2012 (8) TMI 1175 - ITAT MUMBAI

Deductions - Interest paid on borrowings - MAT - Peak load infringement charges - Sales tax incentive.

Interest paid on borrowings - HELD THAT:- Respectfully following the principles laid down in the Setabganj Sugar Mills Ltd vs. CIT [1960 (11) TMI 10 - SUPREME COURT] and by the Coordinate bench in assessee’s own case, we modify the order of the CIT (A) and allow the expenditure as revenue expenditure u/s 36(1)(iii). The amendment to the section wherein the borrowed funds are to be capitalized till the date on which such asset was put to use has come up with effect from 1.4.2004. As seen from the facts of the claim from the order of the CIT (A) all the borrowings are for the existing business, even though new advantages have been created. Therefore, the interest expenditure is allowable as revenue expenditure. Accordingly this ground is allowed.

Peak load infringement charges - HELD THAT:- What assessee has paid is additional charges for overdrawing the power sanctioned to it which the HPSEB has levied as peak load infringement charges. These are nothing but electricity charges but paid for additional drawal of power than the sanctioned load at that particular point of time. The amounts are compensatory in nature and not penalty for surcharge violation. The same cannot be disallowed by invoking Explanation to section 37(1). In view of this, we direct AO to allow the amount. Ground is allowed.

Sales tax incentive - power tariff freeze - Electricity duty - Road Transport subsidy as capital receipt - MAT - HELD THAT:- We are of the view that so far as the exclusion of these items from book profits under section 115JB is concerned, we find that even though there are Coordinate Bench decision in favour of assessee, this precedence no longer hold good law in view of the Special Bench decision of this Tribunal in the case of Rain Commodities [2010 (7) TMI 794 - ITAT HYDERABAD]. Respectfully following the Coordinate Bench decision in assessment year 1998- 99 which in turn followed the above Special Bench decision, we reject the grievance of assessee and uphold the stand of the authorities on this issue. The grounds are rejected.

Disallowance of interest on funds borrowed in connection with earning incomes exempt u/s 10(33) - HELD THAT:- Since the CIT (A) has considered the issue on facts wherein a finding has given that assessee has own funds to make investments, no disallowance is required on facts. Not only that the Hon'ble Supreme Court in the case of Munjal Sales Corporation vs. CIT & Another [2008 (2) TMI 19 - SUPREME COURT] held that when assessee had sufficient own funds and profits to provide interest free loans, the submission that loans to sister concerns were out of those funds has to be accepted. Similar view is also taken by the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT]. Thus, we do not see any reason to interfere with the order of the CIT (A). Accordingly Revenue ground is rejected.

In the result, Revenue appeal is dismissed.

In the result assessee’s appeal is partly allowed and Revenue appeal is rejected.