Akshar Proteins Pvt. Ltd., Banaskantha V. The ACIT, B.K. Circle , Palanpur

ITA 2403/AHD/2013

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1343 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Section: 143(3)

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 2403/AHD/2013 ( ASSESSMENT YEAR : 2008-09) AKSHAR PROTEINS PVT. LTD. GANDHI CHOWK, DEESA, BANASKANTHA - 385535 / VS. ACIT CIRCLE, PALANPUR ./ ./ PAN/GIR NO. : AAFCA9457P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA, A.R. / RESPONDENT BY : SHRI S. K. DEV, SR.D.R. DATE OF HEARING 06/08/2019 !'# / DATE OF PRONOUNCEMENT 11/09/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-XX, AHMEDABAD (CIT(A) IN SHORT), DATED 15.02.2012 ARISING IN THE ASSESSMENT ORDER DATED 27.12.2010 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY 2008-09. ITA NO. 2403/AHD/13 [AKSHAR PROTEINS PVT. LTD. VS. ACIT] A.Y. 2008-09 - 2 - 2. AS PER THE CAPTIONED APPEAL, THE ASSESSEE HAS CH ALLENGED THE DISALLOWANCE OF INTEREST OF RS.9,04,781/- ON BORROW ED CAPITAL UNDER S.36(1)(III) OF THE ACT. 3. THE APPEAL FILED BY THE ASSESSEE WAS FOUND TO BE BELATED BY 504 DAYS IN PREFERRING THE APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED AFFIDAVIT GIVING EXPLANATION FOR DELAY AND SE EKING CONDONATION THEREOF. THE ASSESSEE HAS EXPLAINED THE INADVERTEN T LAPSE ON THE PART OF THE TAX CONSULTANT AND THEREBY THE ORDER OF THE CIT(A) COULD NOT BE COMMUNICATED PROPERLY. A READING OF THE CONSEQUENC E OF THE EVENT IS POINTED OUT IN THE AFFIDAVIT GIVES AN IMPRESSION OF BONAFIDE LAPSE. THE DELAY IN FILING THE APPEAL IS THUS CONDONED. 4. THE ASSESSEE IS A CLOSELY HELD COMPANY ENGAGED I N THE BUSINESS OF MANUFACTURING OF MUSTARD OIL. THE RETURN OF INC OME WAS FILED FOR AY 2008-09 AT RS.66,660/-. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSEE HAS MADE SUBSTANTIAL ADDITION TO THE FIXED ASSETS OF RS.2,72,22,942/- TO WARDS FACTORY CONSTRUCTION AND PLANT AND MACHINERY. IT WAS FURTH ER NOTICED BY THE AO THAT THE ASSESSEE HAS PAID INTEREST OF RS.21,68, 045/- ON THE BORROWED FUNDS. THE AO INVOKED THE PROVISIONS OF S ECTION 36(1)(III) OF THE ACT AND HELD THAT INTEREST INCURRED RS.90,47 ,181/- REQUIRES TO BE CAPITALIZED TO THE FIXED ASSETS AND IS NOT ADMISSIB LE AS REVENUE DEDUCTION. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) HOWEVER ENDORSED THE ORDER OF THE AO EX PARTE OWING TO FAILURE OF THE ASSESSEE TO COMPLY WITH THE NOTICE O F HEARING. 6. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. ITA NO. 2403/AHD/13 [AKSHAR PROTEINS PVT. LTD. VS. ACIT] A.Y. 2008-09 - 3 - 7. THE LEARNED AR FOR THE ASSESSEE REFERRED TO THE FINANCIAL STATEMENT OF THE ASSESSEE COMPANY AND CONTENDED THA T THE BORROWED FUNDS HAVE NOT BEEN USED FOR THE ACQUISITION OF THE FIXED ASSETS DIRECTLY AND THEREFORE THE INTEREST EXPENDITURE CAN NOT BE ADDED TO THE ACTUAL COST OF THE FIXED ASSETS. THE LEARNED AR SE CONDLY SUBMITTED THAT ERSTWHILE PROVISO OF SECTION 36(1)(III) OF THE ACT AS APPLICABLE AT THE RELEVANT TIME REQUIRES CAPITALIZATION OF INTERE ST INCURRED ON BORROWED CAPITAL ONLY WHERE THE ACQUISITION OF ASSE TS RESULTS IN EXTENSION OF EXISTING BUSINESS OR PROFESSION. THE LEARNED AR SUBMITTED THAT IN THE ABSENCE OF EXTENSION TO THE E XISTING BUSINESS THE INTEREST INCURRED FOR UTILIZATION OF BORROWED CAPIT AL TOWARDS FIXED ASSETS WOULD NOT BE IMPEDIMENT FOR DEDUCTION UNDER S. 36(1)(III) OF THE ACT. 8. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AO. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE ST RAIGHTWAY NOTICE FEW FACTS FROM THE FINANCIAL STATEMENT FOR T HE YEAR ENDING 31.03.2008. OWN CAPITAL (SHARE CAPITAL + RESERVES + SURPLUS) OF THE ASSESSEE STANDS AT RS.42.40 LAKHS AS ON 31.03.2008 WHEREAS BORROWED CAPITAL STANDS AT RS.120.16 LAKHS, THE TOTAL FIXED ASSETS AT THE END OF THE YEAR STANDS AT RS.324.01 LAKHS AND THE ADDITION TO THE EXISTING PLANT AND MACHINERY (PREVIOUS YEAR; RS.24.42 LAKHS) STANDS AT RS.254.47 LAKHS. THIS BEING SO, IT IS OBVIOUS AND GLARING THAT FRESH INVESTMENT IN PLANT AND MACHINERY RS.254.47 LAKHS T O THE EXISTING PLANT AND MACHINERY OF RS.24.42 LAKHS TANTAMOUNTS T O SUBSTANTIAL EXPANSION OF THE EXISTING BUSINESS AS CONTEMPLATED IN THE ERSTWHILE PROVISO TO SECTION 36(1)(III) OF THE ACT PRIOR TO I TS AMENDMENT. THUS, IN TERMS OF THE PROVISO, IT IS OBLIGATORY ON THE PA RT OF THE ASSESSEE TO CAPITALIZE AND EXCLUDE THE INTEREST ON BORROWED CAP ITAL FROM REVENUE ITA NO. 2403/AHD/13 [AKSHAR PROTEINS PVT. LTD. VS. ACIT] A.Y. 2008-09 - 4 - ACCOUNT AS ATTRIBUTABLE TO ACQUISITION OF FIXED ASS ETS TILL THE TIME, THE ASSET IS PUT TO USE. IT IS OSTENSIBLE THAT BORROWE D CAPITALIZE HAVE BEEN UTILIZED FOR ACQUISITION OF FIXED ASSETS. THE PROV ISO TO SECTION 36(1)(III) OF THE ACT THUS HAS BEEN RIGHTLY INVOKED BY THE AO. WE SEE NO ERROR IN THE FINDINGS OF THE AO AS ENDORSED BY T HE CIT(A). WE THUS DECLINE TO INTERFERE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 11/09/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 11/09/2 019