TaxTMI 
TaxTMI 
TaxTMI 
2017 (7) TMI 206
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....eal No.PN/CIT(A)-1/Addl.CIT Rg-1/Pn/71/2013-14) granted partial relief to the assessee. Aggrieved by the order of Ld. CIT(A), Assessee and Revenue are both in appeal before us. 3. The grounds raised by the assessee in appeal No.1208/PUN/2015 reads as under : "1. The Learned Commissioner of Income Tax Appeal (1), Pune has erred in confirming the disallowance of Rs. 1,50,000/- made by the Assessing Officer towards professional fees. 2. The Learned Commissioner of Income Tax Appeal (1), Pune has further erred in confirming the disallowance partly amounting to Rs. 9,19,855/- towards interest paid on capital borrowed for capital work in progress as term loan being expenditure of capital nature. 3. The Learned Commissioner of Income Tax Appeal (1), Pune has also erred in confirming the disallowance amounting to Rs. 1,88,561/- towards proportionate interest on funds used for repayment of loan borrowed for work in progress as term loan being expenditure of capital nature. 4. The Learned Commissioner of Income Tax Appeal (1), Pune has also erred in confirming the disallowance of Rs. 9,41,363/- made by the Assessing Officer towards repayment of term loan from Axis Bank on wrong pres....
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....ted fact that on the additions which are in dispute, the tax effect is less than Rs. 10 lakhs and in the absence of any material placed on record by the Revenue to demonstrate that the issue in the present appeal is covered by exemptions specified in clause (8) of the aforesaid CBDT Circular, we are of the view that the monetary limit prescribed by the instructions of the aforesaid CBDT Circular would be applicable to the present appeal of the Department and therefore the present appeal is not maintainable on account of low tax effect. In such circumstances, we dismiss the appeal of Revenue without expressing any opinion on merits of the case. However, in case there is any error in the computation of the tax effect involved or if for any reason, the aforesaid CBDT Circular is not applicable, it would be open to the Revenue to seek revival of the appeal. 8. In the result, the appeal of the Revenue is dismissed. 9. Now we take-up assessee's appeal in ITA No.1208/PUN/2015. 10. Before us, Ld.A.R. submitted that he does not wish to press ground No.1. In view of the submission of Ld.A.R., ground No.1 is dismissed as not pressed. 11. Ground Nos.2, 3 and 4 being inter-connected are con....
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....nk of India. 30.06.2009 Term Loan 15020-00 10318686857 80,552 State Bank of India. 31.07.2009 Term Loan 15020-00 10318686857 70,136 State Bank of India. 31.07.2009 Term Loan 01502-01WIP 1031868868 85,073 State Bank of India. 31.08.2009 Term Loan 15020-00 10318686857 58,810 State Bank of India. 31.08.2009 Term Loan 01502-01WIP 1031868868 82,948 State Bank of India. 30.09.2009 Term Loan 15020-00 10318686857 43,397 State Bank of India. 30.09.2009 Term Loan 01502-01WIP1031868868 77,516 State Bank of India. 31.10.2009 Term Loan 15020-00 10318686857 35,567 State Bank of India. 31.10.2009 Term Loan 01502-01 WIP 1031868868 78,488 State Bank of India. 30.11.2009 Term Loan 01502-01 WIP1031868868 72,894 State Bank of India. 30.11.2009 Term Loan 15020-00 10318686857 19,720 State Bank of India. 18.12,2009 Term Loan 15020-00 10318686857 3,919 State Bank of India. 31.12.2009 Term Loan 01502-01 WIP1031868868 72,550 State Bank of India. 31.01.2010 Term Loan 01502-01 WIP1031868868 70,045 State Bank of India. 28.02.2010 Term Loan 01502-01 WIP1031868868 61,011 State Bank of India. 31.03.2010 Term Loan 01502-01WIP1031868868 54,735 State Ba....
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....d for expansion of marketing and distribution network including takeover of the term loan from Bank of Maharastra and not for work in progress and hence the Assessing Officer's contention that the amount pertains to interest on capital borrowed for work in progress will not hold good. The said loan was repaid during the month of December 2009." 11.2.1 It is pleaded that considering the fact that the interest was paid on term loans which were sanctioned in earlier years and used for the purpose of business including purchase of plant and machinery, expansion on marketing and distribution network, the interest of Rs. 14,31,882/- is fully allowable expense and the same may please be allowed. 11.3 The contentions raised by the Ld. Counsel challenging the impugned addition are carefully considered in the light of the facts of the relevant material placed on record. The interest in question amounting to Rs. 14,31,882/- relates to two different term loans availed from SBI Bank by the appellant namely Term Loan account No.1031868868 interest on which amounts to Rs. 9,19,855/- and Term Loan account No.10318686857 interest on which amounts to Rs. 5,12,027/-. As per the Annexure 'F' to th....
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....o interest on capital borrowed for CWIP is not correct. It is also noticed from the ledger account filed by the appellant, the said loan was repaid in December 2009 and the balance as on 31 March 2010 is nil. Therefore, in respect of this loan, the Assessing Officer is not justified in disallowing interest on the ground that a part of the loan was utilized towards capital work-in-progress for extension of corporate office. Accordingly, the disallowance of Rs. 5,12,027/- made by the Assessing Officer is not sustainable and the same is hereby deleted. 11.3.2 Thus, out of the total disallowance of interest of Rs. 14,31,882/- made by the AO, disallowance to the extent of Rs. 9,19,855/- is sustained. Appellant gets consequential relief of Rs. 5,12,027/- ( 14,31,882-9,19,855) on this ground. Ground of appeal No. 8 stands partly allowed. 12. Ground of appeal No. 9 states that the Assessing Officer erred in disallowing an expenditure amounting to Rs. 1,95,442/- , being proportionate interest expenditure on funds used for repayment of loan borrowed for work in progress as term loan being expenditure of capital nature. 12.1 During the assessment proceedings, Assessing Officer also noti....
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.... in case of appellant company the facts are totally different and there is no diversion of loan funds to sister concerns as interest free advances and the loan funds sanctioned by the bank had been used for the same purpose for which same has been sanctioned and the loan was sanctioned for business purpose and hence the case quoted by the Assessing Officer is totally different from the facts of the appellant's case. It is reiterated that the appellant company has not advanced any amount to its sister concerns or any other party covered under section 40A(2)(b) with the intention to divert funds borrowed for non business purpose or for payment of interest free advances. The funds borrowed by the appellant company from the banks have been utilized for the same purpose for which it has been actually sanctioned and considering this factual position the addition made by the Assessing Officer may be deleted. 12.3 The submissions made by the Ld. Counsel are carefully examined with reference to the facts of the case and the details of the loans on which the interest was paid by the appellant. The interest of Rs. 1,95,442/- was disallowed by the Assessing Officer on the ground that the par....
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....art of funds utilized is required to be capitalized towards the cost of asset not put to use and the same cannot be allowed as revenue expenses. The disallowance on this ground was worked out by the Assessing Officer in the case of project loans availed from Axis Bank as under : Project loans Axis Bank; Date Amount (Rs.) Rate Days Interest (Rs.) 01.04.2009 521129.3 14.50% 365 75563.75 04.04.2009 100000 14.50% 362 14380.82 16.04.2009 393593.7 14.50% 350 54725.70 02.05.2009 54781.22 14.50% 333 7246.88 02.05.2009 430635 14.50% 333 56967.70 05.05.2009 534706.3 14.50% 331 70310.28 01.06.2009 604270.1 14.50% 304 72975.96 02.06.2009 172163 14.50% 303 20723.24 03.06.2009 289970.9 14.50% 302 34788.56 01.07.2009 158576.6 14.50% 274 17260.96 02.07.2009 902131.4 14.50% 273 97838.00 01.08.2009 656908 14.50% 243 63414.11 03.08.2009 424012.1 14.50% 241 40594.8 01.09.2009 723526.4 14.50% 212 60934.8 02.09.2009 351321.6 14.50% 211 29448.45 01.10.2009 24110.52 14.50% 182 1743.22 01.10.2009 526131.5 14.50% 182 38040.03 05.10.2009 500000 14.50% 178 35356.16 03.11.2009 17943.1 14.50% 151 1076.34 03.11....
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....e part of the cash credit funds were utilized for repayment of Axis Bank project loan taken for capital WIP and new Hotel Project i.e towards the cost of assets not put to use. The contention of the appellant in this regard is that the funds borrowed by the appellant company from the banks have been utilized for the same purpose for which the loans were sanctioned and no borrowed funds have been diverted for non-business purposes and therefore the decision of P & H High Court in the case of Abhishek Industries reported in ITR 286 ITR 1 referred by the Assessing Officer is not applicable to the facts of the case. The contention of the appellant cannot be accepted. As per the Director's report, ' The Citiotel' i.e hotel project became operational only from January 2010 and under the proviso to sec. 36(1) (iii), 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 or 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 de....