TMI Blog2005 (1) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... The revenue has raised as many as eight grounds of appeal before the Tribunal. Ground Nos. 6 to 8 are general. Ground Nos. 1 to 5 constitute single issue disputing the ld. CIT(A) s impugned order in directing the Assessing Officer to allow deduction of interest payment of Rs. 5,53,47,977 as revenue expenditure under section 36(1)( iii ). The ld. DR has contended that the assessee had capitalized the above interest payment on borrowing made for purchase of plant and machinery etc. Referring to para 11( c ). on page 6 of assessment order, the ld. DR has contended that out of the above interest payment the assessee transferred interest payment of Rs. 1,80,10,292 to the capital work-in-progress account and no depreciation was claimed thereon; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee s books of account, the said interest payment has been capitalized and had claimed depreciation in the return. He has contended that during assessment proceedings, the assessee had withdrawn its claim for depreciation and claimed deduction for interest only, and so also in the subsequent assessment year 1996-97. He has contended that the assessee is not claiming both depreciation as also deduction for interest but is claiming only deduction for interest payment, and in this regard he has referred to the assessee s letter dated 10-12-1998 and 22-12-1997. He has also contended that the ld. DR s citation ITO v. Shreyas Shipping Ltd. [2003] 86 ITD 556 (Mum.) is on the provision of section 143(1)( a ) regarding adjustment and so the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings and that the assessee cannot ask for two different methods for the above two purposes. He has also contended that the issue is not covered by the judgment of Hon ble Bombay High Court in CIT v. Tata Chemicals Ltd. [2002] 256 ITR 395 inasmuch as the Hon ble Bombay High Court has not given any finding on this issue and has not replied the question. 6. We have considered the rival contentions, relevant material on record as also the cited decisions. In ITO v. Shreyas Shipping Ltd. [2003] 86 ITD 556 (Mum.) it has been held that the method of accounting referred to in section 145 is the one as followed by assessee in writing his books of account and not a separate method, which the assessee may chose for filing his return o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry will not be decisive and conclusive in relation to allowability of particular deduction. It has also been held therein that the deductibility of expenditure will depend on relevant law. It has also been held therein that the interest paid on funds borrowed for business purposes, including for the purpose of setting up of new unit of existing running business, will qualify for grant of deduction under section 36(1)( iii ) irrespective of the fact as to whether such unit has commenced production or not in the year under consideration. 9. In Tata Chemicals Ltd. v. Dy. CIT [2000] 72 ITD 1 (Mum.) it has been held that where assessee s new fertilizer business was under process of con- struction, it was found to be interlacing, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable, holding that the fertilizer division was part of assessee s existing chemical business carried on in the relevant previous year. This Tata Chemicals Ltd. v. Dy. CIT [2000] 72 ITD 1 being the decision of Mumbai Tribunal deserves to be followed by us in preference over J.C.T. Ltd. v. Asstt. CIT [1998] 65 ITD 169 , being a decision of Calcutta Tribunal. However, in CIT v. Tata Chemicals Ltd. [2002] 256 ITR 395 (Bom.) the issue regarding allowability of interest as revenue expenditure when the same stood capitalized in the books was contained in question No. ( a ) but the Hon ble High Court did not decide the same on merits for the reason that the same had not been raised before the Tribunal. 13. However, a view simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case, it is not the situation that the assessee wants to retain/maintain one practice of treatment in the books of account and other different practice for the purpose of filing return of income or otherwise for getting the I.T. liability determined, but the assessee having given a particular treatment in earlier years, but now in the current year, the assessee, having been so advised seeks to change that practice that it seeks to change the treating of the interest payment as capital expenditure to treating the same as revenue expenditure and claim deduction thereof accordingly together with withdrawing its claim of depreciation on the same. However, entries in the books of account are not decisive of the nature of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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