Osho Forge Ltd., Ludhiana V. DCIT,Circle-1, Ludhiana

MA 17/CHANDI/2023

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0096 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-11-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-11-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2023
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Commercial expediency; Capital expenditure
• Section: 191

Judgement Text

आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “बी” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH (VIRTUAL COURT) ᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM Miscellaneous Application No. 17/Chd/2023 In ITA NO. 101/Chd/ 2020 Assessment Year: 2009-10 Osho Forge Ltd. D-42, Phase V, Focal Point Ludhiana बनाम The DCIT., Circle I, Ludhiana ̾थायी लेखा सं./PAN NO: AAACO3362L अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Sarabjit Garg, CA राज᭭व कᳱ ओर से/ Revenue by : Shri Dharam Vir, JCIT, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 03/11//2023/ उदघोषणा कᳱ तारीख/Date of Pronouncement : 08/11/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : The present miscellaneous application has been filed by the Assessee against the order passed by the Coordinate Bench dt. 02/08/2022 in ITA No. 101/Chd/2020 for Assessment Year 2009-10. 2. In the Miscellaneous Application, it has been submitted as under: 1. That the only ground of appeal in this case was against sustaining of disallowance of interest amounting to Rs. 36,86,676/- u/s 36(1)(iii) of the IT. Act by Ld. CIT(A). 2. That in the written submissions as reproduced at para 16 of the aforesaid order vide para 2.3 and 2.4, the assessee had submitted as under:- "2.3 That despite the fact that the assessee had already capitalized interest u/s 36(1)(iii), the Ld. AO worked out the interest to disallowed on the entire amount of capital expenditure made during the year under appeal @12% p.a. for full year irrespective of the date of incurrence of capital expenditure and after deducting the interest already disallowed by the assessee amounting to Rs. 39,17,410/-, 2 disallowed a further sum of Rs. 36,83,,676/- on the ground that the assessee is paying huge amounts of interest on other bank borrowings and by relying on the judgement of Hon'ble Punjab & Haryana High Court in case Abhishek Industries Ltd. 2.4 During the course of appeal it was stated that the treatment given by the assessee found favour with Hon'ble ITAT, Chandigarh in case of DCIT vs. Samrat Forging Ltd. In ITA No. 975/Chd/2011. It was further submitted that investment in fixed assets was made out of commercial expediency. Therefore, no disallowance could be made u/s 36(1)(iii) as held by Hon'ble Apex Court in case of S.A. Builders Ltd. Vs, CIT 288ITR 1 (SC)." Further attention of the Ld. CIT(A) was drawn to the judgment of Hon'ble Punjab & Haryana High Court in case of CIT vs. Kudu Industries as reported in [2015] 62 taxmann.com 191 wherein it was held various amounts advanced to the assessee get merged into a common pool. Therefore, there is no justification either for the assessee or for the department to take into consideration the rate of interest in respect of a particular advance or advances to the assessee. The only logical approach is to take into consideration the average interest rate at which the assessee has availed of the advances. In this case the Hon'ble Court specifically observed that the judgment of this Court in Commissioner of Income Tax-I, Ludhiana vs. M/s Abhishek Industries, Ludhiana (supra) does not deal with the question of the rate of interest to be applied in cases where the assessee has mixed funds available with it. Hence even if this judgment is applied u/s 36(1)(iii), average rate of interest on which funds have been borrowed by the assessee should have been applied for working out disallowance u/s 36(1)(iii), not 12% as has been done in this case". . 3. That the provisions of Section 36(1)(iii) are reproduced hereunder: - iii) the amount of the interest paid in respect of capital l3 borrowed 13 for the purposes of the business 13 or profession : [Provided that any amount of the interest paid, in respect of capital borrowed for acquisition 15 of an asset 16 [***] (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.] 4. That this Hon'ble Bench adjudicated the issue at hand at Sr. 18 of its order as under:- "We have heard the rival contentions and pursued the material on record. Given that the facts and circumstances of the case are exactly identical as in ITA No. 100/Chd/2020 as fairly submitted by both the parties during the course of hearing, our findings and directions contained in Para 11 supra disposing off assessee's ground of appeal in ITA no. 100/CHD/2020 shall apply mutatis mutandis to this appeal. Hence the ground of appeal is allowed for statistical purposes". 3 5. That this Hon'ble Bench has not adjudicated on the issues raised by the assessee as per Sr. No. 2.2 and some of the issues raised as per Sr. No. 2.3 above. 6. That as per Section 36(1)(iii) disallowance of interest has to be from the date of borrowing for acquisition of asset to the date when it was first put to use, whereas in this case it has been disallowed for full year irrespective the date of borrowing. 3. The ld AR has relied on the contents of the misc. application. 4. The Ld. DR is heard who has relied on the order passed by the Coordinate Bench and submitted that in this case, the Coordinate Bench has passed the consolidated order for A.Y. 2007-08 and 2009-10 and for the impugned A.Y. i.e, 2009-10, the Coordinate Bench has directed to follow its direction as given in A.Y. 2007-08 since the facts and circumstances of both the cases were similar. It was accordingly submitted that there is no basis in the present Misc. Application so filed by the assessee and the same therefore deserves to be dismissed. 5. In this regard, we refer to para 18 of the impugned order wherein while disposing off the grounds of appeal for A.Y. 2009-10, the Bench has recorded its findings as under: "18. We have heard the rival contentions and purused the material on record. Given that the facts and circumstances of the case are exactly identical as in ITA No. 100/Chd/2020 as fairly submitted by both the parties during the course of hearing, our findings and directions contained in Para 11 supra disposing off assessee's ground of appeal in ITA no. 100/CHD/2020 shall apply mutatis mutandis to this appeal. Hence the ground of appeal is allowed for statistical purposes". 6. We also refer to para 12 of the impugned order wherein while disposing off the grounds of appeal for A.Y. 2007-08, the Bench has recorded its finding as under: “12. We have heard the rival contentions and purused the material available on record. The assessee has contended that besides the loan of Rs 15 lacs, rest all payments towards the purchase of machinery has been funded through internal accruals however it has failed to support and demonstrate the same through its financials and/or documentation either before the lower authorities and even before us, nothing has been brought on record to support the said contention. Regarding other contention of the assessee that where the borrowed funds were raised and utilized, it enters the common pool of funds available with the assessee, in such a scenario, average rate of interest should be applied instead of rate of interest in respect of particular borrowing, we find merit in the said contention and remand the matter to the file of the AO to verify the average 4 rate of interest prevailing on borrowings done by the assessee during the year under consideration and determine the amount of interest so determined for the purposes of making the disallowance under section 36(1)(iii). Needless to say, the assessee be given credit for interest already capitalized in the books of accounts. In the result, the ground of appeal is allowed for statistical purposes.” 7. We therefore find that the matter has been duly considered by the Coordinate Bench and basis the admitted position by the assessee as well as Revenue where the identical set of facts and circumstances of the case were prevailing in the year under consideration (A.Y 2009-10) as well as earlier year (A.Y 2007-08), it was directed to follow the directions as given in the earlier year. We therefore don’t find any mistake which is apparent from the order so passed by the Coordinate Bench and in view of the same, we do not see any basis in the present Misc. Application so filed on behalf of the assessee, hence the same is dismissed. 8. In the result, the misc. application is dismissed. (Order pronounced in the open Court on 08/11/2023). Sd/- Sd/- आकाश दीप जैन िवᮓम ᳲसह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा᭟यᭃ / VICE PRESIDENT लेखा सद᭭य/ ACCOUNTANT MEMBER AG Date: 08/11/2023 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar