2019 (4) TMI 549

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....he extent of 9.75% under section 36(1)(iii) of the Act in respect of capital work-in-progress. 3. Brief facts of the case are that the assessee has filed its return of income on 7.11.2014 declaring total income at NIL. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. It emerges out from the record that the assessee at the relevant time was engaged in manufacturing of fine product (denier) in POY, FDY, DTY and texturised yarn. It has shown total turnover of Rs. 344.55 crores and net profit at Rs. 3,86,54,576/-. On scrutiny of the accounts the ld.AO observed that the assessee has shown closing capital work-in-progress at Rs. 4,81,60,593/-. It has debited ....

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....pital work-in-progress of Rs. 4,83,38,831/- and the assessee has debited an amount of Rs. 1,46,18.356/- in the P&L A/c, on working capital. The assessee was asked by the A.O. as to why proportionate interest @12% should not be capitalized and also show caused as to why the difference should not be added to the total income. Since no separate account has been maintained and the investment is made from common hotchpotch fund, interest is required to be disallowed. The Assessing Officer had disallowed interest on capital work in progress by calculating interest on the Capital Work in Progress of Rs. 4,83,38,831/- on daily basis @12% for whole year and disallowed total interest of Rs. 17,34,463/-. The appellant has submitted that for t....

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....iled to appreciate such fact and made disallowance at notional rate of 12%. 2.4. The submissions of the appellant's have been considered. The reliance of appellant on various case laws is considered, it is seen that, in each case it was required to examine the availability of funds and the source of the same, it is seen that the appellant company is having mixed funds and is not having separate accounts for different operations. From the combined balance sheet of the appellant, it is seen that both secured and unsecured loans have gone up substantially high during the year under appeal. It is further seen that the appellant was already having heavy investment in fixed assets which is more than several times of Share capital. In....

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....ly allowed." 4. The ld.counsel for the assessee at the outset contended that the ld.CIT(A) has not recorded any finding in this year, rather relied upon the order of ld.CIT(A) in the Asstt.Year 2013-14, whereas in the Asstt.Year 2013-14, the ld.CIT(A) has followed the order of A.Y.2012-13. The Tribunal has deleted such disallowance in the Asstt.Year 2012-13 also. This order has been followed in ITA No.983/Ahd/2017 for the Asstt.Year 2013-14. Putting reliance upon this order, the ld.counsel for the assessee contended that disallowance be deleted. On the other hand, the ld.DR relied upon the order of the ld.CIT(A). 5. We have duly considered rival contentions and gone through the record carefully. A perusal of the order of the ld.CIT....