a taxing Act, one has to look merely on what is clearly said. There is no room for any intendment. Nothing is to be read in, nothing is to be implied. One can only look family at the language used. Cape Brandy Syndicate v. IR 12 TC 358 approved in Canadian Eagle Oil Co. Ltd. v. King 27 TC 205. Viscount Simonds held as under in the case of London Investment & Mortgage Co. Ltd v. Worthington (Inspector of Taxes) [1959] 37 ITR 56 (HL) : "I hesitate in any case to introduce by way of implication in a taxing statute a provision which cries aloud for express statement if it is intended." 6. The arguments of the Departmental ....
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....ble to a period after the asset is first put to use shall not form part and shall be deemed never to have formed part of the actual cost of the asset." In the Memorandum explaining the provisions in Finance Bill, 1986, it was stated as under :-- "It has been found that certain taxpayers (backed by some Court decisions, the first of which was rendered on May 13, 1974) are resorting to a major change in accounting practice by capitalising the interest paid or payable in connection with the acquisition of an asset relatable to the period after such asset is first put to use. This capitalisation implies inclusion of such interest in the 'actual cost' of the asset for the purposes of claiming depreciation, investment allowance, etc., under....
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....gh Courts, the first being the decision of the Allahabad High Court in the case of CIT v. J.K. Cotton Spg. & Wvg. Mills Ltd. [1975] 98 ITR 153. As held in the case of Cape Brandy Syndicate and approved in the case of Canadian Eagle Oil Co. Ltd. in a taxing Act one has to look at what is clearly said. There is no room for any intendment. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. In the case of London Investment & Mortgage Co. Ltd., Viscount Simonds stated that he hesitated to introduce by way of implication in a taxing statute a provision which cries aloud for express statement if it is intended. As held by the Supreme Court in the case of A. V. Fernandez v. State of Kerala AIR 1957 SC....