M/s Amartex Industries Ltd., Chandigarh V. Addl. CIT, Chandigarh

ITA 808/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77190 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 10-06-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 02-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Capital asset; Depreciation; Principle of natural justice; Proportionate interest; Notional interest
• Section: 143(3); 14A; 32; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1034 /CHD/2012 ASSESSMENT YEAR : 2006-07 M/S AMARTEX INDUSTRIES LTD., VS THE DY. COMMISSION ER OF SCO 18-19, INCOME TAX, SECTOR 9D, CIRCLED 1(1), CHANDIGARH. CHANDIGARH . PAN : AABCA2243H & ITA NO.1033/CHD/2012 ASSESSMENT YEAR : 2009-10 M/S AMARTEX INDUSTRIES LTD., VS THE ADDL. CIT, SCO 18-19, RANGE I, SECTOR 9D, CHANDIGARH. CHANDIGARH. PAN : AABCA2243H & ITA NO.808/CHD/2013 ASSESSMENT YEAR : 2010-11 M/S AMARTEX INDUSTRIES LTD., VS THE ADDL. CIT, SCO 18-19, RANGE I, SECTOR 9D, CHANDIGARH. CHANDIGARH. PAN : AABCA2243H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRIKSHIT AGGARWAL RESPONDENT BY : DR. AMARVEER SINGH DATE OF HEARING : 17.06.2014 DATE OF PRONOUNCEMENT : 24.07.2014 ORDER PER SUSHMA CHOWLA, JM THESE THREE APPEALS FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME T AX (APPEALS) CHANDIGARH DATED 04.07.2012 AND 27.05.2013 RELATING TO ASSESSMENT 2 YEARS 2006-07, 2009-10 AND 2010-11 RESPECTIVELY AGA INST THE ORDER PASSED UNDER SECTION 148 R.W.S. 143(3) OF THE INCOM E-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. ALL THE THREE APPEALS RELATING TO THE SAME ASSES SEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. ITA 1034/CHD/2012 :: ASSESSEE'S APPEAL :: A.Y. 2006-07 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT (A) THROUGH HIS ORDER DATED 04.07.2012 H AS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SE CTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE INITIATION AND CONCLUSION OF REASSESSMENT PROCEEDIN GS U/S 148 R.W.S. 147 OF THE ACT IS BAD IN LAW AND HENCE THE REASSESSMENT FRAMED IS ILLEGAL. 3. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSIT ION OF THE CASE, THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION O F LD. AO WHEREIN HE HAD DISALLOWED THE INTEREST CLAIMED U/S 36(1)(III) OF THE ACT AMOUNTING TO RS. 29,54,333/- ON CAPITAL WORK IN PROGRESS. 4. THE GROUND OF APPEAL NO. 1 RAISED BY THE ASSESS EE IS GENERAL IN NATURE AND THE SAME IS DISMISSED. 5. THE ISSUE IN GROUND NO. 2 RAISED BY THE ASSESSEE IS AGAINST THE RE- OPENING OF ASSESSMENT UNDER SECTION 147/148 OF THE ACT. 6. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE BEFORE US MOVED AN APPLICATION UNDER RULE 11 OF THE ITAT RULE S, 1963 CLAIMING THAT THE SAID GROUND OF APPEAL NO. 2 WHICH IS PUREL Y ON LEGAL ISSUE, WAS NOT RAISED BEFORE THE COMMISSIONER OF INCOME TAX (A PPEALS) BUT THE SAME WAS TAKEN IN THE ORIGINAL GROUND OF APPEAL FIL ED BEFORE THE TRIBUNAL AND IN THE INTEREST OF NATURAL JUSTICE, THE SAID GR OUND OF APPEAL MAY BE TREATED AS ADDITIONAL GROUND OF APPEAL. 3 7. THE PLEA OF THE ASSESSEE BEFORE US WAS THAT T HE SAID GROUND OF APPEAL BEING PURELY LEGAL ISSUE WAS TO BE ADMITTED AND ADJUDICATED. WE FIND MERIT IN THE PLEA OF THE ASSESSEE AS THE ISSUE RAISED IS PURELY LEGAL ISSUE AND FOLLOWING THE RATIO LAID DOWN BY THE HON' BLE SUPREME COURT IN NATIONAL THERMAL POWER CO. LTD. 229 ITR 383 (S.C), WE ADMIT THE SAID GROUND OF APPEAL AND PROCEED TO DISPOSE OF THE SAME . 8. IN THE FACTS OF THE PRESENT CASE, THE ASSESSE E HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3.46 CR ON 13.12.2006. THE ASSESSMENT IN THE CASE WAS COMPLETED UNDER SECT ION 143(3) OF THE ACT ON TOTAL INCOME OF RS. 4.22 CR VIDE ORDER DATED 19.12.2008. THEREAFTER REASONS WERE RECORDED FOR RE-OPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND NOTICE WAS ISSUED TO THE ASSESSEE UNDER SECTION 148 OF THE ACT AND WAS SERVED UPON THE ASSE SSEE ON 31.03.2011. THE ASSESSEE IN REPLY STATED THAT THE ORIGINAL RETU RN OF INCOME FILED ON 29.11.2006 MAY BE TREATED AS FILED IN RESPONSE TO N OTICE UNDER SECTION 148 OF THE ACT. THE ASSESSING OFFICER FROM THE PER USAL OF THE BALANCE- SHEET OBSERVED THAT THE ASSESSEE HAD SHOWN CAPITAL WORK-IN-PROGRESS AT RS. 5.90 CR AND SINCE THE CAPITAL ASSETS WERE NOT P UT TO USE IN THE YEAR UNDER CONSIDERATION, THE PROPORTIONATE INTEREST PAY ABLE WAS TO BE DISALLOWED IN VIEW OF THE RATIO LAID DOWN BY THE HO N'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS ABHISHEK INDUSTRIES LT D. 286 ITR 1 (P&H). FURTHER, THE ASSESSING OFFICER NOTED THAT E VEN THE PROVISO TO SECTION 36(1)(III) OF THE ACT WAS INSERTED W.E.F. 0 1.04.2003 AND HENCE, THE PROPORTIONATE INTEREST PAID ON THE FUNDS APPLIE D FOR CAPITAL ASSETS @ 5% WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. REJECTING THE PLEA OF THE ASSESSEE THAT IT HAD NOT STARTED ANY NEW BUSINESS DURING THE YEAR UNDER CONSIDERATION AND FU RTHER THE LOANS BORROWED WERE NOT FOR ANY INDEPENDENT VENTURE, UNAC COUNTED WITH ITS 4 EXISTING BUSINESS, THE EXPANSION OF THE EXISTING BU SINESS WAS FULLY AUTHORIZED BY THE MEMORANDUM AND ARTICLES OF ASSOCI ATION OF THE ASSESSEE COMPANY AND HENCE, NO PART OF INTEREST COU LD BE DISALLOWED IN THE CASE OF MIXED POOL OF FUNDS. THE ASSESSING OFF ICER, REJECTING THE CLAIM OF THE ASSESSEE DISALLOWED THE INTEREST UNDER SECTION 36(1)(III) OF THE ACT AT RS. 29,54,333/-. NO OTHER ADDITION WAS MADE VIDE ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 148 O F THE ACT. 9. BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS ), THE ONLY ISSUE RAISED WAS AGAINST THE DISALLOWANCE OF INTEREST, WH ICH WAS UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS A BHISHEK INDUSTRIES (SUPRA). 10. THE ASSESSEE IS IN APPEAL BEFORE US ON BOTH THE ACCOUNTS I.E. VIDE GROUND NO. 2, IT HAD RAISED THE ISSUE OF INITIATION AND CONCLUSION OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 147/148 OF THE ACT AND ALSO AGAINST THE ADDITION MADE ON MERITS BY DISALLOWING THE INTEREST UNDER SECTION 36(1)(III) OF THE ACT AT RS. 29,54,333/-. 11. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT O NCE THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT, THE INVOCATION OF PROVISO TO SECTION 36(1)(III) OF THE ACT WAS NOT AUTOMATIC AS IT HAD TO BE ESTABLISHED WHETHER THE INTEREST BE ARING FUNDS WERE UTILIZED FOR MAKING THE SAID INVESTMENT. THE FIRST ASPECT OF THE ISSUE IS THAT WHERE THE ASSESSEE HAS NOT RAISED THE SAID ISS UE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), WHETHER THE S AME CAN BE ADMITTED FOR ADJUDICATION IN THE SECOND ROUND OF AP PEAL. WE FIND THAT THE ISSUE OF RE-ASSESSMENT UNDER SECTION 148 OF THE ACT IS PURELY A LEGAL ISSUE IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN 5 NATIONAL THERMAL POWER CO. LTD. (SUPRA). WE ADMIT THE SAID LEGAL ISSUE AND PROCEED TO DECIDE THE SAME. 12. WE FIND NO MERIT IN THE PLEA OF THE LD. DR F OR THE REVENUE THAT THE SAME IS FACTUAL ISSUE AND NOT LEGAL ISSUE. HOWEVER , THE RE-OPENING OF ASSESSMENT UNDER SECTION 147/148 OF THE ACT IS VALI D BECAUSE FACT OF DIVERSION OF FUNDS WAS NOT PROPERLY DISCLOSED BY TH E ASSESSEE AND THEREFORE, PROVISO TO SECTION 147 IS NOT APPLICABLE . HENCE, THE PROCEEDINGS INITIATED UNDER SECTION 147/148 OF THE ACT HAVE BEEN VALIDLY INITIATED AND COMPLETED. 13. NOW COMING TO THE ISSUE RAISED ON MERITS I.E . THE DISALLOWANCE WORKED OUT UNDER SECTION 36(1)(III) OF THE ACT ON T HE CAPITAL WORK-IN- PROGRESS. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEE'S OWN CASE IN APPEALS RELATING TO ASSESSM ENT YEARS 2006-07 TO 2008-09 WITH LEAD ORDER IN ITA NO. 1056/CHD/2010 RE LATING TO ASSESSMENT YEAR 2006-07. THE TRIBUNAL IN ITA NO. 6 87/CHD/2011 IN THE APPEAL FILED BY THE REVENUE RELATING TO ASSESSMENT YEAR 2007-08 ADDRESSED THE SAID ISSUE OF DISALLOWANCE OF INTERES T UNDER SECTION 36(1)(III) OF THE ACT. THE TRIBUNAL VIDE ORDER DAT ED 30.07.2012 VIDE PARA 86 AT PAGE 41 HELD AS UNDER : 86. WE FIND THAT THE ISSUE IN THE PRESENT CASE IS COVERED BY THE PROVISO TO SECTION 36(L)(III) OF THE ACT WHICH CLEARLY PROVIDES THAT WHERE BORROWED FUNDS HAVE BEEN UT ILIZED FOR INVESTMENT IN THE FIXED ASSETS FOR THE PERIOD FRO M THE DATE OF UTILIZATION OF THE FUNDS TILL THE DATE OF PUTTING THE ASSETS TO USE, INTEREST RELATABLE TO SUCH DEPLOYMENT OF FUNDS IS TO BE DISALLOWED. WE FIND THAT THE ASSESSING OFFICER H AD APPLIED THE ABOVE SAID PROVISIONS TO WORK OUT THE DISALLOWANCE OF RS.6,89,945/- AS PER SCHEDULE AT PAGE 81 OF THE ASS ESSMENT ORDER. WE ARE IN CONFORMITY WITH THE ORDER OF THE ASSESSIN G OFFICER AND REVERSING THE ORDER OF THE CIT (APPEALS) WE ALLOW G ROUND NO.L RAISED BY THE REVENUE. 6 14. THE LD. AR FOR THE ASSESSEE IN FAIRNESS POI NTED OUT THAT THOUGH THE ISSUE IS PURELY AGAINST THE ASSESSEE BUT THE AS SESSING OFFICER HAD MADE WRONG CALCULATION BY APPLYING A FLAT RATE OF I NTEREST OF 5% TO THE CLOSING BALANCE. IN THE ABOVE FACTS AND CIRCUMSTAN CES, WE ARE OF THE VIEW THAT THE ISSUE NEEDS TO BE SET ASIDE TO THE FI LE OF ASSESSING OFFICER TO RE-WORK THE DISALLOWANCE UNDER SECTION 36(1)(III ) OF THE ACT BY APPLYING PRO-RATA DAY PRODUCT METHOD AND NOT BY APP LYING FLAT RATE OF INTEREST ON THE CLOSING BALANCE OF EACH DAY. THE G ROUND OF APPEAL NO. 3 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. ITA 1033/CHD/2012 :: ASSESSEE'S APPEAL :: A.Y. 2009-10 15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE WORTHY CIT (APPEALS) THROUGH HIS ORDER DATED 04.07, 2012 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF PROVISIONS O F SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF LD. A O WHEREIN HE HAD IS ALLOWED THE INTEREST CLAIMED U/S 36(1)(III) OF THE ACT FOR RS. 7,93,364/- ON CAPITAL WORK IN PROGRESS. 3. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO WHEREIN HE HAD DISALLOWED THE DEPRECIATION OF RS. 43,248/- ON FIXE D ASSETS INSTALLED AT BADDI UNIT BY ALLEGING THAT IF THE UNIT DID NOT FUNCTION, THE DEPRECIATION ATTRIBUTABLE TO THAT UNIT IS NOT ALLOWABLE. 4. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF LD. A O WHEREIN HE HAD MADE DISALLOWANCE OF RS. 7,895/- U/S 14A OF THE ACT R.W. R. 8D BY ASSESSING THE NOTIONAL INTEREST ON INVESTMENT OF RS. 1,50,000/- I N EQUITY SHARES OF SISTER CONCERN, 16. THE GROUND OF APPEAL NOS. 1 & 5 RAISED BY THE ASSESSEE ARE GENERAL IN NATURE AND THE SAME ARE DISMISSED. 17. THE GROUND OF APPEAL NO. 4 RAISED BY THE ASSE SSEE IS NOT PRESSED HENCE, THE SAME IS DISMISSED. 7 18. NOW COMING TO GROUND OF APPEAL NO. 2, THE ISS UE RAISED IS DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) O F THE ACT ON CAPITAL WORK-IN-PROGRESS. SIMILAR ISSUE AROSE BEFORE THE T RIBUNAL IN ITA NO. 1034/CHD/2012 AND WE HAVE ALREADY DECIDED THE SAME IN PARAS HEREIN ABOVE. FOLLOWING THE SAME PARITY OF REASONING, WE DECIDE THE ISSUE AGAINST THE ASSESSEE. HOWEVER, WE SET ASIDE THE SA ME TO THE FILE OF ASSESSING OFFICER TO RE-WORK THE DISALLOWANCE ON PR O-RATA DAY PRODUCT METHOD. THE GROUND OF APPEAL NO. 2 RAISED BY THE A SSESSEE IS THUS, PARTLY ALLOWED. 19. THE ISSUE IN GROUND OF APPEAL NO. 3 IS IN REL ATION TO THE DISALLOWANCE OF DEPRECIATION OF RS.43,248/- ON FIXE D ASSETS INSTALLED AT BADDI UNIT. 20. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION HAD NOT CLAIMED AN Y DEDUCTION UNDER SECTION 80IC OF THE ACT IN RESPECT OF THE UNIT AT B ADDI. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE INFO RMED THAT NO WORK HAD BEEN CARRIED OUT AT THE BADDI UNIT DURING THE Y EAR. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF DEPRECIATION CLAIME D IN BADDI UNIT. THE ASSESSEE HAD CLAIMED DEPRECIATION AMOUNTING TO RS. 43,248/-. HOWEVER, AS NO WORK HAD BEEN CARRIED OUT AT THE BADDI UNIT, THE CLAIM OF THE ASSESSEE VIS--VIS THE DEPRECIATION ON ASSETS AT RS . 43,248/- WAS DISALLOWED. THE SAME WAS UPHELD BY THE COMMISSIONE R OF INCOME TAX (APPEALS) AGAINST WHICH THE ASSESSEE IS IN APPEAL. 21. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT TH E ACTIVITIES WERE DISCONTINUED IN BADDI UNIT AND PART OF THE MACHINER Y WAS SHIFTED TO DERA BASSI UNIT. HOWEVER, SOME OF THE MACHINERY WAS LEF T IN BADDI UNIT. THE LD. AR FOR THE ASSESSEE FURTHER EXPLAINED THAT THE BUSINESS WAS THUS, 8 DISCONTINUED IN ASSESSMENT YEAR 2009-10 BUT HAD RES TARTED IN ASSESSMENT YEAR 2011-12 IN BADDI UNIT. IT WAS FURTHER CONTEND ED BY THE LD. AR FOR THE ASSESSEE THAT SECTION 32 OF THE INCOME TAX ACT HAD TO BE INTERPRETED IN CASES THE ASSET WAS TEMPORARILY NOT IN USE BUT W AS PART OF THE BLOCK OF ASSETS AND WHETHER ON SUCH BLOCK OF ASSETS, DEPRECI ATION WAS ALLOWABLE. RELIANCE WAS PLACED UPON CIT VS YAMAHA MOTOR INDIA PVT. LTD. 328 ITR 297 (DEL). 22. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT GROUND OF APPEAL IS IN RELATION TO THE ALLOWABILITY OF DEPRECIATION ON THE ASSETS WHICH WE RE PART OF BLOCK OF ASSETS IN BADDI UNIT. DURING THE YEAR UNDER CONSIDE RATION, NO MANUFACTURING ACTIVITY WAS CARRIED OUT AT THE SAID UNIT AND PART OF THE ASSETS WERE TRANSFERRED TO THE DERA BASSI UNIT BY T HE ASSESSEE. HOWEVER, BALANCE ASSETS WERE LYING IN BADDI UNIT AND THE ASS ESSEE CLAIMED DEPRECIATION ON THE SAME WHICH WAS DISALLOWED BY TH E ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS). WE FIND N O MERIT IN THE STAND OF THE REVENUE AUTHORITIES IN VIEW OF THE CON CEPT OF BLOCK OF ASSETS WHERE THE ASSETS CANNOT BE INDIVIDUALLY IDENTIFIED AFTER THE SAME ARE MERGED IN THE BLOCK OF ASSETS. THE ASSESSEE HAD TE MPORARILY SUSPENDED THE ACTIVITIES AT BADDI UNIT AND HAD RE-STARTED MAN UFACTURING ACTIVITY IN ASSESSMENT YEAR 2011-12. WE FIND SUPPORT FROM THE R ATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN CIT VS YAMAHA MOTOR INDIA PVT. LTD. (SUPRA) WHEREIN IT WAS HELD THAT AS LONG AS THE MACHINERY WAS AVAILABLE FUR USE, THOUGH NOT ACTUALLY USED, IT FLL WITHIN THE EXPRESSION 9 USED FOR THE PURPOSE OF THE BUSINESS AND THE ASSE SSEE COULD CLAIM THE BENEFIT OF DEPRECIATION. IN THE TOTALITY OF THE ABOVESAID FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO A LLOW DEPRECIATION ON THE FIXED ASSETS REMAINING AT BADDI UNIT. THE GROU ND OF APPEAL RAISED BY THE ASSESSEE IS THUS, ALLOWED. ITA 808/CHD/2013 :: ASSESSEE'S APPEAL :: A.Y. 2010-11 24. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE WORTHY CIT (APPEALS) THROUGH HIS ORDER DATED 27 .05.2013 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF PROVISION S OF SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSIT ION OF THE CASE, THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE AC TION OF LD. AO. OF MAKING IMPUGNED ADDITION OF RS. 4,56,830/ - BY ERRONEOUSLY DISALLOWING PROPORTIONATE INTEREST CALCULATED AT AV ERAGE RATE OF 5.03% P.A. ON OUTSTANDING MONTHLY BALANCES OF CAPITAL WO RK IN PROGRESS (CWIP) BY HOLDING THAT THE APPELLANT HAS USED INTER EST BEARING FUNDS TOWARDS PURCHASE OF FIXED ASSETS AND HAS FURTHER ER RED IN IGNORING THE FACT THAT THE APPELLANT COMPANY HAD HUGE INTEREST F REE FUNDS. 3. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSIT ION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN PARTLY CONFIRMING THE AC TION OF LD. AO. WHEREIN HE MADE DISALLOWANCE OF INTEREST OF RS. 9,2 7,451 /- CALCULATED @ 5.03% P.A. ON THE AVERAGE BALANCE OF INTEREST FR EE ADVANCES TO FOLLOWING PARTIES STANDING IN THE BOOKS OF APP ELLANT COMPANY BY INVOKING THE PROVISIONS OF SECTION 36(L)(III) OF TH E ACT:- NAME OF THE CONCERN AVERAGE BALANCE (IN RS.) I. AMARTEX INFRASTRUCTURE LTD. 98,03,246/- II. AMARTEX INTEGRATED TEXTILE PARK 3,58,000/- III. ARUN GROVER (IMPREST) 27,32,615/- 4. THAT ON FACTS, CIRCUMSTANCES AND LEGAL PO SITION OF THE CASE, THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO. OF MAKING DISALLOWANCE OF DEPRECIATION OF RS. 37,312/- CLAIMED BY THE APPELLANT COMPANY IN RESPECT OF ITS BADDI UNIT BY E RRONEOUSLY HOLDING THE SAME TO BE NOT ALLOWABLE AS NO WORKING TOOK PLA CE IN THE UNIT DURING THE YEAR UNDER CONSIDERATION. 10 5. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION O F LD. AO OF MAKING IMPUGNED ADDITION OF RS. 8,301/- IN THE TOTAL INCOM E BY ERRONEOUSLY INVOKING THE PROVISIONS OF SECTION 14A R.W.R. 8D OF INCOME T AX RULES, 1962 EVEN WHEN NO EXPENDITURE WAS INCURRED DURING THE YEAR BY THE APPELLANT COMPANY FOR MAKING SUCH INVESTMENT. 25. THE GROUND OF APPEAL NO. 1 RAISED BY THE ASSE SSEE IS GENERAL IN NATURE AND THE SAME IS DISMISSED. 26. THE GROUND OF APPEAL NOS. 3 AND 5 ARE NOT PRE SSED AND HENCE, THE SAME ARE DISMISSED. 27. THE ISSUE IN GROUND OF APPEAL NO. 4 IS IDENTICA L TO THE ISSUE IN GROUND OF APPEAL NO. 3 RAISED IN ASSESSMENT YEAR 20 09-10 IN RESPECT OF DEPRECIATION ON FIXED ASSETS AT BADDI UNIT. IN LIN E WITH OUR DECISION IN PARAS HEREIN ABOVE, THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 28. NOW COMING TO GROUND OF APPEAL NO. 2 RAISED BY THE ASSESSEE WHICH IS AGAINST THE ADDITION OF RS. 456,830/- ON A CCOUNT OF DISALLOWANCE OF INTEREST ON THE MONTHLY BALANCES OF CAPITAL WORK-IN- PROGRESS. THE ASSESSING OFFICER HAD MADE THE SAID DISALLOWANCE AS THE ASSESSEE HAD UTILIZED INTEREST BEARING FUNDS TO MAK E ADDITIONS TO THE ASSETS WHICH WERE CAPITALIZED AS WORK-IN-PROGRESS. 29. THE LD. AR FOR THE ASSESSEE FAIRLY ADMITTED T HAT PRINCIPALLY THE SAID ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSMENT YEAR 2006-07. HOWEVER, IN THE CAPTIO NED ASSESSMENT YEAR, THE WORK HAD COMPLETED AND THE AMOUNT WAS TRA NSFERRED TO FIXED ASSETS AND THE BALANCE WHICH WAS LEFT UNDER THE SAI D HEAD, WAS ONLY INTEREST PART AND THERE WAS NO MERIT IN ADDING THE SAME. 11 30. WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD, IN LINE WITH OUR DECISION IN THE PARAS HEREIN ABOVE WHEREIN WE HAVE UPHELD THE CHARGEABILITY OF INTEREST ON THE AMOUNTS DEBITED TO WORK-IN-PROGRESS. HOWEVER, WE HAD DIRECTED THE ASSESSING OFFICER TO R ECOMPUTE THE SAME ON PRO-RATA BASIS. DURING THE YEAR UNDER CONSIDERA TION, THE PLEA OF THE ASSESSEE IS THAT THE SAID AMOUNTS DEBITED TO WORK-I N-PROGRESS HAD BEEN TRANSFERRED TO THE FIXED ASSETS AND THE BALANCE AMO UNT LEFT UNDER THE SAID HEAD WAS ONLY ON ACCOUNT OF INTEREST. WE DEEM IT F IT TO RESTORE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE CLAIM OF ASSESSEE AND IN CASE THE AMO UNTS DEBITED TO WORK- IN-PROGRESS HAVE BEEN SHIFTED TO THE FIXED ASSETS A CCOUNT AND THE BALANCE AMOUNT UNDER THE SAID HEAD WAS ONLY INTEREST, THEN NO DISALLOWANCE IS WARRANTED ON ACCOUNT OF DISALLOWANCE OF PROPORTIONA TE INTEREST. THE ASSESSING OFFICER SHALL VERIFY THE CLAIM OF THE ASS ESSEE AND DECIDE THE ISSUE IN LINE WITH OUR DIRECTIONS. THE GROUND OF A PPEAL NO. 2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 30. IN THE RESULT, ALL THE THREE APPEALS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JULY,2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDIC IAL MEMBER DATED: 24 TH JULY,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT,CHD.