2012 (1) TMI 224

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....ya ORDER Per RAJENDRA SINGH (AM) This appeal by the assessee is directed against the order dated 30.7.2010 of CIT(A) for the assessment year 2006-07. The only dispute raised is regarding disallowance of interest under section 36(1)(i) of the IT Act. 2. The assessee is a manufacturer and exporter of diamonds. The AO during the assessment proceedings noted that the assessee had given adv....

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.... Rs. 9,07,768/-. The AO therefore, disallowed the interest to that extent by capitalizing the same towards acquisition of new assets for expansion of business. The assessee disputed the decision of AO and submitted before CIT(A) that the assessee had made advance payments for acquisition of new premises. It was also submitted that the assessee had not used any borrowed funds for acquisition of pre....

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....used any borrowed fund for acquisition of new premises. Authorities below had proceeded with the presumption that payments were made from borrowed funds which was not based on any material. She referred to figures from the balance sheet to point out that the assessee had capital and reserves of Rs. 3.95 crores. The assessee had secured loans of Rs. 34.38 crores which were for specific purposes and....

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....f section 36(1)(iii), any interest on borrowings made for acquisition of assets for extension of existing business is required to be capitalized till the asset is first put to use. In this case, assessee had made total advance payments of Rs. 1,53,25,5000/- for acquisition of two new premises out of payment made during the year was Rs. 10,06,000/- and balance payment had been made in the earlier y....