M/s. Havmor Ice Cream Limited, Ahmedabad V. The DCIT, Circle-2(1)(1), Ahmedabad

ITA 1070/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8470 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Capital asset; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. HAVMOR ICE CREAM LTD, 2 ND FLOOR, COMMERCE HOUSE IV BESIDES SHELL PETROL PUMP PRAHLADNAGAR, AHMEDABAD - 380015 PAN: AABCH6766L (APPELLANT) VS THE DCIT, CIRCLE - 2(1)(1), AHMEDABAD - 3800014 (RESPONDENT) REVENU E BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: S H RI DHINAL SHAH , A.R. DATE OF HEARING : 15 - 02 - 2 018 DATE OF PRONOUNCEMENT : 11 - 04 - 2 018 / ORDER P ER : AMAR JIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2012 - 13 , ARIS ES FROM ORDER OF THE CIT(A) - 2 , AHM EDABAD DATED 29 - 02 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOL LOWING GROUNDS OF APPEAL: - HAVMOR ICE CREAM LIMITED (HEREINAFTER REFERRED TO AS 'APPELLANT') CRAVES LEAVE TO PREFER APPEAL AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) - 2, AHMEDABAD ['HEREINAFTER REFERRED TO AS 'LEARNED CIT(A)'] IN CONFIRMING THE ACTION OF DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 2(1)(1), AHMEDABAD ('HEREINAFTER REFERRED TO AS 'LEARNED AO') PURSUANT TO THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX, ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT') ON THE FOLLO WING GROUNDS: GROUND NO 1 DISAL LOWANCE OF ESIC OF RS. 1,48,520/ - UNDER SECTION 36(1 )(VA) R.W.S. 2(24)(X) OF THE ACT I T A NO . 1070 / A HD/2 0 16 A SSESSMENT YEAR 2012 - 13 I.T.A NO. 1070 /AHD/20 16 A.Y. 2012 - 13 PAGE NO M/S. HAVMOR ICE CREAM LTD. V S. DCIT 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED A O OF DISALLOWING ESIC BY INVOKING THE PROVISION OF SECTION 36(1)(VA) R.W.S. 2(24)(X) WITHOUT CONSIDERING THE FACTS SUCH ESIC DOES NOT REPRESENT EMPLOYEE'S CONTRIBUTION TO SUCH FUND. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L EARNED CIT(A) HAS ERRED IN REJECTING THE CONTENTION OF THE APPELLATE THAT SUCH ESIC CONTRIBUTION IS THE LABOUR EXPENSES FOR THE COMPANY SINCE IT IS CONTRIBUTED BY THE APPELLATE WITHOUT ANY RECOVERY FROM LABOURERS AND THEREFORE THE SAME IS NOT COVERED UNDER SECTION 36(1)(VA) OF THE ACT. GROUND NO 2 - DISALLOWANCE OF RS. 10,75,906/ - UNDER SECTION 36(1 )(III) TOWARDS CAPITAL WORK IN PROGRESS ('CWIP') 3. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN MAKING DISALL OWANCE OF INTEREST OF RS.10,75,906/ - UNDER SE CTION 36(1)(III) OF THE ACT ON ACCOUNT OF EXPENDITURE INCURRED BY THE APPELLATE ON CWIP. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONSIDERING THE FA CTS THAT EXPENDITURE INCURRED ON CWIP HAS NOT RESULTED INTO AN EXTENSION OF ANY EXISTING BUSINESS WITHIN THE MEANING OF THE PROVISIO TO SECTION 36(1)(III) OF THE ACT AND ACCORDINGLY, NO DISALLOWANCE OF INTEREST CAN BE MADE UNDER SECTION 36(1)(III) OF THE A CT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN REJECTING THAT THE APPELLANT HAS SUFFICIENT OWNED FUNDS TO MAKE INVESTMENT IN CWIP AND ACCORDINGLY, NO INTEREST ON BORROWED FUNDS SHOULD B E DISALLOWED UNDE R SECTION 36(1 )(III) OF THE ACT 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A), HAS ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAS MADE THE PAYMENTS TOWARDS CWIP FROM ITS OWN FUNDS AND NO IMMEDIATE BORROWINGS HA VE BEEN UTILISED TO MAKE THE PAYMENTS FOR THE CWIP. 7. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE SUBMISSION OF THE APPELLANT THAT IN CASE HE WISHES TO CONSIDER THAT BORROWED FUNDS HAVE BEEN UTILIZED FOR CWIP, DISALL OWANCE OF INTEREST CAN BE RESTRICTED TO RS . 1,30,150/ - BY TAKING INTO CONSIDERATION THE RELEVANT DATES OF PAYMENTS MADE TOWARDS CWIP DURING THE YEAR UNDER CONSIDERATION INSTEAD OF COMPUTING SUCH DISALLOWANCE AT FLAT RATE OF @12% OF THE VALUE OF CWIP 3. I N THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 2,39,23,970/ - WAS FILE ON 30 TH SEP, 2012. SUBSEQUENTLY , THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 8 TH AUGUST, 2013. THE ASSESSEE COMPANY IS ENGAGED IN THE BUS INESS OF MANUFACTURING AND DISTRIBUTION OF ICE - CREAM AND RELATED PRODUCTS . ON SCRUTINY, THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE HAS MADE LATE PAYMENT OF EMPLOYEE S CONTRIBUTION TOWARDS ESIC OF RS. 148520/ - ON 26 TH JULY, 2012 WHEREAS THE DUE DA TE OF PAYMENT OF ESIC AS PER THE RELEVANT ACT FOR THE PURPOSE OF ESIC IS 21 ST APRIL, 2 012. THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE JUDGMENT OF GUJARAT STATE ROAD T RANSPORT CORPORATION (2014) 41 TAXMAN.COM 100 (GUJ). THEREFORE, THE ASSESSING OFF ICER I.T.A NO. 1070 /AHD/20 16 A.Y. 2012 - 13 PAGE NO M/S. HAVMOR ICE CREAM LTD. V S. DCIT 3 HAS DISALLOWED RS. 1 , 48 , 520/ - AS PER PROVISION OF SECTION 2(24) (X) ON THE REASONING THE ASSESSSEE IS NOT ELIGIBLE FOR DED UCTION U/S. 36(1 )(VA) OF THE ACT. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALSO SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 3.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION T O ESI TOTALLING TO RS. 1,48,520/ - . THE ASSESSING OFFICER IN THE ORDER HAS MENTIONED THAT AS PER THE PROVISIONS OF CLAUSE (VA) OF SUB SECTION (1) OF 36 OF THE ACT, THE ASSESSEE IS ENTITLED TO DEDUCTION IN RESPECT OF T HE SUM REFERRED TO IN SUB CLAUSE (X) OF CLAUSE (24) OF SECTION 2 OF THE ACT IF SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND ON OR BEFORE THE DUE DATE OF RESPECTIVE ACTS. THE AO HAS FURTHER RELIED ON THE RECENT JUDGMENT OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION [2014] 41 TAXMANN.COM 100 (GUJARAT). 3.4. THE APPELLANT ON THE OTHER HAND HAS STATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS AT THE APPELLATE STAGE THAT THE CONTRIBUTION RELATED TO EMPLOYEES TOWARDS EMPLOYEE'S CONTRIBUTION TO ESIC WAS DEPOSITED IN THE FUND AFTER THE DUE DATE MENTIONED IN THE RESPECTIVE ACT. HOWEVE R, THE APPELLANT HAS STATED THAT THE SAID AMOUNTS OF THE EMPLOYEES CONTRIBUTION TO ESI HA S BEEN DULY DEPOSITED BEFORE DUE DATE OF FILING OF FILING OF RETURN OF INCOME MENTIONED IN SECTION 139(1) OF THE I. T. ACT, 1961. FURTHER CLAIMED THAT THE APPELLANT HAD ENGAGED HAD ENGAGED CASUAL LABOURS WHO WERE NOT PERMANENT. THE APPELLANT HAS CONTRIBUTE D THE ESI CONTRIBUTION OUT OF ITS OWN COFFERS WITHOUT RECOVERY THEREOF FROM THE CASUAL LABOURS. THUS, THE PROVISIONS, OF SECTION 2(24) (X) R.W.S. 36(1 )(VA) ARE NOT APPLICABLE. 3.5. IT IS WORTH HERE TO MENTION THAT THE DISALLOWANCE WAS MADE FOR THE REASON THAT EMPLOYEES' CONTRIBUTION TO ESIC WAS NOT PAID WITHIN THE DUE DATES SPECIFIED UNDER THE ESI ACT. THE APPELLANT'S PLEA THAT IT HAS ENGAGED THE CASUAL LABOURS ONLY AND PAID THEM THE CASUAL LABOUR CHARGES IS UNVERIFIABLE WITHOUT SUPPORTING DETAILS AND EVID ENCES IN RESPECT THEREOF. THE APPELLANT'S FURTHER CONTENTION THAT THE ESI PAYMENTS HAVE BEEN MADE BY THE APPELLANT OUT OF ITS OWN COFFERS WHICH WAS IN THE NATURE OF LABOUR PAYMENTS IS ALSO NOT VERIFIABLE WITHOUT ANY SUPPORTING EVIDENCES. THE APPELLANT'S PL EA THAT THE ESI CONTRIBUTION WAS IN THE NATURE OF LABOUR EXPENSES ONLY AUTOMATICALLY ESTABL ISHED THAT THE APPELLANT HAS DEPOSITED THE ESI OUT OF THE LABOUR EXPENSES WHICH WERE PAYABLE TO THE EMPLOYEES. THUS, THE LABOUR EXPENSES WHICH WERE OTHERWISE LIABLE TO BE PAID TO THE LABOURS HAVE BEEN DEPOSITED AS CONTRIBUTION ON THE BEHALF OF LABOURS IN THE ESI. SO THE PROVISIONS O F SECTION 2(24) (X) R.W.S. 36(1 )(VA) ARE VERY MUCH APPLICABLE OVER THE FACTS. HENCE, THE DISALLOWANCE MADE BY THE AO IS CORRECT AND JUSTIF IED. THE ADDITION WAS ALSO SUPPORTED BY THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GS RTC IN TAX APPEAL NO. 637 OF 2013 . THE GROUND OF APPEAL IS DISMISSED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD ON THIS ISSUE. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS MADE LATE PAYMENT OF EMPLOYEE S CONTRIBUTION TOWARDS ESIC OF RS. 148520/ - ON 26 TH JULY, 2012. I.T.A NO. 1070 /AHD/20 16 A.Y. 2012 - 13 PAGE NO M/S. HAVMOR ICE CREAM LTD. V S. DCIT 4 WHEREAS THE DUE DATE OF PAYMENT OF ESIC AS PER THE RELEVANT ACT FOR THE PURPOSE OF ESIC IS 21 ST AP RIL, 2012. THE CONTENTION OF THE ASSESSEE THAT THE ESI CONTRIBUTION WAS IN THE NATURE OF LABOUR EXPENSES FOR THE COMPANY SINCE IT WAS CONTRIBUTED BY THE ASSESSEE WITHOUT ANY RECOVERY FROM THE LABOURERS HAS NO MERIT AS THE ASSESSEE HAS DEPOSITED THE ESI OU T OF THE LABOUR EXPENSES WHICH WERE PAYABLE TO THE EMPLOYEES. THEREFORE IT IS ESTABLISHED FROM THESE FACTS THAT LABOUR EXPENSES WHICH WERE TO BE PAID TO THE LABOURS HAVE BEEN DEPOSITED AS CONTRIBUTION ON THE BEHALF OF LABOURS IN THE ESI. IN VIEW OF THE ABOVE FACTS AND THE DETAILED FINDINGS OF THE LD.CIT(A) IT IS CLEAR THAT THE PROVISIONS OF SECTION 2(24) (X) R.W.S. 36(1)(VA) ARE ATTRACTED TO THE CASE OF THE ASSESSEE. AFTER CONSIDERING ABOVE AND THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CI T VS. GSRTC IN TAX APPEAL NO. 637 OF 2013 WE ARE INCLINED WITH THE DECISION OF LD.CIT(A). THEREFORE, GROUNDS OF APPEAL NO.1 TO 2 OF THE ASSESSEE ARE DISMISSED. DISALLOWANCE OF RS. 10 , 75 , 9 06/ - U/S. 36(1 )(III) 6 . DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO EXPLAIN WHETHER ANY INTEREST WAS CAPITALIZED TOWARDS THE CAPITAL ASSETS ACQUIRED OUT OF THE BORROWED FUNDS DURING THE YEAR UP TO DATE OF PUT TO USE OF ASSET IN THE BUSINESS. ON SCRUTINY OF THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THE CLOSING CAPITAL WORK IN PROGRESS WAS REPORTED AT RS. 1,79,31,767/ - AND THE ASSESSEE HAS NOT CAPITALIZED ANY INTEREST U/S. 36(1)(II I ) OF THE ACT. IN THIS RESPECT , THE ASSESSEE HAS EXPLAINED THAT IT HAS STARTED A NEW FACTORY (NO.2) AT NARODA GIDC, AHMEDABAD AND THE FACTORY HAS STARTED PRODUCING ICE CREAM FROM 08 - 02 - 02011. THEREFORE , THE MAJOR PART OF INTEREST PERTAINING TO THE CURRENT YEAR IS FOR THE PURPOSE OF RUN NING THE BUSINESS. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STAT ING THAT THE ASSESSEE HAS NOT GIVEN ANY SPECIFIC REASON AND SUPPORTING EVIDENCES TO SUBSTANTIATE THAT WHY THE INTEREST WAS NOT CAPITALIZED TOWARDS CWIP AND NO I.T.A NO. 1070 /AHD/20 16 A.Y. 2012 - 13 PAGE NO M/S. HAVMOR ICE CREAM LTD. V S. DCIT 5 BORROWE D FUNDS WAS UTILIZED TOWARDS PURCHASE OF VARIOUS ITEMS FORMING PART OF THE CWIP AS ON 31 ST MARCH, 2012. CONSEQUENTLY, THE ASSESSING OFFICER HAS COMPUTED INTEREST @ 12% ON THE VARIOUS ITEMS FORMING PART OF THE CWIP AND CAPITALIZED IT U/S. 36(1)(III) OF THE ACT AS PER THE WORKING GIVEN BELOW: - OPENING CWIP AS ON 01 ,04.201 1 0 CLOSING CWIP AS ON 31.03.2012 17931767 AVERAGE BORROWED FUND (A) 17931767 8965884 INTEREST @ 12% ON ABOVE AVERAGE VALUE OF CWIP 1075906 7 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 4.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE AP PELLANT. THE AO HAS MADE THE DISALLOWANCE OF INTEREST AMOUNTING TO RS . 10,75,906/ - ON THE AVERAGE WIP. THE AO OBSERVED THAT THE APPELLANT HAD SHOWN AN AMOUNT OF RS. 1,79,31,767/ - AS CLOSING WIP ON ACCOUNT OF INVESTMENT IN THE NEW FACTORY CONSTRUCTION AT 18 5A, PHASE - I, NARODA, GIDC, AHMEDABAD. DURING THE YEAR UNDER CONSIDERATION VARIOUS MACHINES WERE UNDER INSTALLATION BY THE APPELLANT. OUT OF THE AFORESAID TOTAL COST OF RS.1,79,31,767/ - , THE APPELLANT HAS M ADE THE PAYMENT OF RS.99,08,118/ - WITH THE BALANCE UNPAID AT RS.80,23,649/ - . IT HAS BEEN PLEADED BY THE APPELLANT THAT THE PAYMENT TOWARDS CWIP HAS BEEN MADE FROM THE SALE RECEIPTS OF THE ICE CREAM, AND THEREFORE, THE APPELLANT HAS NOT UTILISED THE BORROWINGS TO MAKE PAYMENT FOR THE CWIP. HENCE, NO INTERE ST DISALLOWANCE IS WARRANTED. ON GOING THROUGH THE BANK STATEMENT COPY SUBMITTED, IT HAS BEEN FOUND THAT AT THE TIME OF MAKING THE PAYMENT THE APPELLANT HAD THE OVERDRAFT BALANCE IN ITS CASH CREDIT ACCOUNT IN CORPORATION BANK. THIS IS MORE EVIDENT FROM THE DETAILS OF SUCH OVERDRAFT BALANCE ON THE IMMEDIATE DATE OF THE PAYMENT TOWARDS CWIP DEPICTED AS UNDER: - DATE OF CWIP PAYMENT AMOUNT PAID TOWARDS CWIP (RS.) OVERDRAFT BALANCE IN BANK ACCOUNT IMMEDIATELY PRIOR TO THE CWIP PAYMENT (RS .) 26/10/2011 5,91,992/ - 1 ,32,23,054/ - 22/12/2011 4,50,000/ - 30,28,460/ - 23/12/2011 27,000/ - 1,79,13,226/ - 27/12/2011 10,715/ - 7,67,680/ - 31/12/2011 8,542/ - 1,49,60,391/ - 02/01/2012 58,736/ - 5,62,16,162/ - I.T.A NO. 1070 /AHD/20 16 A.Y. 2012 - 13 PAGE NO M/S. HAVMOR ICE CREAM LTD. V S. DCIT 6 06/01/2012 27,000/ - 2, 52,22,648/ - 20/01/2012 2,035/ - 6,01,46,517/ - 03/02/2012 1 ,83,784/ - 8,73,74,902/ - 04/02/201 2 9,317/ - 9,13,07,846/ - 06/02/2012 2,33,396/ - 9,08,84,082/ - 10/02/2012 83,651/ - 12,60,98,639/ - 17/02/2012 1,60,792/ - 13,63,32,590/ - 18/02/ 2012 17,301/ - 13,34,55,335/ - 23/02/201 2 1,55,850/ - 1 2,58,1 0,950/ - 29/02/201 2 37,49,723/ - 11,25,28,157/ - 02/03/201 2 20,81, 781 / - 11,72,99,713/ - 08/03/2012 4,51,398/ - 11.24,97,677/ - 09/03/2012 1,83,077/ - 11,27,04,361/ - 13/03/2012 6,07,304/ - 9,84,26,960/ - 1 6/03/201 2 83,810/ - 10,84,36,838/ - 23/03/2012 62,062/ - 10,55,32,056/ - 24/03/201 2 94,690/ - 9,80,96,908/ - 30/03/2012 2,32,147/ - 4,09,50,312/ - 31/03/2012 3,42,014/ - 4,00,82,083/ - TOTAL 99,08,118/ - FR OM THE ABOVE CHART, IT IS VERY MUCH APPARENT THAT WHEN THE CWIP PAYMENTS WERE MADE BY THE APPELLANT, THE APPELLANT WAS ALREADY AVAILING THE OVERDRAFT FACILITY AND THERE WAS CREDIT BALANCE IN THE BANK ACCOUNT. SO BY MAKING THE PAYMENT OF CWIP, THE OVERDRAFT BALANCE HAS INCREASED TO THE EXTENT OF THE PAYMENT TOWARDS CWIP. THUS, FROM THE ABOVE TABLE, THE CLAIM OF THE APPELLANT THAT THE PAYMENT HAVE BEEN MADE OUT OF ITS OWN FUNDS IN THE FORM OF SHARE CAPITAL, RESERVES AND SURPLUS IS FOUND NOT CORRECT. IN FACT, THE SHARE CAPITAL AND RESERVES AND SURPLUS FUNDS HAVE ALREADY BEEN EXHAUSTED BY THE APPELLANT BY INVESTMENT IN VARIOUS ASSETS AND TOWARDS WORKING CAPITAL REQUIREMENTS. THE CASE LAWS RELIED UPON BY THE APPELLANT ARE NOT RELEVANT AND NOT IDENTICAL TO THE FAC TS OF THE CASE. I.T.A NO. 1070 /AHD/20 16 A.Y. 2012 - 13 PAGE NO M/S. HAVMOR ICE CREAM LTD. V S. DCIT 7 4.4. THE APPELLANT HAS FURTHER CONTENDED THAT THE PROVISIONS OF SECTION 36(1) (III) ARE NOT APPLICABLE IN VIEW OF THE VARIOUS JUDGMENTS FOR THE REASON THAT IT WAS NOT THE EXTENSION OF BUSINESS BUT IT WAS MERE CONTINUATION OF THE EXISTING BU SINESS OF THE APPELLANT AND DO NOT REPRESENT CAPITAL ASSETS UTILISED FOR SETTING UP OF ANOTHER LINE OF BUSINESS. THIS ARGUMENT ITSELF CONTRADICTS WITH THE APPELLANT'S OWN STAND TAKEN BEFORE THE AO THAT THE INTEREST FOR THE TWO MONTHS IN RESPECT OF THE NEW PLANT IN A. Y. 2011 - 12 HAS ALREADY BEEN CAPITALISED BY THE APPELLANT OBVIOUSLY TREATING THE S AME AS EXTENSION OF THE EXISTING BUSINES S. MOREOVER, AS PER THE PROVISO TO SECTION 36(1) (III), IT IS AMPLY CLEAR T HAT ANY INTEREST PAID IN RESPECT OF CAPITAL BORR OWED FOR ACQUISITION OF A N ASSET, EVEN FOR THE EXTENSION OF THE EXISTING BUSINESS HAS TO BE CAPITALISE D TILL THE DATE ON WHICH SUCH AS SET WAS FIRST PUT TO USE AND THE SAME CANNOT BE ALLOWED AS DEDUCTION. THUS, THE PROVISIONS OF SECTION 36(1) (III) ARE CLEA RLY APPLICABLE EVEN IN RESPECT OF THE EXTENSION OF THE EXISTING BUSINESS AND HENCE APPELLANT'S CONTENTION IS NOT ACCEPTED. IN VIEW OF THE AFORESAID DISCUSSION, THE DISALLOWANCE OF INTEREST CLAIM MADE BY THE AO IS FOUND CORRECT AND JUSTIFIED AND HENCE THE S AME IS CONFIRMED. THUS THE GROUND OF APPEAL IS DISMISSED. 8 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. T HE ASSESSEET HAD SHOWN AN AMOUNT OF RS. 1,79,31,767/ - AS CLOSING WIP ON ACCOUNT OF INVESTMENT IN THE NEW FACTO RY CONSTRUCTION AT 185A, PHASE - I, NARODA, GIDC, AHMEDABAD. DURING THE YEAR UNDER CONSIDERATION VARIOUS MACHINES WERE UNDER INSTALLATION BY THE APPELLANT. OUT OF THE AFORESAID TOTAL COST OF RS.1,79,31,767/ - , THE ASSESEE HAS MADE THE PAYMENT OF RS.99,08,11 8/ - WITH THE BALANCE UNPAID AT RS.80,23,649/ - . IT HAS BEEN ESTABLISHED FROM THE FINDINGS OF THE LD. CIT(A) THAT MOST OF THE PAYMENT TOWARDS CWIP HAS BEEN MADE OUT OF THE OVERDRAFT BALANCE IN ITS CASH CREDIT ACCOUNT IN CORPORATION BANK. THE ASSESSEE HAS FAIL ED TO DEMONSTRATE THAT HOW THE PAYMENT S HAVE BEEN MADE OUT OF ITS OWN FUNDS. THE LD COUNSEL HAS FURNISHED A PAPER BOOK CONTAINING THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - 1. DEPUTY COMMISSIONER OF INCOME TAX VS CORE HEALTH CARE LIMITED (298 ITR 194) (SC) 2 . VARDHMAN POIYTEX LIMITED VS COMMISSIONER OF INCOME TAX (254CTR102)(SC) 3. JOINT COMMISSIONER OF INCOME TAX VS UNITED PHOSPHOROUS LIMITED (299 ITR 9)(SC) 4. COMMISSIONER OF INCOME TAX VS NIRMA LIMITED (367 ITR 12)(GUJARAT HC) 5. DEPUTY COMMISSIONER OF I NCOME TAX VS GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. (215 TAXMAN 616) I.T.A NO. 1070 /AHD/20 16 A.Y. 2012 - 13 PAGE NO M/S. HAVMOR ICE CREAM LTD. V S. DCIT 8 6. DEPUTY COMMISSIONER OF INCOME TAX VS VODAFONE WEST LIMITED (ITA NO. 909/AHD/2014 & 944/AHD/2014) (AHMEDABAD ITAT) 7. ASSISTANT COMMISSIONER OF INCOME TAX VS RAAJRATN A METAL INDUSTRIES LIMITED (ITA NO. 540/AHD/2012 AND 542/AHD/2012) (AHMEDABAD ITAT) WE OBSERVE AFTER PERUSAL OF ABOVE JUDICIAL PRO NOUNCEMENTS AND FROM THE PROV ISO TO SECTION 36(1) (III) THAT ANY INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR A CQUISITION OF AN ASSET, EVEN FOR THE EXTENSION OF THE EXISTING BUSINESS HAS TO BE CAPITALIZED TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE AND THE SAME CANNOT BE ALLOWED AS DEDUCTION. HOWEVER , FOR WANT OF INFORMATION AND SUPPORTING EVIDENCES , THE ASSESSING OFFICER CAPITALIZED THE INTEREST @12% ON THE VARIOUS ITEMS FORMING PART OF CWIP. AFTER CONSIDERING THE ABOVE FACTS AND JUDICIAL FINDINGS , WE CONSIDER IT WILL BE APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE A SSESSING OFFICER FOR DECIDING AFRESH AFTER TAKING IN TO CONSIDERATION THE EXACT DATE OF ADDITIONS TO VARIOUS ITEMS FORMING PART OF CWIP AND AFTER EXCLUDING THE PERIOD WHEN THE CAPITAL ASSET ACTUALLY PUT TO USE IN THE LIGHTS OF THE DIRECTIONS LAID DOWN IN THE ABOVE JUDICIAL PRONOUNCEMENT S. THEREFORE , AS DIRECTED , WE RESTORE THIS ISSUE TO THE FILE OF THE A SSESSING OFFICER FOR DECIDING A FRESH AFTER AFFORDING ADEQUATE OPPORTUNITIES TO THE ASSESSEE. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUN CED IN THE OPEN C OURT ON 11 - 04 - 201 8 SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 11 /04 /2018 / COPY OF ORDER FORWAR DED TO: - 1. ASSESSEE 2. REVENUE I.T.A NO. 1070 /AHD/20 16 A.Y. 2012 - 13 PAGE NO M/S. HAVMOR ICE CREAM LTD. V S. DCIT 9 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,