TMI Blog2010 (11) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... f convenience. 3. The common ground No.1 raised in both the appeals are as under:- 1. On the facts and circumstances of the case, the Ld. CIT(A) II Ludhiana has erred in deleting the disallowance of ₹ 56,48,840/- (assessment year 2005-06) and ₹ 1,44,242/- (assessment year 2006 -07) made on account of interest relatable to investment in capital work-in-progress at the end of the year under consideration. 4, The brief facts of the case relating the issue are that the assessee is engaged in the manufacturing of hosiery garments. During the assessment year 2005-06, the Assessing Officer noted the assessee to have made addition of ₹ 3,64,44,156/- to the capital work in progress. The assessee had made the said inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as under:- 6. I have carefully considered the contention of the Ld.Counsel for the appellant and perused the relevant record. I agree with the Assessing Officer that in view of the provisions of explanation 8 to section 43(1) of the Act the proviso inserted below section 36(1)(iii) by the Finance Act, 2003 w.e.f. A.Y. 2004-05, the amount of interest paid in respect of capital borrowed for acquisition of new assets for the period from the date on which the capital was borrowed for the acquisition of the asset till the date on which such asset was first put to use is required to be disallowed. However for making this disallowance it is to be demonstrated that certain interest bearing borrowed capital was actually invested by an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowed any fresh loans during the relevant period, there is no question of such loans being utilized for investment in Capital Work in Progress of ₹ 32.76 Lacs, during the same period. In view of these submissions of the ld.Counsel and the position explained being duly verifiable from record of the appellant, it has to be considered that no borrowed funds were used by the appellant for the assessment year under consideration even for investment in the Capital Work in Progress at ₹ 32.76 lacs. 6.2 In view of the above discussion as the appellant had not utilized any borrowed funds to finance the Capital Work in Progress of ₹ 364.44 Lacs,, there is no justification for making disallowance of interest of ₹ 56,48,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2004-05. The Tribunal upholding the order of CIT(A) dismissed the appeal filed by the Revenue holding that no interest bearing capital was invested in the aforesaid capital work in progress, which is opening balance for the year under consideration. In view of the ratio laid down by the Tribunal in assessee s own case relating to assessment year 2004-05 in ITA No. 965/Chd/2009 vide order dated 18.1.2010, we uphold the order of CIT(A) that there is no merit in disallowing the interest attributable to the opening capital work in progress of ₹ 331.68 lacs. 6. The assessee during the year had made an addition of ₹ 36.27 lacs to the said capital work in progress during the year and claimed not to have borrowed any fresh loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the perusal of the audit report that there was delay in respect of employees contribution to ESI amounting to ₹ 30,705/- and PF amounting to ₹ 4,78,479/-. The plea of the assessee before the CIT(A) was that the entire payment was paid before the due date of filing the return of income and there was no merit in the said disallowance. The CIT(A) followed the ratio laid down by the Hon'ble Supreme Court in CIT v Vinay Cement Ltd 213 CTR (SC) 268 wherein it was held that even if the employer of as well as the employee share of contribution to PF ESI was paid before the due date of filing the return of income, no disallowance was to be made. The CIT(A) further noted that amounts in question were deposited on or before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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