TaxTMI 
TaxTMI 
2023 (10) TMI 917
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..../s 143(3) vide order dated 24.12.2018 at loss of Rs. 1,09,21,08,344/- after making addition on account of disallowance of interest paid on borrowed capital of Rs. 28,98,09,649/-. 3. Being aggrieved, an appeal was filed by the assessee before Commissioner of Income Tax (Appeals)-30, New Delhi. The appeal was allowed by the ld. CIT(A) vide order dated 25.02.2022 in Appeal No.10314/2018-19. 4. Being aggrieved by the order of CIT (A)-30, New Delhi, the Department has filed appeal before the ITAT, New Delhi which is present appeal. 5. The grounds of appeal in appeal filed by Department are as under: "1. Whether on the facts and in the circumstances of the case, the Ld. CIT (A) erred in deleting the additions made by the AO. 2. Whether on ....
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....pitalized under 'Inventory of Rs. 44.72 crores, interest paid of Rs. 15.74 crores was claimed through 'cost of revenue' by debit to Profit & Loss a/c while balance interest paid of Rs. 28.98 crores was claimed through Computation as whole of interest paid was period cost, revenue in nature and being paid to banks and financial institutions which is covered under section 43B. 9. Computation of income for the AY 2016-17 is placed at Page no.2 of Paper Book. The assessee claimed deduction in respect of interest paid as per provisions of Section 36(1)(iii) read with Section 43B of Income Tax Act, 1961. 10. The AO requisitioned the assessee to explain vide notice dated 25.10.2018 as to why interest paid of Rs. 28.98 crores on borro....
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....ges transferred to stock (Inventory) 44.72* 7. Charged directly to Profit and Loss account 34.95 *Claimed as Revenue expenditure -Rs.15.73 Cr. Capitalized to inventory - Rs. 28.98 Cr. 12. Before us, the ld. AR relied on the order of the ld. CIT(A) while ld. DR supported the order of the Assessing Officer. 13. Heard the arguments of both the parties and perused the material available on record. 14. Brief submissions for allowbility of deduction of interest paid which was claimed by the assessee through Computation as per provisions of law as contained u/s 36(1)(iii) read with Section 43-8 are summarized as under: "a) Assessee is following percentage of completion method for recognition of revenue as per Accounting Standard-7 (AS....
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....rrowed funds which has not commenced production. As far as first three conditions as stated above are concerned, there is no adverse comments from the AO about non-compliance of any conditions. There is nothing in from the AO in the assessment order that proviso to Section 36(1)(iii) is applicable in case of assessee." 15. The assessee is claiming the part of interest paid on money borrowed capitalized under the head 'Inventory' through Computation for last several years. The assessment of assessee is completed u/s 143(3) of Income Tax Act, 1961 for earlier years as well as for later years. This issue is examined in assessment of several earlier years and later years after examination, contention of assessee is accepted and no ad....
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....(iii) of Income Tax Act, 1961 as the assessee is not engaged in manufacturing and amounts were not borrowed for expansion or setting up of new units which were not put to use or commercial production has not started. The AO has not made any case in the assessment order that the assessee's case is covered by the proviso to Section 36(1) (iii) of IT Act. Considering this, interest paid is not to be treated as capital expenses as interest paid in only those cases which are covered by proviso to Section 36(1)(iii) are to be treated as capital expenses and not to be allowed. Considering this, no part of interest paid in case of the assessee is to be disallowed. 17. Further, there is nothing adverse in the assessment order stating that the a....
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.... of its treatment in books of accounts. 20. Reliance is being placed on following decisions for allowing of interest: * Lakhanpal National Ltd. vs. ITO in 162 ITR 240 (Guj.) (1986) * CIT vs. BPCL in 252 ITR 43 (Bombay) (2001) * Chemicals and Plastics Ltd. vs. CIT 260 ITR 193 (Mad.) (2002) * Berger Paints (India) Ltd. vs. CIT in 266 ITR 99 (SC) (2004) * Associated Pigments Ltd. vs. CVIT in 234 ITR 589 (Cal.) (1998) * CIT vs. C.L. Gupta & Sons in 259 ITR 513 (All.) (2002) * CIT vs. Modipon Ltd. in C.A. no. 19763 of 2017 (SC) (2017) * DCIT vs. GSK Consumer Healthcare Ltd. in 107 ITD 343 (Chd.) 21. To conclude, * The assessee has filed working to show that it has not claimed double benefit in any of earlier years or during t....