LAFFANS PETROCHEMICALS LTD., Mumbai V. DY.COMM OF INCOME TAX,RG.10(2)(1), MUMBAI

ITA 1982/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5636 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Capital asset; Depreciation; Proportionate interest; Corroborative evidences; Set aside
• Section: 271(1)(c); 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.1982/M/2018 ASSESSMENT YEAR: 2008-09 M/S. LAFFANS PETROCHEMICALS LTD., 10, LUTHAR IND. COMPLEX, ANDHERI KURLA ROAD, SAFED PHOOL, ANDHERI (E), MUMBAI 400 042 PAN: AAACL0645D VS. DY. CIT - 10(2)(1) ROOM NO.509, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SMT. RENU KAPOOR, A.R. REVENUE BY : SHRI SATISH CHANDRA RAJORE, D.R. DATE OF HEARING : 22.07.2019 DATE OF PRONOUNCEMENT : 22.07.2019 O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-17, MUM BAI DATED 26.02.2018 AND IT PERTAINS TO ASSESSMENT YEAR 2008- 09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER DISAL LOWING INTEREST OF RS.1,22,10,166/- U/S. 36(1)(III) OF THE INCOME TAX ACT. 2. THE ASSESSEE COMPANY CRAVES LEAVE TO ADD, ALTER OR AMEND THE ABOVE GROUND OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PETROCH EMICAL PRODUCTS HAD FILED ITS RETURN OF INCOME FOR ASSESSM ENT YEAR ITA NO.1982/M/2018 M/S. LAFFANS PETROCHEMICALS LTD. 2 2008-09 ON 08.09.2008 DECLARING TOTAL INCOME OF RS.3,90,04,129/-. THE ASSESSMENT HAS BEEN COMPUTED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ON 14.12 .2010 DETERMINING THE TOTAL INCOME OF RS.5,48,30,780/- BY MAKING VARIOUS ADDITIONS INCLUDING DISALLOWANCE OF DEPRECI ATION ON BUILDING AND ELECTRICAL FITTINGS AND ALSO CAPITALIZ ATION OF FINANCE COST TOWARDS AMOUNT SPENT FOR ACQUISITION OF FIXED ASSETS AMOUNTING TO RS.1,22,10,166/-. IN FIRST ROUND OF L ITIGATION, THE MATTER WENT UP TO TRIBUNAL, WHERE THE TRIBUNAL HAS UPHELD THE FINDINGS OF LD. CIT(A) IN DELETING THE ADDITIONS MA DE BY THE AO TOWARDS DEPRECIATION ON BUILDING AND ELECTRICAL FIT TINGS. HOWEVER, IN RESPECT OF CAPITALIZATION OF FINANCE CO ST, THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE AO TO VERIFY THE FACTS WITH REGARD TO CLAIM OF THE ASSESSEE THAT INVESTMENTS IN FIXED ASSETS ARE OUT OF OWN FUNDS. IN CONSEQUENT ASSESSMENT PRO CEEDINGS, THE AO HAS REITERATED ITS FINDINGS IN RESPECT OF CA PITALIZATION OF INTEREST EXPENSES UNDER SECTION 36(1)(III) ON THE G ROUND THAT THE ASSESSEE HAS FAILED TO FILE ANY EVIDENCES INCLUDING COPIES OF CONSORTIUM ACCOUNTS AS WELL AS CASH FLOW STATEMENTS TO PROVE AVAILABILITY OF INTEREST FREE FUNDS AT ITS DISPOSAL FOR MAKING INVESTMENTS IN FIXED ASSETS. THE RELEVANT FINDINGS OF THE AO ARE AS UNDER: 5.8 THE SUBMISSIONS PUT FORTH BY THE ASSESSEE HAVE BEEN CAREFULLY CONSIDERED. AS OBSERVED BY THE HON'BLE ITAT, THE ISSUE AS TO WHETH ER THE INTEREST BEARING FUNDS WERE USED FOR MAKING INVESTMENTS OR INTEREST FREE FUNDS WERE AVAILABLE AT THE TIME OF MAKING INVESTMENTS CAN BE ANALYSED BY TAKING INTO CONSIDER ATION THE DAY-TO-DAY CASH FLOW STATEMENT. THE HON'BLE ITAT HAS FURTHER OBSERVED TH AT THE CASH CREDIT ACCOUNTS IN THE CONSORTIUM OF BANKS MAINTAINED BY THE ASSESSEE ARE REQUIRED TO BE LOOKED INTO IN ORDER TO ASCERTAIN WHETHER IN A PARTICULAR BANK ACCOUNT, THE ASSESSEE HAD DEPOSITED ANY MONEY OR NOT AND WHETHER COMMON FUNDS, I.E. INTERES T FREE FUNDS AND INTEREST BEARING FUNDS ARE AVAILABLE IN THAT ACCOUNT. THESE EVIDENCE S HAVE NOT BEEN FURNISHED BY THE ASSESSEE IN ORDER TO PROVE THAT THE INVESTMENTS IN FIXED ASSETS WERE MADE FROM THE COMMON FUNDS. THE ASSESSEE HAS MERELY STATED THAT T HE EVIDENCES WERE ALREADY FURNISHED AT THE TIME OF ORIGINAL ASSESSMENT PROCEE DINGS. THE HON'BLE ITAT HAS HELD THAT THE CURRENT YEAR'S PROFIT IS NOT AN ITEM AVAIL ABLE THROUGH THE YEAR AND IT CANNOT BE A FIXED SUM. IT WAS OBSERVED THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD OPENING RESERVES OF RS,25.50 CRORES WH ICH WERE ALREADY INVESTED IN THE ITA NO.1982/M/2018 M/S. LAFFANS PETROCHEMICALS LTD. 3 FORM OF FIXED ASSETS OF RS.27.05 CRORES (OPENING GR OSS BLOCK) AND THEREFORE, THERE WERE NO FREE RESERVES AVAILABLE TO MEET THE COST OF FIXE D ASSETS ACQUIRED DURING THE YEAR. AS REGARDS THE FREE RESERVES FOR THE YEAR UNDER CONSID ERATION, IT WAS NOTICED THAT THE ASSESSEE DID NOT GENERATE ENOUGH CASH FROM ITS OPER ATIONS TO MEET THE COST OF FIXED ASSETS. AS PER THE CASH FLOW STATEMENT OF THE ASSES SEE, IT WAS NOTICED THAT THE ASSESSEE UTILIZED MOST OF ITS BORROWINGS FOR ACQUIS ITION OF FIXED ASSETS. IT WAS FURTHER NOTICED THAT THE ASSESSEE UTILIZED ITS BORROWINGS A ND OPENING CASH TO MEET THE NEGATIVE FLOW FROM ITS OPERATING ACTIVITIES FOR THE YEAR. 5.9 TO REBUT THE FINDINGS MADE IN THE ORIGINAL ASSE SSMENT PROCEEDINGS, THE ASSESSEE IS REQUIRED TO FILE THE COPIES OF CONSORTIUM OF ACCOUN TS AS WELL AS DAILY CASH FLOW STATEMENTS TO PROVE THAT THE ASSESSEE HAD SUFFICIEN T INTEREST FREE FUNDS AT ITS DISPOSAL FOR MAKING INVESTMENTS IN FIXED ASSETS. IN THE ABSE NCE OF ANY SUPPORTING EVIDENCES, THE ASSESSEE'S CONTENTION THAT THE INVESTMENTS WERE MAD E OUT OF OWN FUNDS CANNOT BE ACCEPTED. IN VIEW OF THE ABOVE DISCUSSION AND IN VIEW OF THE PROVISIONS OF SECTION 36(1)(III) AND EXPLANATION 8 OF SECTION 43(L) OF TH E ACT, THE PROPORTIONATE FINANCE COST OF RS.1,22,10,166/- AS WORKED OUT IN THE ORDER U/S. 14 3(3) DATED 14.12.2010 IS HEREBY CAPITALIZED AND THE SAME IS ADDED TO THE TOTAL INCO ME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT ARE INITIATED SEPARATELY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME INACCURATE PARTICULARS OF INC OME. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). BEFORE THE LD. C IT(A), THE ASSESSEE HAS REITERATED ITS SUBMISSIONS MADE BEFORE THE AO TO ARGUE THAT IT HAS OWN FUNDS IN FORM OF SHARE CAPITA L AND RESERVES IN EXCESS OF AMOUNT INVESTED IN FIXED ASSETS, THERE FORE THE QUESTION OF INTEREST DISALLOWANCE UNDER SECTION 36( 1)(III) READ WITH EXPLANATION 8 TO SECTION 43(1) DOES NOT ARISE. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE AND ALSO TAKING NOTE OF DIRECTIONS OF THE TRIBUNAL, IN FIRST ROUND OF LITIGATION HELD THAT ALTHOUGH ASSESSEE CLAIMS TO HA VE USED OWN FUNDS FOR INVESTMENT IN FIXED ASSETS, BUT FAILED TO FILE CASH FLOW STATEMENT AND OTHER DETAILS IN ORDER TO PROVE AVAIL ABILITY OF OWN FUNDS. THEREFORE, HE OPINED THAT THERE IS NO ERROR IN THE FINDINGS OF THE AO AND ACCORDINGLY, UPHELD ADDITIONS MADE TO WARDS INTEREST CAPITALIZATION AND DISMISSED APPEAL FILED BY THE ASSESSEE. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 4.1 I HAVE CAREFULLY CONSIDERED THE FACTS AND BRIEF BACKGROUND OF THE CASE ALONG WITH SUBMISSIONS AND ARGUMENTS OF THE AR OF THE APP ELLANT COMPANY. THE RELEVANT ORDERS HAVE ALSO BEEN CONSIDERED. THE BASIS OF EFFE CT GIVEN BY THE A.O. HAS BEEN EXAMINED. ITA NO.1982/M/2018 M/S. LAFFANS PETROCHEMICALS LTD. 4 4.2 THE DISPUTE IS SOLELY ON THE ISSUE OF UTILIZATION O F FUNDS FOR MAKING INVESTMENT IN CAPITAL ASSETS. DURING ORIGINAL ASSESSMENT U/S 143( 3), IT WAS OBSERVED BY THE A.O. THAT THE APPELLANT HAS UTILIZED INTEREST BEARING FU NDS OF RS,7,98,83,438/- FOR ACQUISITION OF FIXED ASSETS WHICH WERE NOT PUT TO U SE. THUS, IN THE BACKGROUND OF PROVISIONS OF EXPLANATION 8 TO SECTION 43(1) AND PR OVISO TO SECTION 36(1)(III) OF THE ACT, THE A.O. CAPITALIZED PROPORTIONATE INTEREST FO R ACQUIRING THE CAPITAL ASSET WHICH WAS NOT PUT TO USE. UPON APPEAL, THE CIT(A) ON THE BASIS OF HIS OWN APPRECIATION OF THE AVAILABLE FUNDS, ALLOWED THE APPEAL OF THE APPE LLANT. BEING AGGRIEVED, THE REVENUE PREFERRED FURTHER APPEAL BEFORE THE HON'BLE TRIBUNAL WHICH VIDE ORDER DATED 25.04.2013 HAS SET ASIDE THE ORDER GIVING CER TAIN CRUCIAL OBSERVATIONS AND DIRECTIONS. THE RELEVANT PORTION IS QUOTED BELOW :- 'THE ISSUE AS TO WHETHER THE INTEREST BEARING FUNDS WERE USED FOR MAKING INVESTMENTS OR INTEREST FREE FUNDS WERE AVAILABLE A T THE TIME OF MAKING INVESTMENTS IS A PURE QUESTION OF FACTS WHICH CAN B E ANALYSED BY TAKING INTO CONSIDERATION THE DAY-TO-DAY CASH FLOW STATEMENT. F OR EXAMPLE, THE ASSESSEE'S SHARE CAPITAL, RESERVES AND SURPLUS AS O N THE FIRST DAY OF THE ACCOUNTING YEAR IS RS.33.50 CRORE AND INVESTMENT IN ASSETS IS ONLY TO THE TUNE OF RS.27.05 CRORE, IT CANNOT BE INFERRED THAT SUM O F RS.6.45 CRORE IS AVAILABLE WITH THE ASSESSEE. THERE IS A POSSIBILITY THAT THE ASSESSEE MIGHT HAVE PURCHASED RAW MATERIAL, ETC. AND THERE MAY NOT BE A NY CASH AVAILABLE AS ON THE FIRST DAY OF THE ACCOUNTING YEAR. THE CURRENT Y EAR'S PROFIT IS NOT AN ITEM AVAILABLE THROUGHOUT THE YEAR AND IT CANNOT BE A FI XED SUM. ORDINARILY, THE AMOUNT AVAILABLE WITH THE ASSESSEE IS RECYCLED OR U TILIZED IN PURCHASE OF RAW MATERIAL, ETC. FOR EXAMPLE, ON 1 ST MAY, 2007, THE ASSESSEE HAS NO LIQUID FUNDS AND AVAILED CASH CREDIT FACILITY TO PURCHASE ASSETS WORTH RS.5 CRORE BUT ON A SUBSEQUENT DAY, SAY AFTER ONE MONTH, THE ASSES SEE HAD RECEIVED CERTAIN SUMS IN THE ORDINARY COURSE OF BUSINESS, IT CANNOT BE INFERRED THAT THE ORIGINAL INVESTMENT WAS MADE OUT OF THE INTEREST FR EE FUNDS AVAILABLE SUBSEQUENTLY. EVEN AT THE END OF THE YEAR CURRENT Y EAR'S PROFIT MAY NOT BE AVAILABLE WITH THE ASSESSEE SINCE IT WOULD HAVE BEE N UTILIZED FOR DIFFERENT PURPOSES. IN FACT THE LEARNED CIT(A) MENTIONED THAT THE ASSESSEE MAINTAINED CASH CREDIT ACCOUNTS IN THE 'CONSORTIUM OF BANKS' W HICH ARE REQUIRED TO BE LOOKED IN TO AS TO WHETHER IN A PARTICULAR BANK ACC OUNT THE ASSESSEE HAD DEPOSITED ANY MONEY OR NOT AND WHETHER COMMON FUNDS , I.E. INTEREST FREE FUNDS AND INTEREST BEARING FUNDS ARE AVAILABLE IN T HAT ACCOUNT AND IF THE ASSESSEE IS ABLE TO PROVE THAT FROM THE SAID COMMON FUNDS INVESTMENTS WERE MADE, THEN CERTAINLY THE DECISION OF THE HON'BLE HI GH COURT CAN BE APPLIED IN PRINCIPLE.' 4.3 THE FOLLOWING IMPORTANT POINTS COMES OUT FROM THE A NALYSIS OF DIRECTIONS OF THE HON'BLE TRIBUNAL:- (I) ACTUAL UTILIZATION OF FUNDS WHETHER INTEREST FREE O R INTEREST BEARING IS A QUESTION OF FACTS WHICH CAN BE ANALYZED ONLY FROM SCRUTINY OF DAY TO DAY CASH FLOW STATEMENT. (II) THE HON'BLE TRIBUNAL HAS OBSERVED THAT FROM THE AMO UNT REFLECTED IN SHARE CAPITAL RESERVES & SURPLUS IT CANNOT AUTOMATI CALLY BE INFERRED THAT THESE AMOUNTS ARE AVAILABLE WITH THE ASSESSEE. THERE IS A ITA NO.1982/M/2018 M/S. LAFFANS PETROCHEMICALS LTD. 5 POSSIBILITY OF INVESTMENT IN RAW MATERIAL ETC. AND IT MAY NOT BE AVAILABLE IN A LIQUID FORM. (III) WHAT IS IMPORTANT IS AVAILABILITY OF INTER EST FREE INVESTIBLE SURPLUS WHICH NEEDS TO BE EXAMINED. (IV) EVEN THE CURRENT YEAR PROFIT IS NOT AN I TEM AVAILABLE THROUGH THE YEAR. ORDINARILY SUCH AMOUNTS ARE RECYCLED OR UTILIZED IN PURCHASE OF RAW MATERIAL. (V) IN THIS CASE, THE CASH CREDIT ACCOUNT IN CONSOR TIUM OF BANK WAS REQUIRED TO BE LOOKED INTO IN ORDER TO SEE WHETHER THE ASSESSEE HAD DEPOSITED ANY MONEY OR NOT, WHETHER COMMON FUNDS I. E. INTEREST FREE FUNDS OR INTEREST BEARING FUNDS ARE AVAILABLE IN THAT ACCOUNT, (VI) (VI) THE DIRECTION WAS VERY CATEGORICAL TO EXAMINE THE CASH FLOW STATEMENT DAY TO DAY AVAILABILITY AND INVESTMENT AN D ULTIMATELY INVESTIBLE SURPLUS ON THE DATE OF MAKING SUCH INVES TMENTS. 4.4 THE A.O. HAS RIGHTLY OBSERVED THAT SUBMISSION O F BANK STATEMENT, CLAIM OF DEPOSIT PUT OF SALE PROCEEDS ETC. CANNOT BE A SUFFI CIENT COMPLIANCE IN THE BACKGROUND OF DIRECTIONS OF THE HON'BLE TRIBUNAL. N O CASH FLOW STATEMENT OR DAY TO DAY CASH AVAILABILITY OR DIRECT NEXUS BETWEEN INVES TMENT AND AVAILABILITY OF FUNDS COULD BE SUBMITTED BEFORE THE A.O. DURING THE APPEL LATE PROCEEDING, THE TWIN ARGUMENTS HAS BEEN TAKEN. FIRST ARGUMENT IS THE SAM E WHICH HAS BEEN PUT FORTH BEFORE THE A.O. I.E. THE RECEIPT OF FUNDS FROM DEBT ORS. NONE OF THE SPECIFIC DIRECTION OF THE TRIBUNAL HAS BEEN COMPLIED. THUS, THIS ARGUM ENT IS DEVOID OF ANY MERIT AND THE AO'S CONCLUSION CANNOT BE INTERFERED WITH. SECO NDLY, AS MENTIONED EARLIER, THERE WERE CROSS APPEALS BEFORE THE HON'BLE ITAT, M UMBAI, AGAINST THE ORDER OF THE CIT(A) IN ORIGINAL ASSESSMENT. THE DEPARTMENT'S APP EAL RESULTING INTO SET ASIDE OF ISSUE OF CAPITALIZATION OF INTEREST WHICH IS THE SU BJECT MATTER OF APPEAL, WAS SET ASIDE FIRST I.E. 26-04.2013. THE ASSESSEE COMPANY'S APPEAL AGAINST THE ORDER OF THE CIT(A) HAS BEEN DECIDED LATER, PRECISELY ON 20.02.2 015. THE AR OFF THE APPELLANT COMPANY HAS CLAIMED THAT VIDE THIS ORDER, THE ITAT HAS ALLOWED DEPRECIATION UNDER VARIOUS HEADS WHICH WAS THE SUBJECT MATTER OF SCRUT INY BY THE A.O. WHERE HE CONCLUDED THAT ASSETS WERE NOT PUT TO USE DURING TH E RELEVANT PREVIOUS YEAR. FIRST OF ALL, IT IS NOT CLEAR WHETHER THE ASSETS FOR WHICH T HE HON'BLE TRIBUNAL HAS ALLOWED DEPRECIATION ARE THE SAME ASSETS. MOREOVER, BEFOR E ME, THE ORDER FOR ADJUDICATION IS ORDER U/S 143(3) R.W.S. 254 MEANING BY, IT HAS T O BE EXAMINED WHETHER THE A.O. HAS FOLLOWED THE DIRECTIONS OF THE ITAT VIDE ORDER DATED 26.04.2013 OR NOT. THE ORDER OF THE ITAT WAS TO BE COMPLIED WITHIN THE NAR ROW BOUNDARY OF LIMITATIONS UNDER THE DIRECTIONS OF THE HON'BLE ITAT. THUS, IN MY OPINION ANY SUBSEQUENT DECISION OF ANY APPELLATE AUTHORITY WILL NOT HAVE A NY BEARING ON THE SPECIFIC DIRECTIONS GIVEN BY THE ITAT. THUS, IN MY OPINION, THERE IS NO REASON AND JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE A. O. GROUND OF APPEAL IS, THEREFORE, DISMISSED AND THE ORDER OF THE AO IS UPHELD. 4. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) WAS ERRED IN CONFIRMING THE ADDITIONS MADE BY THE A O TOWARDS DISALLOWANCE OF INTEREST EXPENSES UNDER SECTION 36( 1)(III) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FILED C OMPLETE DETAILS ITA NO.1982/M/2018 M/S. LAFFANS PETROCHEMICALS LTD. 6 INCLUDING CONSORTIUM ACCOUNT STATEMENT AND ALSO CAS H FLOW STATEMENTS BEFORE THE AO TO PROVE AVAILABILITY OF O WN FUNDS TO MAKE INVESTMENTS IN FIXED ASSETS. THE LD. A.R. FUR THER SUBMITTED THAT THE ASSESSEE HAS FILED A LETTER TO T HE AO ON 13.04.2015 AND EXPLAINED EVIDENCES FILED IN SUPPORT OF AVAILABILITY OF OWN FUNDS BEFORE HIS STAFF MR. PRAK ASH AND ALSO STATED THAT MR. PRAKASH HAS CHECKED THE SAME AND SA TISFIED THAT THE PAYMENTS HAVE BEEN MADE OUT OF SALES REALIZATIO NS. ALTHOUGH, ENOUGH EVIDENCES HAVE BEEN FILED TO PROVE AVAILABILITY OF OWN FUNDS, THE AO AS WELL AS THE LD. CIT(A) IGNO RED ALL EVIDENCES FILED TO JUSTIFY AVAILABILITY OF OWN FUND S AND MADE ADDITIONS UNDER SECTION 36(1)(III) OF THE INCOME TA X ACT, 1961. IN THIS REGARD, SHE HAS FILED A STATEMENT ALONG WIT H FINANCIAL STATEMENT EXPLAINING TOTAL OWN FUNDS AVAILABLE WITH THE ASSESSEE AND AMOUNT OF INVESTMENTS MADE IN FIXED ASSETS. 5. THE LD. D.R., ON THE OTHER HAND, STRONGLY SUPPOR TING THE ORDER OF LD. CIT(A) SUBMITTED THAT EVEN IN REMAND P ROCEEDINGS THE ASSESSEE HAS FAILED TO FILE CASH FLOW STATEMENT AND OTHER DETAILS BEFORE THE AO AS WELL AS THE LD. CIT(A) IN LIGHT OF DIRECTIONS OF THE ITAT. THEREFORE, THERE IS NO ERR OR IN THE FINDINGS RECORDED BY THE LD. CIT(A) IN CONFIRMING T HE ADDITIONS MADE TOWARDS DISALLOWANCE OF INTEREST. 6. WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PART IES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE WHOLE ISSUE R EVOLVES AROUND DISALLOWANCE OF INTEREST EXPENSES UNDER SECTION 36( 1)(III) READ WITH PROVISO PROVIDED THERETO, AS PER WHICH THE ASS ESSEE HAS UTILISED BORROWED FUNDS FOR ACQUISITION OF CAPITAL ASSETS. ITA NO.1982/M/2018 M/S. LAFFANS PETROCHEMICALS LTD. 7 CONSEQUENTLY, THE AO HAS CAPITALIZED INTEREST EXPEN SES TO CAPITAL ASSETS ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE AVAILABILITY OF OWN FUNDS. IT IS THE CLAIM O F THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT ITS OWN FUNDS IN FORM OF SHARE CAPITAL AND RESERVES IS MUCH MORE THAN THE AMOUNT O F INVESTMENTS IN FIXED ASSETS. CONSEQUENTLY, NO DISA LLOWANCE COULD BE MADE IN RESPECT OF INTEREST EXPENSES, WHEN THE ASSESSEE HAS PROVED AVAILABILITY OF OWN FUNDS. WE FIND THAT IN THE FIRST ROUND OF LITIGATION, THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO TO VERIFY CERTAIN FACTS WITH REGARD TO CLAIM OF THE ASSESSEE THAT ITS OWN FUNDS ARE IN EXCESS OF IN VESTMENTS IN FIXED ASSETS AND DIRECTED THE AO TO VERIFY THE FACT S WITH REGARD TO CASH CREDIT ACCOUNTS MAINTAINED IN THE CONSORTIUM BANKS AND ALSO AVAILABILITY OF OWN FUNDS AS ON THE DATE OF IN VESTMENTS IN THE FIXED ASSETS. WE FURTHER NOTED THAT IN REMAND PROCEEDINGS, THE AO OBSERVED THAT ALTHOUGH THE TRIBUNAL HAS DIRE CTED THE ASSESSEE TO FILE CASH FLOW STATEMENTS TO PROVE AVAI LABILITY OF SUFFICIENT INTEREST FREE FUNDS AT ITS DISPOSAL FOR MAKING INVESTMENTS IN FIXED ASSETS, THE ASSESSEE HAS FAILE D TO FILE ANY EVIDENCES TO PROVE AVAILABILITY OF OWN FUNDS. WE F URTHER NOTE THAT EVEN THE LD. CIT(A) HAS RECORDED CATEGORICAL F INDING IN THE LIGHT OF OBSERVATIONS OF THE TRIBUNAL THAT ALTHOUGH THERE IS DIRECTION FROM THE TRIBUNAL TO FILE CASH FLOW STATE MENT AND OTHER DETAILS TO ASCERTAIN AVAILABILITY OF OWN FUNDS, THE ASSESSEE HAS FAILED TO FILE ANY DETAILS INCLUDING CASH FLOW STAT EMENTS. HOWEVER, THE FACT REMAINS THAT THE ASSESSEE HAS FIL ED A LETTER WRITTEN TO THE AO ON 13.04.2015 ALONG WITH RECTIFIC ATION APPLICATION UNDER SECTION 154 OF THE ACT, WHERE IT HAS BEEN STATED THAT TWO BOX FILES CONTAINING ALL THE BANK STATEMENTS HAVE ITA NO.1982/M/2018 M/S. LAFFANS PETROCHEMICALS LTD. 8 BEEN FILED BEFORE THE AO TO PROVE THE AVAILABILITY OF OWN FUNDS AND THE SAID LETTER IS PART OF PAPER BOOK FILED BY THE ASSESSEE. THE ASSESSEE HAS ALSO FILED FINANCIAL STATEMENT ALO NG WITH COMPUTATION OF OWN FUND AS PER WHICH ITS OWN FUND I N FORM OF CAPITAL AND RESERVES AND SURPLUS IS IN EXCESS OF IN VESTMENTS MADE IN FIXED ASSETS. THE ASSESSEE CLAIMS THAT IT HAS FILED NECESSARY DETAILS BEFORE THE AO, INCLUDING BANK STA TEMENTS TO PROVE AVAILABILITY OF OWN FUNDS, WHEREAS THE LOWER AUTHORITIES CLAIMS THAT NO EVIDENCE HAS BEEN FILED INCLUDING CA SH FLOW STATEMENT IN ORDER TO PROVE AVAILABILITY OF OWN FUN DS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE REEXAMINED BY THE AO IN LIGHT OF CLAIM OF THE ASSES SEE THAT IT HAS SUFFICIENT OWN FUNDS WHICH HAS BEEN USED FOR ACQUIS ITION OF FIXED ASSETS. IF, ASSESSEE IS ABLE TO PROVE THE AVAILABI LITY OF SUFFICIENT OWN FUNDS WHICH IS IN EXCESS OF INVESTMENTS IN FIXE D ASSETS, THEN THE QUESTION OF DISALLOWANCE OF INTEREST EXPEN DITURE UNDER SECTION 36(1)(III) DOES NOT ARISE, EVEN IF PROVISO PROVIDED THERETO STATES THAT INTEREST PAID ON BORROWED FUNDS NEEDS T O BE CAPITALIZED TILL THE DATE SUCH ASSETS ARE PUT TO US E, IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. HDFC BANK LTD. IN ITA NO.330 OF 2012 DECIDED ON 23R D JULY 2014. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO VERIFY THE CLAIM OF THE ASSESSEE IN L IGHT OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (SUPRA) WHERE THE HONBLE COURT CLEARLY HELD T HAT IF OWN FUNDS IS IN EXCESS OF INVESTMENTS MADE IN FIXED ASS ETS, THEN THE GENERAL PRESUMPTION GOES IN FAVOUR OF THE ASSESSEE THAT INVESTMENTS IN ASSETS IS OUT OF OWN FUNDS. NEEDLES S TO SAY, THE ASSESSEE SHALL FURNISH NECESSARY EVIDENCES INCLUDIN G CASH FLOW ITA NO.1982/M/2018 M/S. LAFFANS PETROCHEMICALS LTD. 9 STATEMENT TO PROVE AVAILABILITY OF OWN FUNDS. IN C ASE, THE ASSESSEE PROVES AVAILABILITY OF OWN FUNDS, THEN THE AO IS DIRECTED TO DELETE THE ADDITIONS MADE TOWARDS CAPIT ALIZATION OF INTEREST UNDER SECTION 36(1)(III) READ WITH EXPLANA TION 8 TO SECTION 43(1) OF THE INCOME TAX ACT, 1961. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22.07.2019. SD/- SD/- (RAM LAL NEGI) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.07.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.