TaxTMI 
TaxTMI 
2025 (3) TMI 1797
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....lant craves leave to add, alter, amend or modify all or any of the grounds of appeal before or at the time of hearing." 3. As is evident form a bare perusal of the grounds raised before us, the solitary grievance of the assessee is against the confirmation by the ld.CIT(A) of disallowance of interest expenses amounting to Rs. 10,43,063/- made by the AO in terms of provisions of section 36(1)(iii) of the Act. 4. This is the second round before the Tribunal. In the first round, the AO had noted that the interest attributable to funds utilized for acquiring capital assets during the year by the assessee had not been capitalized and further noting that no fund flow statement had been provided by the assessee explaining the source of investment in capital assets, accordingly, he disallowed the interest attributable to the funds deployed for acquiring the fixed assets during the year, which worked out to Rs. 10,43,063/-. The ld.CIT(A), however, deleted the disallowance noting that the AO had not identified capital borrowed for acquiring the capital assets. 5. The matter was carried in appeal before the Tribunal. The ITAT noted that since the assessee had not furnished necessary ....
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....t and second round of the proceedings, as pointed out to us during the course of hearing. Undisputedly, this is the second round of appeal before us for adjudicating the issue of disallowance of interest under section 36(1)(iii) of the Act. The fact noted by the AO for making the impugned disallowance being that the assessee has made huge investment in capital assets during the year, and no disallowance made of interest with regard to funds deployed for making the same. That no fund flow statement had been furnished by the assessee for demonstrating the funds utilized in investment/capital assets. The ITAT in the first round had noted the fact of the assessee having not furnished any fund flow statement either before the AO or before the CIT(A) for reconciliation of funds used in acquiring capital assets, and noting so, had restored the matter back to the AO to decide afresh after examination of relevant details furnished by the assessee. The relevant finding of the ITAT at para 10 of its order are reproduced hereunder: "10. Regarding disallowance of interest made by the Ld.AO as per the provision of sec.36(1)(iii) as discussed above in the ground no.2 of the assessee, ....
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....ived during the course of business deposited therein were utilized for acquiring capital assets and no interest bearing loans were used for the same. 15. In our view, this demonstration of the facts by the assessee, coupled with the ratio of Hon'ble Apex Court, as noted above, is sufficient for accepting the plea of the assessee that no interest bearing funds had been deployed for acquiring capital assets, therefore calling for no disallowance of interest under section 36(1)(iii) of the Act. In the light of the above, we are unable to agree with the ld.CIT(A), and we therefore, direct the deletion of disallowance of interest made under section 36(1)(iii) of the Act amounting to 10,43,063/-. Grounds raised by the assessee are allowed. 16. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 7th March, 2025 at Ahmedabad. ============= Document 1 5.5 In view of tre.AO's observation in the Assessment Order finalized u/s.143(3) of the Act and the Homble ITAT's observations in its ITA order, the assessce was required : fumar relevant details/documents However despite various opportunities given to the assessee, the assesses ....
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....he assets in question have been put to use within the year under consideration. This is also fortified by the fact that the AO after examining the conditions regarding the claim of depreciation has duly allowed the same. For the purpose of claim of depreciation the basic conditions are: a. The asset should be owned by the assessee, and b. The asset should have been used for the purpose of business. Since the AO has granted depreciation the issued regarding the asset being put to use for business purpose stands satisfied. Therefore the AO is not justified in disallowing the interest for the entire period. as the same is in basic contravention of the provisions of the Act. Document 3 As regards the issue of utilization of funds it has been extensively established that the AO has treated the entire interest amount comprising finance charges. bank charges, dealers deposit interest etc. while disallowing the interest. Secondly, it has been conclusively proved and established that the interest free funds in the form of share capital & reserves far exceed the alleged investment in assets. The perusal of the records and documents in the earlier hearing would indicate that ther....