9911796707
TMI Blog2015 (6) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal (fully). 2. Without prejudice, on the facts and in the circumstances of the appellant's case, the CIT(A) erred in holding that even for A.Y. 1997-98 (i.e. prior to A.Y. 2004-05) interest for the period falling after commencement of production will not be allowable on the borrowings which were allegedly referable to those assets which had not been used for actual production and further erred in not allowing deduction of a sum of Rs. 1,97,32,000/- which pertained to the period falling after commencement of production. 3. Without prejudice on the facts and in the circumstances of the appellant's case, the Assessing Officer was directed only to give effect according to decision of Core Healthcare's case by Tribunal and accordingly the Assessing Officer had no jurisdiction and in turn CIT also to raise new issues on facts and in law. 4. Without prejudice on the facts and in the circumstances of the appellant's case, the CIT(A) erred in inferring that out of the original project if some of the business asset are not used for actual production then in respect of those assets business is not set up on the date of commencement of production. 5. Without prejudice on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest expenses in question. And also raising the very claim as revenue expenditure. He drew distinction in facts of the instant case with those involved before the hon'ble Supreme Court (supra). And arrived at a conclusion that interest claim was disallowed on the ground that the said assessee had installed new machinery but production had not started. He further observed that it was not the department's case before the hon'ble apex court that a new business had been set up or commenced during the assessment year in question. Thereafter, the assessing officer turned to the facts of the instant case. The assessee had started its commercial production on 23.9.96. end continued to make heavy additions during October to March 1997 of Rs. 38, 38, 78,342/-. The assessee had also shown capital work in progress as on 31.3.1997 of Rs. 16, 01, 69, 517/-. This total sum reads almost Rs. 54 crores. The assessing officer quoted alleged failure in producing details of the abovesaid outgo and substantive addition in its plant and machinery even after its commercial production had started with usage of borrowed fund to invoke section 36(1)(iii) of the Act. He tabulated the facts of assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of assessee even though the commercial production was started on 23/9/1996, the assessee continued to make heavy additions towards plant and machinery and the addition during October to March 1997period amounted to Rs. 38,38,78,342. In addition, the assessee has also shown capital work in progress for the year ending 31/3/1997. at an amount of Rs. 16,01,69,570. Thus, in the case of assessee, after the start of commercial production, the addition in plant and machinery including capital work in progress comes to Rs. 54 crores approximately. This was not the fact in the case of Core Healthcare Ltd and hence, since the facts are not identical, with due respect to the apex court's decision, it is submitted that though the assessing officer relied upon the said case, If %vas not the only case biit several other case laws were also relied upon." 4.2. In this case the commercial production-was started on 23/9/1996. This fact has not been disputed by the AO in the assessment order. According to the AO since the business is 'newly setup, up to the time of commencement of commercial production the interest liability up to the stage of commencement of production should be capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court in the case of Core Healthcare is in respect of the claim of interest on the borrowed funds used for the expansion of the business of the assessee. There is a difference between expansion and newly setup of the business. The business cannot be expanded unless it is first fully setup. If the original project of the appellant was to install 10 looms and only two looms are put to use by the appellant out of the 10 looms and from such two looms the appellant had started commercial production, then it cannot be said that the balance eight looms represent the expansion of the business. The decision of Hon'ble Supreme Court; in the case of Core Healthcare would not apply in respect of the interest expenses incurred for the purchase of the eight looms. In this case, the setting up of the business will mean the installation and commercial production from all the 10 looms. If however, after setting up and ' commercial production from the 10 looms, the appellant wants to expand his business by putting up another five looms, then it would amount to the expansion of the business for which the interest would be allowable on the borrowed funds to purchase the five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leaves both the parties aggrieved. 6. We have heard both the sides and perused the case files. The assessee refers to the hon'ble apex court's judgment in Core Health Care (supra) and submits that section 36(1)(iii) only requires the interest sum in respect of capital borrowed for the purpose of the business or profession. The Revenue seeks to restore the Assessing Officer's finding. We intend to disagree with submissions of both the parties. It stands narrated in the preceding paragraph that a coordinate bench in its earlier order has already held facts of the issue involved in the impugned assessment year identical to those in assessment year 1995-96 (supra). However, both the lower authorities have nowhere considered any consequential order passed in the earlier assessment year. In other words, they have not taken into account the specific directions in the earlier remand order. Nor do the parties before us have placed on record any such consequential order passed in earlier assessment year dealing with the very issue of interest disallowance. In these circumstances, we reiterate our earlier directions and remit the grounds raised by both the parties to the Assessing Officer fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
