Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 953 - AT - Income TaxDisallowance of interest expenses u/s 36(1)(iii) - interest expenses incurred by the assessee on the borrowed money utilized for the acquisition of the machineries - HELD THAT:- Admittedly, there was the acquisition of the new machinery out of the borrowed fund which was not put to use during the year under consideration. But the question arises whether such acquisition of machinery amounts to the extension of the existing business. None of the authorities below has put some light on this aspect. As such the proviso to section 36(1)(iii) of the Act mandates to capitalize the amount of interest on the machine acquired out of the borrowed fund provided such acquisition results in the extension of the business Value of the machine acquired by the assessee during the year is negligible to the total value of the plant and machineries shown by the assessee in its balance-sheet as on 31 March 2011. Such, small addition in the plant and machinery cannot amount to the extension of the existing business. As there is no detail available before us suggesting that there was some increase in the production/sales etc, we are not inclined to treat the interest expense on the acquisition of such machinery out of the borrowed fund as extension of the existing business. Accordingly we hold that as there was no extension of the existing business, therefore the amount of interest expenses incurred by the assessee on the borrowed money utilized for the acquisition of the machineries is eligible for deduction as revenue expense. Hence the ground of Appeal of the assessee is allowed. Disallowance u/s 14A - HELD THAT:- It is presumed that the investment has been made by the assessee out of its own fund without utilizing the borrowed money. Accordingly there cannot be any disallowance on account of interest expense. In holding so we find support and guidance from the judgment of CIT Vs.UTI Bank ltd. [2013 (8) TMI 238 - GUJARAT HIGH COURT] wherein it was held no disallowance of interest expenses is warranted if the own fund of the assessee exceeds the amount of investment. Regarding the addition of administrative expenses, the Ld. AR did not advance any argument at the time of hearing considering the smallness amount involved therein. Accordingly, we do not find any reason to interfere in the finding of the Ld. CIT-A. Accordingly we confirm the disallowance of ₹ 12,807.00 on account of administrative expenses. Hence the ground of appeal of the assessee is partly allowed. Disallowance of books profit under section 115JB for addition u/s 14A - HELD THAT:- Disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. [2014 (11) TMI 1169 - CALCUTTA HIGH COURT] Disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - HELD THAT:- there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income under the clause (f) to Explanation-1 of Sec. 115JB of the Act subject to the condition that the disallowance shall not exceed the amount of disallowance determined by the authorities below under the provisions of section 14A r.w.r. 8D of Income Tax Rules. Hence, the ground of appeal of the assessee is partly allowed. Addition on account of interest on the income tax refund - assessee before us agreed for the addition of the impugned amount of interest on the income tax refund but requested to give a direction to delete the same from the income of the subsequent assessment year provided such interest has been offered to tax - HELD THAT:- DR has not brought anything on record contrary to the argument advanced for the assessee. The scheme of Act prohibits taxing the same income twice. Thus if such amount of interest income has already been offered to tax by the assessee in any of the assessment year, then the same shall stand deleted. Accordingly we set aside the file to the AO with the direction to adjudicate the issue afresh as per the provisions of law and in the light of the above stated discussion. Hence the ground of appeal of the assessee is allowed for the statistical purposes.
|