TaxTMI 
TaxTMI 
2014 (7) TMI 1263
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....ts letter dt 4.2.2006: i) For arranging land @ 15 lakhs per WTG Rs. 45,00,000 ii) Infrastructure development charges (IDC)@32.30 lakhs per WTG Rs. 96,90,000 Total Rs. 1,41,90,000 3.1 While the assessee has included 45 lakhs out of the above in the cost of land, Rs. 96,90,000 has been added to the cost of windmills for claiming depreciation. Since infrastructure development charges are paid towards development of land, the assessee was asked to explain as to why the above sum should not be capitalized with the land cost instead of the cost of windmill. The assessee, vide its letter dated 21.11.2011, submitted that infrastructure development charges have been paid to M/s Shubh Reality which in turn had paid the same to TNEB towards infrastructure development charges - NOC registration and supervision charges for the installation of 3 wind turbine generators. The assessee company also furnished the copies of the debit notes raised by M/s Shubh Reality (South) Pvt Ltd in this regard. 3.2 Though, the assessee claims that the sum has been paid for NOC/Registration charges for the WTG, it has been clearly mentioned in the debit notes itsel....
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....sting and commissioning Kadanganeri Rs. 1,10,200/- Wind Mill Foundation Kavalakurichi Rs, 36,17,810/- Electrical Yard and Transmission Line Kavalakurichi Rs. 36,17,810/- Erection and installing Kavalakurichi Rs. 15,42,800/- Testing and commissioning Kavalakurichi Rs. 1,10,200/- From the nature of various payments as mentioned above which have been made by the assessee company, the CIT(A) observed that it is clear that separate amounts towards earth work and the foundation, erection and commissioning have already been paid to Suzion Infrastructure Ltd. Hence, the payments made to TNEB are not towards development of land infrastructure, foundation, erection and installing and commissioning etc., which, in the sense of terminology of development of windmill are actual infrastructure charges. 3.4 Regarding the payments made to Shubh Reality(South) Pvt Ltd, the CIT(A) found that the assessee has written a letter to the company vide letter dated 4^th Feb 2000 which is evident that the infrastructure development charges are paid to TNEB for arranging land and the evacuation of land, which are separate ....
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.... are towards development of land. It was submitted that actually infrastructure development charge has been paid to TNEB toward infrastructure development charges, NOC registration and Supervision charges for the installation of 3 wind turbine generator. The copies of the debit note raised were also furnished to the AO which show that no part of the amount has been paid towards land. Accordingly, it was submitted that the AO denied depreciation on the said sum of Rs. 96,90,000 by reducing the said sum from the value of the windmill and adding to the asset land. It was submitted that the facts filed would show that the same was towards part of the cost of windmill machinery. On the other hand, the ld DR relied upon the order of the CIT(A). 5 We have heard the parties and considered the relevant material on record. The arguments of the ld AR are totally misplaced. We find that the CIT(A) after considering the submissions, approval letters from the TNEB and the copies of the debit notes observed that the infrastructure development charges are paid to TNEB for the evacuation of land. Further, from the debit notes, the payments made to TNEB are more in the nature of administrat....
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....ion. In view of the above facts and circumstances of the case, we are of the considered opinion that the lower authorities are right in treating the payment towards permission for land utilization, NOC and registration of land and has rightly capitalized them with the cost of land and denied deprecation on this payment of Rs. 96,90,000/-. Accordingly, the ground taken by the assessee on this issue is dismissed. 6 Next ground of appeal is with regard to the disallowance of Rs. 83.21 lacs towards interest on investment expenditure incurred in new the line of business. 6.1 Brief facts of the case are that the AO while making this addition noticed that the assessee has borrowed funds for investment for investment in the new line of business, operations of which were not yet commenced. Accordingly, the AO held that interest relating to borrowed funds ought to be capitalized. The observation made by the AO has been reproduced by the CIT(A) in his order at pages 7 & 8 which reads as under: "The assessee, during the year, has entered into a new line of business by obtaining a licence for operating a FM Radio. Total amount invested during the year amounts of Rs. 8,32,16,000. ....
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....ation and Broadcasting, the nature of expenses is of capital nature. It is seen that this investment has been made out of borrowed capital and the appeal has not capitalized interest related to such investment. 5.3.1 In this connection provisions of sec. 36(1)(iii) are very clear. The same are reproduced hereunder: 36(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, the computing the income referred to in section 28- (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession: (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 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 deduction." In the light of this proviso to section 36(1)(iii), since the assessee has borrowed capital for acquisition of assets (herein in this case being payment of....