Deputy Commissioner Of Income Tax, Circle- 7(1)(1), Bangalore V. M/s. Thermo King India Private Limited, Bangalore

ITA 121/BANG/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7209 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-09-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Keywords: Capital asset; Depreciation
• Section: 13

Judgement Text

ITA NO.121/BANG/2020 M/S. THERMO KING INDIA PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENTAND SHRI B.R. BASKARAN, ACCOUTANT MEMBER ITA NO.121/BANG/2020 ASSESSMENTYEAR:2008-09 DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-7(1)(1) BANGALORE VS. M/S. THERMO KING INDIA PVT. LTD. PLOT NO.35, KIADB INDUSTRIAL AREA BIDADI BANGALORE-562109 PAN NO :AABCT2265L APPELLANT RESPONDENT APPELLANT BY : SHRI MUZAFFAR HUSSAIN, D.R. RESPONDENT BY : SHRI SHARATH RAO, A.R. DATE OF HEARING : 03.09.2020 DATE OF PRONOUNCEMENT : 04.09.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE D ECISION RENDERED BY LD. CIT(A) MYSORE IN RESPECT OF DISALLO WANCE OF INTEREST EXPENDITURE MADE BY THE A.O. IN ASSESSMENT YEAR 200 8-09. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE A SSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN REFRIGERATION UNITS (INCLUDING FREEZERS AND CHILLERS). DURING THE COURSE OF ASSES SMENT PROCEEDING, THE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN CLOSIN G STOCK OF INVENTORY AT RS.12.02 CRORES. HE ALSO NOTICED THAT THE ASSES SEE HAS CLAIMED INTEREST EXPENDITURE OF RS.1.71 CRORES ON THE LOAN TAKEN FROM M/S. ITA NO.121/BANG/2020 M/S. THERMO KING INDIA PVT. LTD., BANGALORE PAGE 2 OF 8 INGER SOLL RAND (I) LTD. THE A.O. NOTICED THAT THE ASSESSEE DID NOT HAVE SURPLUS FUNDS EQUAL TO THE INVENTORY HELD BY I T. ACCORDINGLY, HE TOOK THE VIEW THAT THE ASSESSEE HAS USED THE LOAN F UNDS FOR PURCHASING THE INVENTORY. IN VIEW OF THE SAME, THE A.O. TOOK THE VIEW THAT THE INTEREST EXPENDITURE SHOULD HAVE BEEN CONSIDERED BY THE ASSESSEE WHILE VALUING INVENTORY AS AT THE YEAR END, I.E., THE ASS ESSEE SHOULD HAVE CAPITALIZED PART OF INTEREST EXPENSES IN THE VALUE OF INVENTORY. THE A.O. HAS SO TAKEN THE VIEW BY OBSERVING THAT THE INTERES T ATTRIBUTABLE TO BRING THE INVENTORY TO ITS PRESENT LOCATION AND CONDITION SHOULD BE INCLUDED IN THE COST OF INVENTORY. ACCORDINGLY, HE COMPUTED THE INTEREST ATTRIBUTABLE TO THE INVENTORY BY ADOPTING PRIME LEN DING RATE OF 12.75% DETERMINED BY THE STATE BANK OF INDIA AND ACCORDING LY COMPUTED A SUM OF RS.1,53,37,415/-, AS THE INTEREST ATTRIBUTAB LE TO THE INVENTORY AND DISALLOWED THE SAME. 3. THE LD. CIT(A) DELETED THE DISALLOWANCE AND HENCE T HE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. WE NOTICE THAT THE LD. CIT(A) HAS DELETED DISALLOWA NCE WITH THE FOLLOWING OBSERVATIONS: 5.8 GROUND NO. 13 AND 14 PERTAINS TO DISALLOWANCE OF INTEREST EXPENSES OF RS.1,53,37,415/- BY ATTRIBUTIN G IT TO INVENTORY. IN BRIEF, DURING THE ASSESSMENT PROCEEDI NGS, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE APPE LLANT HAD CLAIMED INTEREST EXPENSE AMOUNTING TO RS. 1,71,25,5 25/-. THE ASSESSING OFFICER NOTED THAT THE APPELLANT DID NOT HAVE INTEREST FREE FUNDS FOR THE PURPOSE OF STOCKING ITS INVENTORY. FURTHER, THE ASSESSING OFFICER HELD THAT THE APPELL ANT WAS NOT ABLE TO PROVE THAT NON-INTEREST BEARING FUNDS WERE UTILIZED FOR THE PURPOSE OF INVENTORY AND THEREFORE, HELD TH AT INTEREST ATTRIBUTABLE IN BRINGING INVENTORY TO ITS PRESENT L OCATION AND CONDITION SHOULD FORM PART OF COST OF INVENTORY. ACCORDINGLY, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 1,53,37,415/-, COMPUTED AT A RATE OF 12.75 PERCENT BEING THE ITA NO.121/BANG/2020 M/S. THERMO KING INDIA PVT. LTD., BANGALORE PAGE 3 OF 8 AVERAGE PRIME LENDING RATE OF SBI AS ON 31 MARCH 20 08. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS MADE DETAILED SUBMISSION. AT THE OUTSET, THE APPELLANT S UBMITS THAT ISSUE RELATING TO THE ATTRIBUTION OF INTEREST ACCRU ED ON LOAN TO THE COST OF INVENTORY HAS ALREADY BEEN DECIDED IN F AVOUR OF THE APPELLANT BY THE COMMISSIONER OF INCOME TAX (AP PEALS) - 7, BANGALORE FOR THE AY 2010-11, AY 2011-12 AND AY 2012-13. THE APPELLANT ALSO ARGUES THAT IT HAD BORROWED LOAN FOR THE PURPOSE OF WORKING CAPITAL REQUIREMENTS. SECTION 36 (1)(III) OF THE ACT, PROVIDES THAT AMOUNT OF INTEREST PAID IN R ESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS AND PR OFESSION SHALL BE ALLOWED AS DEDUCTION WHILE COMPUTING THE I NCOME FROM BUSINESS OR PROFESSION, WITH THE ONLY EXCEPTIO N BEING WHERE IT IS UTILIZED FOR ACQUISITION OF A CAPITAL A SSET, WHICH THEN HAS TO BE CAPITALIZED TILL THE ASSET IS PUT TO USE. IN THE PRESENT CASE, THE LOAN IS UTILIZED FOR THE PURPOSE OF WORKING CAPITAL. THE APPELLANT ALSO HAS RELIED ON SECTION 1 45A OF THE ACT TO CONTEND THAT VALUATION OF INVENTORY NEEDS TO BE DONE AS PER THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THE APPELLANT BEING A COMPANY, IS MANDATE D TO FOLLOW AS 2 ISSUED BY THE ICAI FOR VALUATION OF INV ENTORIES. AS 2 PROVIDES FOR VALUING THE INVENTORY AT COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER. IT ALSO DEFINES THE COST OF INVENTORY TO COMPRISE ALL COSTS OF PURCHASE, COSTS OF CONVERS ION AND OTHER COSTS INCURRED IN BRINGING THE INVENTORIES TO THEIR PRESENT LOCATION AND CONDITION. THE FOLLOWING RELEV ANT PARA OF THE AS-2 IS REPRODUCED HERE UNDER: '6. THE COST OF INVENTORIES SHOULD COMPRISE ALL COS TS OF PURCHASE, COSTS OF CONVERSION AND OTHER COSTS INCURRED IN BRI NGING THE INVENTORIES TO THEIR PRESENT LOCATION AND CONDITION ... 'OTHER COSTS 11. OTHER COSTS ARE INCLUDED IN THE COST OF INVENTORIES ONLY TO THE EXTENT THAT THEY ARE INCURRED IN BRINGING THE INVEN TORIES TO THEIR PRESENT LOCATION AND CONDITION. FOR EXAMPLE, IT MAY BE APPROPRIATE TO INCLUDE OVERHEADS OTHER THAN PRODUCT ION OVERHEADS OR THE COSTS OF DESIGNING PRODUCTS FOR SP ECIFIC CUSTOMERS IN THE COST OF INVENTORIES. 12. INTEREST AND OTHER BORROWING COSTS ARE USUALLY CONSIDERED AS NOT RELATING TO BRINGING THE INVENTOR IES TO THEIR PRESENT LOCATION AND CONDITION AND ARE, THERE FORE, USUALLY NOT INCLUDED IN THE COST OF INVENTORIES. PARA 12 OF THE AS 2, EXCLUDES THE BORROWING COST FR OM THE SCOPE OF OTHER COST. SIMILAR EXCLUSION HAS BEEN PR OVIDED IN THE INCOME COMPUTATION AND DISCLOSURE STANDARD (ICD S) RECENTLY NOTIFIED BY CENTRAL GOVERNMENT FOR THE PUR POSE OF ITA NO.121/BANG/2020 M/S. THERMO KING INDIA PVT. LTD., BANGALORE PAGE 4 OF 8 VALUATION OF INVENTORY AS PER ICDS - II. FURTHER TH E INTEREST ACCRUED ON LOAN FOR MEETING WORKING CAPITAL NEEDS A RE IN THE NATURE OF ADMINISTRATIVE OVERHEADS SAME SHOULD BE SPECIFICALLY EXCLUDED FROM THE COST. THEREFORE, BA SED ON THE ABOVE, THE APPELLANT SUBMITS THAT INTEREST ACCRUED ON LOAN TAKEN FOR THE PURPOSE OF MEETING WORKING CAPITAL NE EDS CANNOT BE ATTRIBUTED TO THE COST OF INVENTORY. FURT HER, THE APPELLANT ALSO HAS PLACED RELIANCE ON THE DECISION OF THE HON'BLE BANGALORE TRIBUNAL IN THE CASE OF JSR CONST RUCTIONS (P) LTD [2016] 71 TAXMANN.COM 184, WHEREIN IT WAS HELD THAT 'INTEREST COST ATTRIBUTED TO LOANS FOR FINANCING TH E NORMAL TRADING ACTIVITY OF THE APPELLANT IS A PERIOD COST AND TO BE CHARGED TO PROFIT AND LOSS ACCOUNT AND SUCH INTERES T CANNOT GO INTO THE COST OF INVENTORIES'. THE SUBMISSIONS O F THE APPELLANT HAVE BEEN CONSIDERED. THE APPELLANT IS A TRADER AND THE INVENTORY MAINTAINED BY IT IS THAT OF THE ITEMS TRADED BY IT. THE SAME DO NOT REPRESENT WORK-IN-PROGRESS OF A NY MANUFACTURING ACTIVITY OR ANY CAPITAL ITEM/ASSET BE ING CONSTRUCTED OR ACQUIRED BY THE APPELLANT FOR ITS OW N USE. INTEREST COST ATTRIBUTED TO LOANS TAKEN FOR FINANCI NG ITS NORMAL TRADING ACTIVITIES IS A PERIOD COST THAT HAS TO BE CHARGED TO PROFIT AND LOSS ACCOUNT. THE REFERENCE DRAWN TO AS 2 & ICDS II BY THE APPELLANT MAKES IT CLEAR THAT GENERALLY I NTEREST AND BORROWING COST DO NOT FORM PART OF COST OF INVENTOR Y. FURTHER, THE RELIANCE PLACED ON THE JURISDICTIONAL ITAT IN T HE CASE OF JSR CONSTRUCTIONS (P) LTD IS ALSO WELL PLACED. THER EFORE, THE APPELLANT IS JUSTIFIED IN CONSIDERING INTEREST AS A PERIOD COST AND DEBITING THE PROFIT AND LOSS ACCOUNT. THEREFORE , THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N OF INTEREST COST AMOUNTING TO RS. 1,53,37,415/-.THEREFORE, APPE AL ON THIS GROUND IS ALLOWED. AS THE MAIN GROUND NO. 13 IS ADJ UDICATED IN THE APPELLANT'S FAVOR, GROUND NO. 14 BECOMES ACA DEMIC IN NATURE AND AS SUCH, THE SAME ARE NOT BEING ADJUDICA TED . AGGRIEVED BY THE ORDER SO PASSED BY LD CIT(A), THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. THE LD. D.R. SUPPORTED THE ORDER PASSED BY THE A.O. ITA NO.121/BANG/2020 M/S. THERMO KING INDIA PVT. LTD., BANGALORE PAGE 5 OF 8 6. ON THE CONTRARY, THE LD. A.R. SUPPORTED THE ORDER P ASSED BY THE LD. CIT(A). IN ADDITION TO THE ABOVE, THE LD. A.R. SUBMITTED THAT THE PRINCIPLE ENUNCIATED BY THE A.O. WOULD BE APPLICABL E ONLY TO CAPITAL ASSETS, AS PER THE PROVISO TO SECTION 36(1)(III) OF THE INCOME TAX ACT 1961 (HEREINAFTER CALLED AS THE ACT). HE SUBMITTE D THAT THE ASSESSEE HAS USED BORROWED FUNDS IN THE NORMAL BUSINESS ACTI VITIES OF TRADING IN REFRIGERATION ITEMS. HENCE, THE QUESTION OF CAPITAL ISING THE INTEREST EXPENDITURE DOES NOT ARISE. HE ALSO PLACED RELIANC E ON THE DECISION RENDERED BY COORDINATE BENCH OF ITAT IN THE CASE OF DCIT VS. JSR CONSTRUCTIONS PVT. LTD. (2016) 71 TAXMANN.COM 184 A ND SUBMITTED THAT THE COORDINATE BENCH HAS, AFTER CONSIDERING AC COUNTING STANDARD - 2 RELATING TO VALUATION OF INVENTORIES, HAS HELD TH AT THE QUESTION OF INCLUDING INTEREST EXPENDITURE FOR CURRENT ASSETS D OES NOT ARISE. THE LD. A.R. ALSO SUBMITTED THAT THE NEWLY INTRODUCED I CDS THOUGH APPLICABLE IN THE SUBSEQUENT YEAR ALSO SUPPORTS THE METHODOLOGY ADOPTED BY THE ASSESSEE. 7. HAVING HEARD THE RIVAL SUBMISSIONS, WE FIND MERIT I N THE CONTENTIONS OF THE LD. A.R. FOR THE SAKE OF CONVE NIENCE, WE EXTRACT BELOW THE DECISION RENDERED BY THE COORDINATE BENCH ON AN IDENTICAL ISSUE IN THE CASE OF M/S. JSR CONSTRUCTIONS PVT. LT D. (SUPRA). 20. WE HAVE PERUSED THE RECORD AND HEARD THE RIVAL CON TENTIONS. THERE IS NO DISPUTE THAT WORK-IN-PROGRESS SHOWN BY THE ASSES SEE WAS A PART OF ITS CURRENT ASSETS. SUCH WORK-IN-PROGRESS AND INVENTORY DID NOT REPRESENT ANY CAPITAL ITEM OR CAPITAL ASSET BEING CONSTRUCTED OR ACQUIRED BY THE ASSESSEE FOR ITS OWN USE. ASSESSEE WAS DOING ROAD WORK BASED ON CONTRACTS AWARDED TO IT. INTEREST COST ATTRIBUTED TO LOANS TA KEN FOR FINANCING ITS NORMAL TRADING ACTIVITY IS, IN OUR OPINION, A PERIOD COST THAT HAS TO BE CHARGED TO ITA NO.121/BANG/2020 M/S. THERMO KING INDIA PVT. LTD., BANGALORE PAGE 6 OF 8 PROFIT & LOSS ACCOUNT. SUCH INTEREST CANNOT GO INTO THE COST OF INVENTORIES. ACCOUNTING STANDARDS AS-2 WHICH DEALS WITH VALUATIO N OF INVENTORIES STATES AS UNDER: 'COST OF INVENTORIES 6. THE COST OF INVENTORIES SHOULD COMPRISE ALL COST S OF PURCHASE, COSTS OF CONVERSION AND OTHER COSTS INCURRED IN BRINGING THE INVENTORIES TO VALUATION OF INVENTORIES TO THEIR PRESENT LOCATION AND CONDITION. COSTS OF PURCHASE 7. THE COSTS OF PURCHASE CONSIST OF THE PURCHASE PR ICE INCLUDING DUTIES AND TAXES (OTHER THAN THOSE SUBSEQUENTLY REC OVERABLE BY THE ENTERPRISE FROM THE TAXING AUTHORITIES), FREIGHT IN WARDS AND OTHER EXPENDITURE DIRECTLY ATTRIBUTABLE TO THE ACQUISITIO N. TRADE DISCOUNTS, REBATES, DUTY DRAWBACKS AND OTHER SIMILAR ITEMS ARE DEDUCTED IN DETERMINING THE COSTS OF PURCHASE. COSTS OF CONVERSION 8. THE COSTS OF CONVERSION OF INVENTORIES INCLUDE C OSTS DIRECTLY RELATED TO THE UNITS OF PRODUCTION, SUCH AS DIRECT LABOUR. THEY ALSO INCLUDE A SYSTEMATIC ALLOCATION OF FIXED AND VARIABLE PRODUCT ION OVERHEADS THAT ARE INCURRED IN CONVERTING MATERIALS INTO FINISHED GOODS. FIXED PRODUCTION OVERHEADS ARE THOSE INDIRECT COSTS OF PR ODUCTION THAT REMAIN RELATIVELY CONSTANT REGARDLESS OF THE VOLUME OF PRODUCTION, SUCH AS DEPRECIATION AND MAINTENANCE OF FACTORY BUI LDINGS AND THE COST OF FACTORY MANAGEMENT AND ADMINISTRATION. VARI ABLE PRODUCTION OVERHEADS ARE THOSE INDIRECT COSTS OF PRODUCTION TH AT VARY DIRECTLY, OR NEARLY DIRECTLY, WITH THE VOLUME OF PRODUCTION, SUC H AS INDIRECT MATERIALS AND INDIRECT LABOUR. 9. THE ALLOCATION OF FIXED PRODUCTION OVERHEADS FOR THE PURPOSE OF THEIR INCLUSION IN THE COSTS OF CONVERSION IS BASED ON THE NORMAL CAPACITY OF THE PRODUCTION FACILITIES. NORMAL CAPAC ITY IS THE PRODUCTION EXPECTED TO BE ACHIEVED ON AN AVERAGE OV ER A NUMBER OF PERIODS OR SEASONS UNDER NORMAL CIRCUMSTANCES, TAKI NG INTO ACCOUNT THE LOSS OF CAPACITY RESULTING FROM PLANNED MAINTEN ANCE. THE ACTUAL LEVEL OF PRODUCTION MAY BE USED IF IT APPROXIMATES NORMAL CAPACITY. THE AMOUNT OF FIXED PRODUCTION OVERHEADS ALLOCATED TO EACH UNIT OF PRODUCTION IS NOT INCREASED AS A CONSEQUENCE OF LOW PRODUCTION OR IDLE PLANT. UNALLOCATED OVERHEADS ARE RECOGNISED AS AN EXPENSE IN THE PERIOD IN WHICH THEY ARE INCURRED. IN PERIODS O F ABNORMALLY HIGH PRODUCTION, THE AMOUNT OF FIXED PRODUCTION OVERHEAD S ALLOCATED TO EACH UNIT OF PRODUCTION IS DECREASED SO THAT INVENT ORIES ARE NOT MEASURED ABOVE COST. VARIABLE PRODUCTION OVERHEADS ARE ASSIGNED TO EACH UNIT OF PRODUCTION ON THE BASIS OF THE ACTUAL USE OF THE PRODUCTION FACILITIES. ITA NO.121/BANG/2020 M/S. THERMO KING INDIA PVT. LTD., BANGALORE PAGE 7 OF 8 10. A PRODUCTION PROCESS MAY RESULT IN MORE THAN ON E PRODUCT BEING PRODUCED SIMULTANEOUSLY. THIS IS THE CASE, FOR EXAM PLE, WHEN JOINT PRODUCTS ARE PRODUCED OR WHEN THERE IS A MAIN PRODU CT AND A BY- PRODUCT. WHEN THE COSTS OF CONVERSION OF EACH PRODU CT ARE NOT SEPARATELY IDENTIFIABLE, THEY ARE ALLOCATED BETWEEN THE PRODUCTS ON A RATIONAL AND CONSISTENT BASIS. THE ALLOCATION MAY B E BASED, FOR EXAMPLE, ON THE RELATIVE SALES VALUE OF EACH PRODUC T EITHER AT THE STAGE IN THE PRODUCTION PROCESS WHEN THE PRODUCTS B ECOME SEPARATELY IDENTIFIABLE, OR AT THE COMPLETION OF PR ODUCTION. MOST BY- PRODUCTS AS WELL AS SCRAP OR WASTE MATERIALS, BY TH EIR NATURE, ARE IMMATERIAL. WHEN THIS IS THE CASE, THEY ARE OFTEN M EASURED AT NET REALISABLE VALUE AND THIS VALUE IS DEDUCTED FROM TH E COST OF THE MAIN PRODUCT. AS A RESULT, THE CARRYING AMOUNT OF THE MA IN PRODUCT IS NOT MATERIALLY DIFFERENT FROM ITS COST. OTHER COSTS 11. OTHER COSTS ARE INCLUDED IN THE COST OF INVENTO RIES ONLY TO THE EXTENT THAT THEY ARE INCURRED IN BRINGING THE INVEN TORIES TO THEIR PRESENT LOCATION AND CONDITION. FOR EXAMPLE, IT MAY BE APPROPRIATE TO INCLUDE OVERHEADS OTHER THAN PRODUCTION OVERHEADS O R THE COSTS OF DESIGNING PRODUCTS FOR SPECIFIC CUSTOMERS IN THE CO ST OF INVENTORIES. 12. INTEREST AND OTHER BORROWING COSTS ARE USUALLY CONSIDERED AS NOT RELATING TO BRINGING THE INVENTORIES TO THEIR PRESE NT LOCATION AND CONDITION AND ARE, THEREFORE, USUALLY NOT INCLUDED IN THE COST OF INVENTORIES.' 21. IT IS CLEAR FROM CLAUSE 12 OF THE ACCOUNTING STAND ARDS 2 THAT NORMAL INTEREST AND BORROWING COSTS CANNOT FORM PART OF CO ST OF INVENTORY. WHEN AN ASSESSEE IS FOLLOWING METHOD OF VALUATION OF INVENT ORY WHICH IS IN ACCORDANCE WITH THE ACCOUNTING STANDARDS PRESCRIBED BY ICAI, IN OUR OPINION, REVENUE CANNOT STEP INTO THE SHOES OF ASSE SSEE AND FOIST ON IT A DIFFERENT METHOD, UNLESS THERE IS A CLEAR STATUTORY EDICT ALLOWING A DEPARTURE FROM SUCH ACCEPTED STANDARDS. WE CANNOT S AY THAT ASSESSEE HAD UNDERSTATED ITS WORK-IN-PROGRESS OR INVENTORY BY NO T CHARGING INTEREST RELATING TO WORKING CAPITAL LOAN TO ITS VALUATION. ASSESSEE WAS WELL JUSTIFIED IN CONSIDERING INTEREST AS A PERIOD COST AND DEBITI NG IN ITS PROFIT & LOSS ACCOUNT. WE DO NOT FIND ANY MERIT IN THE ADDITIONS MADE BY THE AO. AS SUCH, THESE ADDITIONS ARE DELETED AND GROUND NO.5 I S ALLOWED. 8. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E INVENTORIES HELD BY THE ASSESSEE ARE CURRENT ASSETS AND HENCE THE REQUIREME NT OF CAPITALISING THE INTEREST DOES NOT ARISE, AS PER THE PROVISO TO SECTION 36(1) (III) OF THE ACT MANDATES CAPITALIZATION OF INTEREST ONLY IN RESPECT OF CAPIT AL ASSETS PURCHASED OUT OF BORROWED FUNDS. WE ALSO NOTICE THAT THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE ALSO ITA NO.121/BANG/2020 M/S. THERMO KING INDIA PVT. LTD., BANGALORE PAGE 8 OF 8 GETS SUPPORT FROM ACCOUNTING STANDARD 2 ISSUED BY ICAI. THE LD. A.R. ALSO SUBMITTED THAT THE NEWLY INTRODUCED ICDS THOUGH APP LICABLE IN THE SUBSEQUENT YEAR ALSO SUPPORTS THE METHODOLOGY ADOPTED BY THE A SSESSEE. UNDER THESE SET OF FACTS AND IN VIEW OF THE FACT THAT THE DECISION REN DERED BY THE LD. CIT(A) IS IN CONSONANCE WITH THE DECISION RENDERED BY THE COORDI NATE BENCH IN THE CASE OF JSR CONSTRUCTIONS (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE DECISION RENDERED BY LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE S AME. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPT, 2020 SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 4 TH SEPT, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.