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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: SH. N. K. BILLAIYA
This appeal filed by the assessee is preferred against the order of the CIT (A)-36, New Delhi dated 01.12.2017 pertaining A. Y. 2013-14.
The sole grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 1,91,812/-.
Briefly stated, the facts of the case are that the assessee is engaged in the business of manufacturing of Multilayer Films. Return for the year under consideration was filed on 28.09.2013 declaring income of Rs. 83,33,091/-.
Return was selected for scrutiny assessment and accordingly, statutory notices were issued and served upon the assessee.
During the course of assessment proceedings, the A.O observed that the assessee has claimed expenses on interest to the extent of Rs. 52,26,159/-. The Assessing Officer found that the assessee has made investment in plot at TDI amounting to Rs. 29,22,376/-. The Assessing Officer issued a show cause notice asking the assessee to explain as to why proportionate interest should not be disallowed in respect of investments from borrowed funds.
The assessee explained that investment has been made out of free reserves and, therefore, no disallowance is called for.
The explanation of the assessee did not find favour with the Assessing Officer who was of the firm belief that provisions of section 36(1)(iii) of the Act r.w. proviso inserted w.e.f. 01.04.2014 clearly apply on the facts of the case and accordingly, interest to the tune of Rs. 1,91,812/- was disallowed and added to the income of the assessee.
The assessee carried the matter before the ld. CIT(A) but without any success.
Before us, the ld. counsel for the assessee drew our attention to the following chart: Particulars As on As on As on As on As on As on 31.03.13 31.03.13 31.03.13 31.03.13 31.03.13 31.03.13 Owned funds Share 19,08,200 19,08,200 19,08,200 19,08,200 19,08,200 17,08,200 capital Reserves & 59,07,849 50,86,333 41,48,607 34,56,991 28,74,544 16,44,943 surplus Total 78,16,049 69,94,533 60,56,807 53,65,191 47,82,744 33,53,143 owned funds
It is the say of the ld. counsel for the assessee that the amount paid towards cost of plot were completed on 26.07.2010 while cash credit limit from YES Bank Ltd was taken on 28.09.2010. Therefore, no borrowed fund has been utilized towards the cost of plot.
Per contra, the ld. DR strongly supported the finding of the Assessing Officer.
I have heard given thoughtful consideration to the orders of the authorities below. The appellant company has paid towards cost of plot as under: Rs. 2 lakhs 23.04.2008 Rs. 5 lakhs 07.06.2008 Rs. 7,68,800/- 15.06.2008 Rs. 7 lakhs 08.07.2008 Rs. 7,53,576/- 26.07.2010 totaling to Rs. 29,22,376/-.
The undisputed fact is that the loan taken from YES Bank was on 28.09.20110 which means that the plot was purchased much before the borrowings. Therefore, it can be safely concluded that no borrowed fund has been utilized towards the cost of the plot. We, therefore, do not find any merit in the impugned addition. We, accordingly, direct the Assessing Officer to delete the addition of Rs. 1,91,812/-.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 05th September, 2018.