TMI Blog2006 (6) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 3,12,01,951. 3. The grounds of appeal filed with the Form No. 36 on 23rd Oct., 1996 were subsequently revised vide letter dt. 29th June, 2004. In the revised ground, the figure in respect of the claim of interest was changed from Rs. 2,46,50,000 to Rs. 3,12,01,951. Subsequently, the Department made a request vide letter dt. 25th Jan., 2006 for admitting an additional ground as under: "On the facts and in the circumstances of the case, the CIT(A), Nashik has erred in admitting the additional evidences, in contravention of the provisions of r. 46A of the IT Rules in para Nos. 6.2 and 6.3 of the appellate order dt. 5th Aug., 1996 for the asst. yr. 1992-93." 4. The facts of the case in brief are that during the accounting year end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under s. 143(3) on 30th March, 1995, the total income was assessed at Rs. 2,88,30,451. The issue was raised by the assessee before the CIT(A) vide ground No. 5 as under: "5. On the facts and in the circumstances of the case and in law, the learned AO erred in not allowing the claim of deduction under s. 36(1)(iii) of Rs. 3,12,01,951 being the interest and commitment charges paid but capitalized in the accounts. This claim was made during the course of assessment and the amount was also given by way of a note in the computation of total income filed along with the return of income." 6. The CIT(A) allowed the assessee's claim under s. 36(1)(iii) and directed the AO to withdraw the depreciation which was allowed in respect of the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of facts. 9.2 In view of the above legal position the CIT(A) has rightly held in para 6.5 of his order that it was open to the assessee to make the claim under s. 36(1)(iii) through a 'note' appended to the return of income. 10. The legal position with regard to the applicability of s. 36(1)(iii) and the Expln. 8 to s. 43(1) of the Act, as laid down by the Courts, is discussed in the following paras. 11. The Gujarat High Court in the case of CIT vs. Alembic Glass Industries Ltd. (1976) 103 ITR 715 (Guj), observed that the decisions of the Bombay High Court in the case of Calico Dyeing Printing Works vs. CIT (1958) 34 ITR 265 (Bom), and of the Supreme Court in the case of India Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC) held the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72-73. The AO disallowed the claim on the ground that the machinery was not put to use during the relevant accounting year. It was held by the Supreme Court that even though the machinery had not been actually used in the business at the time when the assessment was made, the same had been treated as a business asset and it was purchased only for the purposes of the business, the interest paid on the amount for purchase of such machinery was a deductible amount. 13. In the case of Dy. CIT vs. Core Healthcare Ltd. (2001) 169 CTR (Guj) 416 : (2001) 251 ITR 61 (Guj), the Gujarat High Court held that the scope of s. 36(1)(iii) of the Act and of Expln. 8 under s. 43(1) of the Act were different, as they operated in separate fields, inasmuch as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Associated Fibre Rubber Industries (P) Ltd. that even though the machinery had not been actually used in the business at the time when the assessment was made, the same had been treated as a business asset and it was purchased only for the purposes of the business, the interest paid on the amount for purchase of such machinery was a deductible amount. 16. The Expln. 8 to s. 43(1) of the Act only lays down that where an amount was paid/payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any period after such asset is first put to use shall not be included in the actual cost of such asset. The scope and ambit of this Explanation, on a plain reading is restricted to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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