TaxTMI 
TaxTMI 
2016 (10) TMI 245
X X X X Extracts X X X X
X X X X Extracts X X X X
.... following substantive grounds:- "1. The learned Commissioner of Income Tax (Appeals) has erred in law and on the facts of the appellant's case in confirming the action of the Ld. A.O. of disallowing interest paid Rs. 14,00,195/- u/s. Section 36(1)(iii) of the Act. Both the lower authorities have erred in law and on facts of the appellant's case in not appreciating the fact that entire expansion has been carried out from own funds and hence no part of interest is disallowable. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and on the facts of the appellant's case in confirming the order of the Ld. A.O. of making an addition of Rs. 3,10,014/- on the erroneous plea that the appellant has under i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 were made during the year out of the funds available with the company. After considering the detail provided by the assessee, the assessing officer stated that no doubt during the year under consideration the assessee has made addition to capital work-in-progress at Rs. 5.52 lakhs only, however, there was an opening balance of capital work-inprogress at Rs. 1,80,50,823, but the assessee failed to show that the fixed assets were purchased out of non-interest bearing fund. The assessing officer noticed that in the immediate preceding financial year, the assessee had taken term loan to the extent of Rs. 46,69,304 and unsecured loan amounting to Rs. 1,06,00,000 , during the year under consideration the term loan was taken at Rs. 28 lakhs,howe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... inserted by the Finance Act 2003 w.e.f 1.4.2004 which states as follows: "provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalized in the books of account of not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction." This proviso clearly cast an obligation on the assessee to keep complete and accurate details of sources of funds which have been utilized for acquisition of an asset for extension of existing business or profession. When AO asks the assessee to explain ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the assessee had substantial funds of its own in the form of reserve & surplus and share capital which were utilized towards long term investments of the company as appearing in its balance sheet. Regarding the opening balance of capital WIP Rs. 1,80,50,823/- it was stated by the Ld. counsel that audit accounts for the year 31-03-2005 revealed that during the previous year 2004- 05 relevant to the assessment year 2005-06, the company has received Rs. 1,25,00,000/- towards share capital and the capital WIP increased from Rs. 14,88,029/- to Rs. 1,54,94,775/- in the A.Y. 2005- 06. There were no borrowings in the year either by way of secured loans from banks and FIs or from individuals etc. as unsecured loans. In fact, there is a reduction....
X X X X Extracts X X X X
X X X X Extracts X X X X
....apital WIP in the A. Y. 2007-08. It is evident from the above stated facts and circumstances that the assessee company has its own substantial funds in the form of share capital, reserves and surplus which were used for purchase of fixed assets. The lower authorities has not established that assessee company purchased the fixed assets out of the non-interest bearing funds. In view of above stated facts and findings the addition sustained by the Ld. CIT(A) is not justified, accordingly we allow this ground of appeal of the assessee. Ground No. 2 6. As per the fact of the case on the basis of statement recorded during the course of survey for A.Y.2007-08 the Assessing Officer noticed that the assessee company has under-invoiced the sale....