TMI Blog2013 (2) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... informed that the unspent surplus funds have been invested as per the guidelines and thereupon interest was earned by the assessee. On the other hand, the assessee has to pay interest that too as per the directions of the Government, hence the provisions made by the assessee is, therefore, meant for the purpose of the business, hence qualify for claim u/s.37(1) of the IT Act. - Decided in favor of assessee. - ITA. No.187/Ahd/2010, CO No.71/Ahd/2010 - - - Dated:- 9-11-2012 - Mukul Kumar Shrawat And A Mohan Alankamony, JJ. Appellant Rep by: Shri A Tirkey, Sr.D R Respondent Rep by: Shri S.N. Soparkar, Sr.Adv. with Shri Anil R.Shah ORDER Per: Mukul Kumar Shrawat: This is an appeal filed by the Revenue and Assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have utilized. Since the assessee has failed to utilize the entire grant sanctioned to it, the sanctioning authority has ordered to pay simple interest @ 6% on unspent amount lying with it, and the same cannot be regarded as an expenditure made for the purpose of business or profession. Further more, it is worthwhile to mention that the grants sectioned to it cannot be regarded as borrowed capital, as there no element of refund or repayment i.e. the assessee is not under obligation to repay the amount granted to the sanctioning authority. In absence of obligation to refund amount granted to it, interest on such capital is not deductible u/s.36(1)(iii) of the Act as laid down by Hon ble Punjab Haryana High Court in the case of Pep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd by the Govt. Resolutions relating to the sanction of grant, purpose and mode of its utilisation and also as a corollary for the payment of interest on unspent amount of grant sanctioned by Govt. of Gujarat. 1.4 As a result of G.R dated 14-3-2006, the appellant provided a sum of Rs.1,87,61,273/- as interest @ 6% on the unspent amount of grant provided by Govt. of Gujarat a detailed calculation of which Is provided at Page 5 r.w. pages 11 to 12. The appellant claimed such amount-as deductible u/s 36(l)(iii) or u/s 37(1) of the Act. 1.5 As against the payment of such interest on unutilized portion of grant, the appellant has been parking its surplus funds arising out of unspent amount of grant a well as its operations in inter c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronounced in the case of Pepsu Road Transport Corporation vs. CIT, Patiala reported at 130 ITR 18 (P H). He has argued that the unutilized grant was not a borrowed capital for the purpose of business of profession of the assessee. The assessee had failed to utilize the entire grant sanctioned and there was no obligation to refund the amount so granted. Therefore, the amount in question was not a borrowed amount, hence not deductible u/s.36(1)(iii) of the Act. Even u/s.37(1), the assessee should not be allowed expenditure because admittedly the amount in question was not utilized wholly and exclusively for the purpose of business. 6. From the side of the respondent-assessee, ld.AR Mr. S.N.Soparkar and Mr.Anil R.Shah appeared and placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reason, we hereby also hold that the case laws cited by ld.DR of Pepsu Road Transportation (supra) do not apply on the present facts of this appeal because of the reason that the Hon ble P H High Court in that cited decision has settled the issue which revolve around the provisions of section 36(1)(iii) of IT Act. Now the question left before us is that whether the provisions so made by the assessee is eligible for deduction u/s.37(1) of IT Act. In this connection, few decisions were cited before ld.CIT(A) and considering all those decisions as cited supra, we are of the considered view that on one hand the assessee has earned interest income on investment of the surplus fund and on the other hand made the provisions of interest, hence s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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