TMI Blog2000 (1) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Commissioner of Income-tax under section 263 of the Act and restoring the order of the Assessing Officer ? (2) holding that the provisions of Explanation 8 to section 43(1) cannot be interpreted in the reverse order so as to capitalise the amount of interest paid on borrowings and include the same in the actual cost of the machinery ? (3) applying Explanation 8 to section 43(1) of the Act to the facts and circumstances of the case ? (4) not appreciating the true importance of the provisions of section 43(1) which provide that any amount of interest paid or payable in connection with the acquisition of an asset for any period before such asset was put to use could be included in the actual cost of such asset ?" The petition per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure without making any enquiries, which should not have been done in the light of Explanation 8 to section 43(1) of the Act, the Commissioner came to the conclusion that the view taken by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. He, accordingly, set aside the assessment and directed the Assessing Officer to modify the same by treating the said amount of interest as capital in nature. Being aggrieved, the assessee took the matter in appeal to the Tribunal. Relying on the observations of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 ; India Cements Limited v. CIT [1966] 60 ITR 52, inter alia, to the effect that it is only the interest incurred before the commencem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance on the machineries installed in Dalmiapuram and Salem. Learned counsel's plea that the moneys had been borrowed for modernisation and improvement of productivity with reference to the existing business further gets support from the decision of the Gujarat High Court in the case of Alembic Glass Industries Ltd. [1976] 103 ITR 715, and the decision of the Delhi High Court in the case of CIT v. Modi Industries Ltd. (No. 3) [1993] 200 ITR 341." The Revenue's application under section 256(1) of the Act having been dismissed, the present petition has been filed. We have heard Mr. R. D. Jolly, learned senior standing counsel for the Revenue, and Mr. Harihar Lal, learned counsel for the assessee. It is evident from the format of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n connection with the acquisition of an asset, so much of such amount as is relatable to any period after the said asset is first put to use is not to be included and is to be deemed never to have been included in the actual cost of the said asset. Based on the said clarification, the case of the Revenue is that if the amount of interest in connection with the acquisition of an asset, which is relatable to any period after the said asset has been put to use cannot be capitalised then, as a necessary corollary, the interest payable in connection with the acquisition of an asset before it goes into production has to be capitalised. However, as noted above, in view of the facts found by the Tribunal in ITA No. 3883 of 1991, the said Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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