TMI Blog2019 (5) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... would be revenue expenditure. Therefore, AO should examine this factual aspect and to adjudicate the issue in accordance to law. Disallowance of interest u/s. 36(1)(iii) - AO held that assessee had utilized borrowed capital invested in SBI Mutual Fund of ₹ 5 crores - HELD THAT:- As we already sent the issue back to the file of AO to examine whether the interest is to be capitalized or not in respect of balance loan of ₹ 7.12 crores ( ₹ 35 crores ₹ 27.88 crores), which was disbursed between 01.08.2009 to 31.03.2010. Therefore, disallowance of ₹ 2,93,580/- amounts to double addition/double taxation. Issue needs to be examined by AO whether investment for one month is not from borrowed fund. AO should verify whether investment of ₹ 5 crores is from own sources. Therefore, we direct the AO to examine this factual aspect and to adjudicate the issue in accordance to law. Hence, ground no. 4 raised by the assessee is allowed for statistical purpose. Disallowance u/s. 14A - Counsel pointed out that the assessee did not claim any exempt income. Assessee has offered the exempted income for taxation, therefore, there is no any question arises to dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above grounds. 3. At the time of hearing before us, the ld. Counsel for the assesse informed the Bench that the assessee does not want to press ground no. 2, therefore, we dismiss ground no. 2 raised by the assessee. 4. Ground no. 3 raised by the assesse relates to confirmation of disallowance of ₹ 50,16,609/- made by the AO u/s. 36(1)(iii) of the Act. 5. Brief facts qua the issue are that during the assessment proceedings the assesse submitted the details of pre-operative expenses and capital work in progress, which is given below for ready reference as under:- 8.1 Details of gross interest credited and details of interest debited to profit and loss account as well as taken to capital work in progress are enclosed. Gross interest paid is ₹ 6,86,44,042/- out of which an amount of ₹ 2,45,90,969/- has been taken to preoperative Expenses and the balance of ₹ 4,40,53,073/- has been debited to Profit and Loss account which pertains to the period of 01/08/2009 to 31/03/2010. The manufacturing activities being in full stream from 01/08/2009 the same has been reckoned as the date of commencement of prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest No. of Days Interest Amount 06.08.2009 23,07,787/- 12.25% 238 1,84,338/- 15.08.2009 10,39,958/- 12.25% 229 79,927/- 27.08.2009 8,05,663/- 12.50% 217 59,873/- 26.09.2009 5,48,246/- 12.50% 187 35,110/- 26.09.2009 15,00,000/- 12.50% 187 96,062/- 26.09.2009 4,87,890/- 12.50% 187 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 7.12 crore was disbursed between 01.08.2009 to 31.03.2010 and the interest of ₹ 15.11 lakhs on this portion is charged to revenue. In worst case the amount which can be disallowed towards interest on capital WIP (work in progress) is to be ₹ 15.11 lakhs only. Therefore, we are of the view that balance loan amount of ₹ 7.12 crore, which was disbursed between 1.8.09 to 31.03.10 and interest on such loan of ₹ 15.11 lakh needs to be verified by AO, whether it falls in revenue zone or capital zone. Assessee treated ₹ 15.11 lakh as revenue expenditure. If this interest of ₹ 15.11 lakh is before put to use an asset, then it may be capitalized. Otherwise, it would be revenue expenditure. Therefore, AO should examine this factual aspect and to adjudicate the issue in accordance to law. Ground no. 3 raised by the assessee is allowed for statistical purpose. 11. Ground no. 4 relates to disallowance of ₹ 2,93,580/- out of interest u/s. 36(1)(iii) of the Act. 12. We have heard both the parties and perused the material available on record. We note that in ground no. 3, we have already sent the issue back to the file o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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