TMI Blog2016 (7) TMI 841X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by the assessee in its return of income are not found to be incorrect or erroneous or false. Accordingly, we, respectfully following the above decision of Hon’ble Apex Court, hold that no penalty u/s 271(1)(c) of the Act is leviable in respect of disallowance of interest - Decided in favour of assessee. Difference in the disclosure of receipt as per TDS certificate and books of account - Held that:- No satisfactory explanation is given by the assessee’s counsel. The only explanation was that the difference is meager and that the same is a clerical error. We are unable to accept such explanation and therefore sustain the penalty levied in respect of difference in the receipt. We, therefore, direct the Assessing Officer to calculate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the building was not put to use, the interest attributable to investment in the plot and construction of building is capitalized. It is stated by the learned counsel that no money was borrowed for the purpose of either investment in the plot or for construction of the building. The total investment in the plot was ₹ 1.40 crores and the investment in the building was ₹ 15.98 lakhs and ₹ 3.78 lakhs. Thus, the total investment in the plot and building taken together was less than ₹ 1.25 crores. He stated that the own fund in the form of partner s capital on which no interest was paid was more than ₹ 6.73 crores. Thus, the own fund was much more than the investment in the plot/building. That no money was borr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Hon ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. (2010) 322 ITR 158 (SC). With regard to the difference in the receipt as per TDS certificate and as per books of account, he stated that it is only a clerical mistake which is of insignificant amount and therefore, does not deserve any penalty u/s 271(1)(c) of the Act. 5. Learned DR, on the other hand, argued at length. He also furnished the written submission. His arguments as well as written submission both have been carefully considered. It is stated by the learned DR that as per proviso to Section 36(1)(iii), the amount of interest paid by the assessee is not allowable. He stated that this proviso was inserted by the Finance Act, 2003 with effect from 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the interest paid in respect of capital borrowed for the purposes of the business or profession : [Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset [for extension of existing business or profession] (whether capitalized in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.]. 7. As per proviso, the interest paid in respect of capital borrowed for acquisition of an asset whether capitalized in the books of account or not for any period beginning from the date on which the capital was borrowed for ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the above, it is evident that as per Hon'ble Jurisdictional High Court, if there are interest free funds available, a presumption would arise that the investment was out of interest free funds. Therefore, in view of the above decision of Hon'ble Jurisdictional High Court, the disallowance of interest by the Assessing Officer is not justified. However, the appeal before us is only in respect of penalty and not in respect of addition made by the Assessing Officer. It was clarified by the learned counsel that the assessee has accepted the assessment order and has not filed any appeal. He stated that once the interest is capitalized, the assessee will ultimately get the deduction in the subsequent year in the form of more depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that no penalty u/s 271(1)(c) of the Act is leviable in respect of disallowance of interest of ₹ 9,42,000/- and ₹ 1,50,980/-. 10. So far as the difference in the disclosure of receipt as per TDS certificate and books of account is concerned, no satisfactory explanation is given by the assessee s counsel. The only explanation was that the difference is meager and that the same is a clerical error. We are unable to accept such explanation and therefore sustain the penalty levied in respect of difference in the receipt. We, therefore, direct the Assessing Officer to calculate the penalty at the rate of 100% of the tax sought to be evaded on the difference in the receipt shown in the TDS certificate and as shown in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X
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