Challapalli Sugars Ltd. v. CIT

98 ITR 167Supreme Court of India1975#514 most cited

What is Challapalli Sugars Ltd. v. CIT authority for?

Interest on borrowed capital utilized for acquiring a capital asset is capitalized until business commences. Once business is set up, this interest is deductible under section 36(1)(iii) even if the asset has not yet been put to use, accepting commercial accounting standards in the absence of contrary statutory provisions.

185

judgments rely on this decision, according to BharatTax’s citation analysis of 366,470 Indian tax judgments — from 2007 to 2026.

Also referred to as

Challapalli Sugars Ltd. v. CIT · 98 ITR 167 · Section 36(1)(iii) · Section 32 · capitalization of interest · actual cost · borrowed capital · commencement of business · asset put to use · deductibility of interest · accounting standards · mercantile system

Also reported as

3 SCC 572

Sections most often in play

Section 37(1)Section 115JBSection 234ASection 250Section 40A(2)(b)Section 43BSection 139(1)Section 143(3)

Issues it is cited on

section 10(5)section 32(1)(iia)section 32(1)demergeradditional depreciationright to receivesection 92bsection 32section 22section 57put to usemercantile system of accounting

Judgments citing Challapalli Sugars Ltd. v. CIT

Commissioner of Income Tax Delhi II vs. Monnet Industries Ltd

In the result, the appeal is dismissed

ITA/450/2008HC Delhi21 Nov 2008

Bench: HON'BLE MR. JUSTICE BADAR DURREZ AHMED,HON'BLE MR. JUSTICE RAJIV SHAKDHER

For Respondent: Mr R.D. Jolly
Section 143(1)(a)Section 143(2)Section 260A

…iness at Baroda and accordingly answered the first question in the affirmative. As regards the second question, the Gujarat High Court analysed the ratio of the decision of the Supreme Court in Challapalli Sugars Ltd v. Commissioner of Income Tax: (1975) 98 ITR 167 (SC) as follows:- “………In order to understand the ratio of the decision in Challapalli Sugars Ltd’s case, and with a view to see how far the said ratio is in harmony with the ratio of the above-referred decision of the Supreme Court in India Cements Ltd’s case, it would be necessary to state shortly the facts relating to that decision. There…

Commissioner of Income Tax Delhi II vs. Monnet Industries Ltd

In the result, the appeal is dismissed

ITA - 450 / 2008HC Delhi21 Nov 2008
For Respondent: Mr R.D. Jolly
Section 143(1)(a)Section 143(2)Section 260A

…iness at Baroda and accordingly answered the first question in the affirmative. As regards the second question, the Gujarat High Court analysed the ratio of the decision of the Supreme Court in Challapalli Sugars Ltd v. Commissioner of Income Tax: (1975) 98 ITR 167 (SC) as follows:- “………In order to understand the ratio of the decision in Challapalli Sugars Ltd’s case, and with a view to see how far the said ratio is in harmony with the ratio of the above-referred decision of the Supreme Court in India Cements Ltd’s case, it would be necessary to state shortly the facts relating to that decision. There…

Deputy Commissioner of Income Tax vs. M/S. Core Health Care Ltd

C.A. No.-003952-003955 - 2002Supreme Court08 Feb 2008
For Respondent: M/s. Core Health Care Ltd
Section 260ASection 28Section 36(1)(iii)Section 43(1)

…had installed new machinery. The A.O. vide assessment order dated 30.3.95 disallowed the amount of Rs.1,56,76,000/- placing reliance on the judgment of this Court in Challapalli Sugars Ltd. & Anr. v. Commissioner of Income-tax, A.P. and Anr. \026 (1975) 98 ITR 167, inter alia, on the ground that during the assessment year under consideration assessee had installed new machinery on which production had not started. On appeal, vide order dated 15.11.96, CIT (A) confirmed the addition of interest amount on borrowings of Rs.1,56,76,000. Therefore, both the authorities, namely, the A.O. and CIT (A) added…

Commissioner of Income Tax vs. Woodward Governor India Pvt. Ltd

The appeal is dismissed

ITA-49/2005HC Delhi30 Apr 2007

…affairs of the business of the assessee. The accounts have to be prepared by adopting the principle of prudence. The Courts have also generally deferred to accounting standards. Reliance is placed on the decisions in Challapalli Sugars Ltd. –vs- CIT, 98 ITR 167 (SC) and CIT -vs- Indo Nippon, 261 ITR 275(SC). It is further contended that Central Government also has issued Circulars from time to time recognising these accounting standards. (e) It is emphasized that merely because payment is deferred to a later date, the liability does not cease; it continues to survive in the prese…

Commissioner of Income Tax vs. India Pvt. Ltd

The appeal is dismissed

ITA/49/2005HC Delhi30 Apr 2007

…affairs of the business of the assessee. The accounts have to be prepared by adopting the principle of prudence. The Courts have also generally deferred to accounting standards. Reliance is placed on the decisions in Challapalli Sugars Ltd. –vs- CIT, 98 ITR 167 (SC) and CIT -vs- Indo Nippon, 261 ITR 275(SC). It is further contended that Central Government also has issued Circulars from time to time recognising these accounting standards. (e) It is emphasized that merely because payment is deferred to a later date, the liability does not cease; it continues to survive in the prese…