TaxTMI 
TaxTMI 
2023 (10) TMI 917
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....8,19,17,993/-. The assessment was completed u/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 ....
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....tory under respective Projects for which borrowing was made. Out of total interest capitalized 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 ....
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.... loans 27.48 3. Other 9.08 4. Processing Fees 12.33 5. Total Finance cost 79.67 6. Less: Finance charges 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) re....
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.... any asset for extension of existing business or profession for the period till the date such asset acquired is not put to use. This is applicable in case of manufacturing concerns where addition Unit / Factory is set up with borrowed 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 assesse....
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....ame officer who has filed the Appeal before the ITAT, New Delhi. Copy of Computation and Copy of Assessment order are placed at page No.117-122 of Paper Book. 16. The case of the assessee does not fall under the proviso to Section 36(1)(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....
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....borrowed was paid to Banks and Financial Institutions, interest paid is allowable as deduction as per provisions of Section 36(1)(iii) read with provisions of Section 43-B of Income Tax Act, 1961 in the year in which payment is made irrespective 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....