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TMI Blog2022 (11) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case & in law, the Ld CIT(A) has erred in deleting the addition of Rs.30,33,734/- made by AO u/s 68 of the IT Act, 1961, without appreciating the that the assessee could not furnish any material facts or information regarding the said unsecured loan during the assessment proceedings" 3. On the facts & in the circumstances of the case & in law, the Ld CIT(A) has erred in accepting additional evidences/submission without giving opportunity to the AO in contravention of the rule 46A of the IT Rules." 4. The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal, if need be. 5. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-52, Mumbai, may be set aside and that of the Assessing Officer restored." 3. The issues arising in ground No. 1, raised in Revenue's appeal, is pertaining to the deletion of disallowance of interest expenditure. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the business of construction and real estate. For the year under consideration, the assessee filed its return of income on 30/09/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted voluminous details in this regard which are part of the paper book. As per the details available on record, the assessee installed 3 different mills at different places in the earlier years viz. Sangli Windmill was installed during A.Y. 2007-08 on 30/09/2006, Sinner Windmill has been installed in the A.Y. 2010-11 as on 26/08/2009. Likewise, Jodhpur Windmill has been installed in AY. 2010-11 on 25/09/2009. It is further gathered that for installing these windmills, the assessee raised 3 different term loans from IDBI As per the loans sanction letter of IDBI, the loan was given for the purposes of installation of windmill. It is further noticed that IDBI has directly paid loan to the Company wherefrom the assessee has purchased these windmills viz. Suzlon Infrastructure Services Ltd, Suxlon Energy Ltd. and Suzlone Towers and Infrastructure Ltd. It is further gathered that the assessee debited interest expenditure of Rs. 69,90,148/- in respect of the above loan in the A.Y. 2010- 11, it was allowed by the then AO while completing the assessee in the assessee's case for A.Y. 2010-11 vide order dated 13/03/2013. The fact that windmill had been installed is also proven fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 263 of the Act. 9. We have considered the rival submissions and perused the material available on record. As noted above, learned CIT noticed that the assessee has claimed the interest of Rs. 1.38 crore against secured loans for its mineral project. It was further observed that the said claim was allowed by the AO without examining the applicability of section 36(1)(iii) along with explanation 8 to section 43(1) of the Act. As per the learned CIT, the interest paid for any period beginning from the date on which the capital was borrowed for such acquisition till the date on which such asset was put to use, shall not be allowed as a deduction. During the course of revisionary proceedings, the assessee submitted that interest was paid after the commencement of the project and therefore the same was correctly claimed and allowed. Since the details given by the assessee were not examined by the AO, therefore, the assessment order was set aside on this issue and the AO was directed to examine the applicability of section 36(1)(iii) along with explanation 8 to section 43(1). The relevant observations of learned CIT vide order passed under section 263 of the Act are as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the commencement certificate of windmill, the date on which the asset was put to use as per the commencement certificate. However, it is evident from the record, the AO also started examination on aspects viz. evidence regarding the flow of funds from the loan account to purchase the windmills, installation certificate of windmills, total no. of windmills to be installed, no. of windmills genuinely operating, understanding / MOU / agreement with State Electricity Board about the quantum of electricity to be supplied from the said windmills, total capacity of electricity that could be generated, etc., which were not even directed by the learned CIT vide its order passed under section 263 of the Act. The relevant findings of the AO in this regard are as under: "4.3 From the details on record, it could be seen that assessee availed loan facility, the relevant loan papers are on record and claimed the interest expenditure. However mere claim of interest expenditure is not sufficient within itself. Assessee has to prove with ample evidence the flow of funds from the said loan account to purchase the said windmills, Assessee has to justify the claim relied on loan sanctioning lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icture was not evident from the records submitted. Assessee has to justify the claim, time and again reiterated about the generation of electricity during the year under consideration but kept silence on the total capacity of said capital expenditure and the capacity installed and put to use duly certified and ratified by the engineer's of the Electricity Boards. 4.4 In this connection, reliance is placed on the judgement of Bombay High Court in the case of Phalton Sugar Works Limited Vs CIT 208 ITR 989 the operative part of the said judgement is reproduced as under: "Section 36(1)(ii) of the Income-tax Act, 1961, provides for deduction for payment of interest only if the assessee borrows capital for its own business. The business of the subsidiary company cannot be considered in law as the business of the assessee. The finding of the Tribunal based on commercial expediency appears to us to be incorrect. The fact remains that the moneys borrowed were utilised for business of the subsidiary company and not for the business of the assessee as such. In this view of the matter, we hold that the Tribunal was not justified in holding that the interest on loans borrowed for advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and concealing income thereof." 11. It is pertinent to note that the proceedings before the AO were pursuant to the order passed by the learned CIT under section 263 of the Act, whereby certain specific directions were issued to the AO. The learned CIT was of the view that the interest paid for the period beginning from the date on which the capital was borrowed till the date on which the asset was first put to use is not allowable and therefore in such circumstances the date on which the asset, i.e. windmill, was first put to use becomes relevant. In order to substantiate its claim, the assessee furnished details of starting of operation, copy of the commencement certificate of windmill, the date on which the asset was put to use as per the commencement certificate before the AO. Thus, in view of the above, we are of the considered opinion that once the assessee has furnish the aforesaid documents to substantiate its claim that interest was paid after commencement of the project, therefore, further aspects, as stated above, gone into by the AO are contrary to the directions of the learned CIT vide order passed under section 263 of the Act. It is not a case wherein the learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case. From the perusal of the return of income in case of Suman Kukreja, it is gathered that she has shown an income of Rs. 4,22,57,163/- for A.Y. 2011-12 Her main source of income is from house property: From the perusal of her bank account, it is gathered that she had a decent balance throughout the year. She has also given a confirmation in this regard. She had given loan of Rs. 30 lacs to the assessee. Apparently, there are no cash deposits in her account and her account was showing decent balance over a period of time. Similarly, Reshma Kukreja has shown an income of Rs. 21,27,041/- for A. Y. 2011-12. Her main sources of income are from house property, capital gains and other sources. She has a capital of Rs. 6,89,19,795/- as per her Balance sheet and had given loan of Rs. 33,734 to the assessee from her bank account with Standard Chartered Bank. Looking to the facts of the case all three ingredients like identity of creditor, their capacity to lend and genuineness of transaction is proved. 18. In view of the above, it may be concluded that the assessee has given sufficient details in respect of loan of Rs. 30,33,734/-. The loans have been given from close family members ..... X X X X Extracts X X X X X X X X Extracts X X X X
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