TMI Blog2022 (11) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... irmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 1 raised by the Revenue is dismissed. Addition u/s 68 - AR submitted that though in the submission before the AO it is mentioned that details of unsecured loans are enclosed, however, no such details form part of the submission - HELD THAT:- We deem it appropriate to remand this issue to the AO for de novo adjudication. The assessee is directed to furnish all the details in support of its claim in respect of this issue. Needless to mention that no order shall be passed without affording reasonable opportunity of being heard to the assessee. As a result, ground No. 2 raised in Revenue s appeal is allowed for statistical purposes. - ITA No.5766/Mum./2017 - - - Dated:- 17-11-2022 - Shri Prashant Maharishi, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Harsh M. Kapadia For the Revenue : Shri Tejinder Pal Singh ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the Revenue challenging the impugned order dated 07/06/2017 passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crore against secured loans for its windmill projects. The learned CIT observed that the applicability of provisions of section 36(1)(iii) along with explanation 8 to section 43(1) of the Act does not appear to have been looked into by the Assessing Officer ( AO ). In reply, the assessee submitted that interest was paid after the commencement of the project and therefore the same was correctly claimed and allowed. After considering the submissions of the assessee, learned CIT, vide revision order dated 17/12/2014, passed under section 263 of the Act, set aside the assessment order, inter-alia, on the issue of interest expenditure claimed by the assessee. The AO was directed to examine the applicability of section 36(1)(iii) along with explanation 8 to section 43(1) and decide the issue as per the provisions of the Act. 5. Pursuant to the aforesaid order, the assessee was asked to give justification for the claim of interest as a deduction. In reply 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. The AO vide order dated 26/02/2016, passed under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that loan taken for windmill purposes was diverted for purchase of plot of land. Further, the advance given for purchase of plot of land is meant for business of the assessee itself and therefore it cannot be stated that such loan was given for purposes other than business. As regards, a similar amount of advance given to employees also can be attributed to the purpose of business. 10. In view of the above facts, I hold that the claim of the expenditure towards interest of Rs. 1,38,19,802/- is entirely for the purposes of the business of the assessee and the same is therefore allowable in accordance with the provisions of sec. 36(1)(iii). In the circumstances, the disallowance made by the AO does not appear to be sustainable in law and same is therefore directed to be deleted. Thus, this ground of the assessee is allowed. Being aggrieved, the Revenue is in appeal before us. 7. During the hearing, the learned Departmental Representative ( learned DR ) submitted that the learned CIT(A) relied upon fresh evidence filed by the assessee without calling for any remand report. The learned DR also vehemently relied upon the order passed by the AO. 8. On the other hand, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing business is to be capitalized as pre- commencement expenditure. 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 first put to use, shall not be allowed as deduction. The interest element of the earlier year should also be verified which shall have a consequent Impact during the current year. 3. 4. 5. 6. It was submitted that interest was paid after commencement of the project. Hence, the same was correctly claimed and allowed. It was further submitted that it did not have any investment in which exempt income can accrue. Hence, there is no question of applicability of Section 14A of the IT Act. It also filed details of loans etc and requested to drop the proceedings u/s.263 of the IT Act. The assessee also filed details of loans. 7. I have examined the contention of the assessee. The details given were not there before the AO neither did he examine the same while accepting the assessee's claim. The assessment order is therefore set aside on the specific issue discussed above. The AO will examine the applicability of Section 36(1)(iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said windmills but also depreciation thereon. Further one even fails to understand that if the windmills were put into operation then why the generation of electricity from the said windmills is only to the tune of Rs 3.13 crores when in fact the interest expenditure is to the tune of Rs 1.38 crores. No where during the course of relevant proceedings, the assessee offered a picture about the total number of windmills to be installed for generation of electricity and out of it the windmills genuinely operating. In fact assessee didn't even furnished the diagram of the site showing the numbers of windmills to be installed. The understanding/MOU/agreement with Rajasthan State Electricity Board and Maharashtra State Electricity board about the quantum of electricity to be supplied from the said windmills were also not furnished, further the final memorandum of approval from the said Boards for supply of electricity was also not on record. What needs to be furnished is the number of windmills installed by assessee and the same duly certified and installation ratified by the said Boards. The certified engineer's certificate showing the number of windmills installed was also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing any interest. The Hon'ble High Court held that the assessee with liquidity cannot claim that it can give interest free advances to the partners and others and then borrow funds from the Bank on interest for business purpose. Such borrowings will not be for business purpose but for supplementing the cash diverted by the assessee without any benefit to it. Therefore, so long as assessee is not the beneficiary of the investments made by the partners, their relatives and sister concerns and so long as the advances are interest free, the Assessing Officer is perfectly justified in disallowing the interest in proportion to the advances made. The Hon'ble Supreme Court in the case of SA Builders 288 ITR 1 has also reiterated the aforesaid principles, unless the Assessee Company can prove that the amounts advanced to sister concerns/subsidiary are for the commercial expediency of these concerns. Moreover, the Bombay High Court in the case of Reliance Utilities Power Ltd. has not accepted the contention of the Assessing Officer as no exercise for establishing the nexus of owned funds with investments was carried out during the course of assessment proceedings. As stated earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as shown Revenue/income from the sale of wind power to the tune of Rs.3,13,39,657, and Revenue of Rs. 1,88,11,508, in immediately preceding year also justifies the fact that windmills in respect of which loan was obtained by the assessee were already in operation since preceding years and the interest claimed during the year is post the commencement of the project. In view of the aforesaid findings, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 1 raised by the Revenue is dismissed. 12. The issue arising in ground No. 2, raised in Revenue s appeal, is pertaining to the deletion of addition made under section 68 of the Act. 13. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the revisionary proceedings, the learned CIT noted that during the year fresh interest-free unsecured loan of Rs. 91.54 lakh was raised from Omprakash Co (Prop) and unsecured loan of Rs. 4.78 crore have been squared up. The learned CIT also observed that loan creditors have not been examined during the course of assessment proceedings and fresh capital introduced by the partners has been verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese loans have been repaid in subsequent years. In view of these facts, the addition of Rs. 30,33,734/- made by the AO is directed to be deleted. Thus, this ground of the assessee is allowed. 15. During the hearing, learned AR fairly agreed that on the genuineness of the transaction and creditworthiness of the loan creditors the assessee has not filed any detail. By referring to page 37 of the paper book, learned AR submitted that though in the submission before the AO it is mentioned that details of unsecured loans are enclosed, however, no such details form part of the submission. The learned AR prayed that one more opportunity be granted to the assessee to furnish the details regarding the loan. The learned DR, in all fairness, did not object to the prayer so made for complete adjudication of this issue. 16. Having heard the submissions of both sides and perused the material available on record, we deem it appropriate to remand this issue to the AO for de novo adjudication. The assessee is directed to furnish all the details in support of its claim in respect of this issue. Needless to mention that no order shall be passed without affording reasonable opportunity of bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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