TMI Blog2018 (1) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose - Held that:- As clear from the findings of the CIT-A that the term loan and working capital loan both were availed by the assessee. The assessee used only interest bearing loan for the purpose of business i.e term loan used for acquiring plant & machinery and working capital loan used for working capital, which has been demonstrated by the assessee. Therefore, the disallowance on interest for non business purpose is totally erroneous and unjustified. This disallowance cannot be sustained. The existence of own fund of the assessee is far better than the advances given by the assessee. The decisions as relied on by the CIT-A clearly supports the case of the assessee. Therefore, the CIT-A was justified in directing the AO to delete the addition - Decided against revenue - ITA No. 450/Kol/2016 - - - Dated:- 10-1-2018 - Shri S.S.Viswanethra Ravi, Judicial Member And Shri Dr. Arjun Lal Saini, Accountant Member For The Appellant : Shri David Z.Chawngthu, Addl.CIT, ld. Sr. DR For The Respondent : Shri Dilip Loyalka, FCA, ld. AR ORDER Shri S.S.Viswanethra Ravi, JM: This is appeal filed by the Revenue is directed against the order of the CIT-(A),- I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the assessee is engaged in the business of manufacturing of pig iron. It set up its industry in the F.Y 2006-07. The production started in the year 2008-09. Steel market, which was in the boom in the year 2008-09 started falling day by day from year 2009-10. But, due to such unfavourable market conditions, the assessee had to stop its production from F.Y 2011-12. It was waiting for favourable market condition to resume its production. Machineries and plant are kept ready for use. Further submitted that it was settled principle of law that expenditure including depreciation during suspension of activity for unfavourable market condition that is during the period of lull are allowable as business expenditure. In support of the contention the assessee relied on the decision of the Hon ble Calcutta High Court in the case of CIT Vs. Norplex Oak India reported in 198 Taxman 470(Cal), wherein it was held that the word used appearing in section 32(1) should be given a reasonable meaning. By introducing the said provision, the legislature wanted to give the benefit of depreciation on the plant machinery purchased by the assessee and used for the purpose of the business. The wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions and had claimed that the Plant Machinery were kept ready for use. The AO issued a show cause during assessment proceedings and proposed to disallow the claim of depreciation on Plant Machinery, Factory Building Electric Installation as the Machinery was not put to use during the year. The AO disallowed the appellant claim of depreciation holding that the assessee had failed to meet the condition laid down for use of P M for claim of depreciation. The Appellant has through its written submission mainly contended that the Machineries were kept ready for use and also contended that it is settled principle of law that expenditure including depreciation during suspension of activity for unfavourable market condition that is during the period of full are allowable as business expenditure. The appellant has placed reliance on judgment on the case laws of the jurisdiction High Court in the case of CIT v. Norplex Oak India 198 Taxman 470(Cal) CIT v. Union Carbide (I) Ltd. (2002) 254 ITR 488(cal) CIT v India Tea Timber Co 221 ITR 857(Gau). In view of the above discussion and the totality of the facts of the case, it is held that the appellant is entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 65,81,723/- and claimed the same as deductible expenditure computing the income from business. The AO called the assessee to explain why the interest bearing loan was given to others as interest free advance. In reply, the assessee submitted that it had taken secured loan, unsecured loan and interest paid thereon as under:- Loan Amount Interest Term Loan from Indian Overseas Bank Rs.1,63,59,998 Rs.65,70,241 Unsecured Loans from others (Interest free) Rs.4,65,52,948 Nil 12. The assessee paid interest on term loan of ₹ 65,70,241/-. The assessee pointed out that no interest was paid on unsecured loans as it is interest free loan. The assessee also pointed out that it has net worth (share capital + reserve surplus) of ₹ 4,69,93,522/- and unsecured loans from others ₹ 4,65,52,948/- totaling to ₹ 9,39,87,044/- and the loan/advance given for business purpose is only ₹ 6,67,61,785/-, break up of which are as under:- Loans/advance for busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,72,122 Purchase Advance Map Mines minerals Limited 5,50,000 Purchase Advance New India Mineral 1,81,491 Purchase Advance Padma Logistic and Khanij P.Ltd 88,801 Purchase Advance Pradeep Coke Industries 1,25,889 Purchase Advance Sakchi Industries 7,025 Purchase Advance Sunrise Trading Co. 60,679 Purchase Advance Yash Agencies 2,00,000 Purchase Advance Anjaneya Consultancy (P) Limited 16,13,705 Advance for Consultancy AnjaneyaIspat Limited 1,17,750 Purchase Advance Anup Sarogi 8,50,000 Advance for land purchase Core Minerals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the present case. He also held that the finding of the AO in disallowing ₹ 4,46,817/- as interest for non-business purpose is erroneous and unjustified and accordingly directed the AO to delete the addition of ₹ 4,46,817/- by observing as under:- I have carefully considered the material before me, I found that the AO has erred in holding that the appellant had failed to establish the nexus between interest paid and interest free advances. The A.R of the appellant in his written submission has categorically mentioned that the company had taken interest bearing loan from Indian Overseas Bank of ₹ 2,72,69,998/- and working capital loan from Indian Overseas Bank ₹ 27,74,806/-. The above entire loan was used for acquisition of plant and machinery and no part of the said loan has been used for any other' purposes. The working capital loan was also used for working capital requirement. The appellant above assessee had interest free unsecured loan amounting to ₹ 4,65,52,948/- and also had own funds amounting to ₹ 9,04,93522/-. Therefore, the finding of the AO that assessee has given interest free loan out of interest-free funds is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest for non business purpose is totally erroneous and unjustified. This disallowance cannot be sustained. The existence of own fund of the assessee is far better than the advances given by the assessee. The decisions as relied on by the CIT-A clearly supports the case of the assessee. Therefore, the CIT-A was justified in directing the AO to delete the addition of ₹ 4,46,817/-. We find that the CIT-A has analyzed the case laws as relied on by the assessee on this issue. It is settled law that where assessee s interest free fund exceed the interest free loan given no disallowance of interest can be made by the decisions of various courts. Thus, the CIT-A was fully justified in directing to delete the same to the AO. We do not find any reason to interfere with the order of the CIT-A on this issue. We uphold the same. Thereby, the issue in ground no. 1 deletion of interest ₹ 4,46,817/- raised by the revenue is dismissed. 19. Ground nos.2 3 raised by the revenue are argumentative in nature, which needs no adjudication. Hence, the same are dismissed. 20. Ground no. 4 is general in nature, which requires no adjudication. Hence, the same is dismissed. 21. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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