DCIT, C-1, LUDHIANA vs. M/S ORIENTAL TEXTILES PROCESSING CO. PVT. LTD., LUDHIANA

ITA 86/CHANDI/2018Status: DisposedITAT Chandigarh25 May 2018AY 2014-153 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the deletion of the addition by the CIT(A), agreeing that the Assessing Officer failed to establish that borrowed funds were used for capital work in progress. The Tribunal noted that the assessee had sufficient interest-free funds, which is a key factor in such cases.

What were the facts?

The Assessing Officer capitalized interest on capital work in progress amounting to Rs. 37,53,625/-. The assessee argued that sufficient own funds and interest-free funds were available, and the addition was made mechanically without verifying the source of funds.

What were the issues?

Whether interest on borrowed funds for capital work in progress can be capitalized when the assessee has sufficient interest-free funds. Whether the Assessing Officer fulfilled the conditions under Section 36(1)(iii) before making the addition.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 43(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH’B’, CHANDIGARH

Before: SMT. DIVA SINGH & DR. B.R.R. KUMAR

For Appellant: Shri. Subhash Aggarwal
For Respondent: Shri. Manjit Singh
Hearing: 24/05/2018Pronounced: 25/05/2018

PER DR. B.R.R. KUMAR, A.M.:

The present appeal has been filed by the Revenue against the order of the Ld. CIT(A)-I, Ludhiana dt. 07/11/2017. 2. The only effective ground of appeal is as under:

“Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in law and on facts in deleting the addition of Rs. 37,53,625/- on account of capitalization of interest on capital work in progress ?”

3.

Brief facts of the case are that during the assessment proceedings, the Assessing Officer, on an examination of the Ledger account of the machines, noticed that machines were entered in the books as capital work in progress as on 31/03/2013. However, there were further debit entries and finally the said machines were seen to h

The order continues below.

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