Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (9) TMI 1353 - AT - Income TaxDisallowance u/s 36(1)(iii) - CIT(A) held that the capital work in progress in the balance sheet is shown at ₹ 6,59,49,078/-, therefore, interest attributable to such amount has to be disallowed in view of the proviso to section 36(1)(iii) - as the assessee has already disallowed interest to the extent of ₹ 33,55,108/- on capital work in progress, therefore, credit for the said amount was allowed CIT(A) restricted the disallowance at ₹ 45,58,781/- - Held that:- As relying on CIT v. Core Health Care Ltd. [2008 (2) TMI 8 - SUPREME COURT OF INDIA ] as well as the amendment by way of insertion of proviso to section 36(1) (iii), the interest on monies borrowed for acquiring a capital asset would be disallowed till it is brought to use on the basis that it would add to the cost of the asset. We observe that addition to the CWIP for the relevant assessment year under consideration is ₹ 4,74,04,622/- Further we observe as the extension took place throughout the year, one cannot apply the rate of interest 12% on each item. The assessee has given a detailed chart regarding the calculation of interest pertaining to each restaurant which is amounting to ₹ 33,22,108/-. As the interest was payable on each restaurant starting at different months during the year it is not correct on the ld.CIT(A) to apply the rate of interest for the full year. The assessee has applied mean method and arrived at ₹ 2,37,02,311/- on which the interest is applied at the rate of 12 % which comes to ₹ 28,44,277/-. The assessee has already capitalized ₹ 33,22,108/-. Neither the assessing officer nor the Ld. CIT(A) has verified the interest capitalized and the calculation of capital work in progress by the assessee, and has made addition on notional basis. The authorities below has also not brought on recorded any evidence on the basis of which they have rejected assessee’s claim.In the interest of justice, we remit the issue back to ld.A.O for verifying the interest capitalized by the assessee with a direction that the disallowance should not be on notional basis. The assessing officer is further directed that in the event the working provided by the assessee, that has been reproduced in hereinabove appears to be correct, he may allow the same. - Decided in favour of assessee for statistical purposes.
|