ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 10, PUNE vs. M/S. UMW DONGSHIN MOTECH PVT.LTD, PUNE

ORDER

PER INTURI RAMA RAO, AM:

1. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) erred in deleting the disallowance of interest u/s 36(1)(iii) when the assessee during assessment proceedings has failed to produce the proofs of the machinery put to use when the onus was on the assessee to prove that the borrowed capital was actually put to use and there is commencement of a business from the installed

2. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) erred in not appreciating that the assessee has failed to justify through documentary evidences and supporting material the installation certificate or any other supportive documentary evidence inspite of sufficient opportunity granted by the A.O. during assessment proceedings ? 3. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) erred in deleting the addition on account of depreciation and additional depreciation by not appreciating that the assessee has failed to produce proof of machinery put to use for business when the onus to prove that the borrowed capital was actually put to use and there is a commencement of business from the installed machineries and assets as well as the working capital is also poured into the business lies on the assessee? 4. The appellant craves leave to add, amend or alter any of the above grounds of appeal

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3. Briefly, the facts of the case are as under : The respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing of automobile and engineering components. The return of income for the assessment year 2012-13 was filed on 26.10.2012 declaring total income of Rs.Nil. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income Tax, Circle-10, Pune (‘the Assessing Officer’) vide order dated 17.12.2014 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at total income of Rs.Nil after setting of unabsorbed losses of earlier years. However, the Assessing Officer made disallowance of interest u/s 36(1)(iii) on the ground that the interest paid on loans borrowed for the purpose of acquisition of fixed assets were not put to use. The Assessing Officer also disallowed the depreciation and additional depreciation on such assets. The Assessing Officer had come to conclusion that the assets were not put to use taking into consideration the following facts : (i) That the proof of machinery put to use for the business purposes was not furnished. (ii) That the assessee company made an advance of Rs.14,06,167/- to Kazu Company Ltd. towards testing and installation. (iii) The assessee company had worked at 20% of capacity only.

4. The Assessing Officer noticing that the appellant incurred interest expenditure of Rs.10,54,08,247/- disallowed the same placing reliance on the provisions of section 36(1)(iii) of the Act. Similarly, the Assessing Officer also denied the depreciation and the additional depreciation of 80% of the cost of the plant and machinery.

5. Being aggrieved by the above disallowances, an appeal was preferred before the ld. CIT(A), who vide impugned order deleted these disallowances agreeing with the submissions of the assessee that the fixed assets purchased have been capitalized and the assets have been put to use.