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TMI Blog2016 (1) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest expenses of Rs. 12,91,84,505/- on loans from Ministry of Chemical and Fertilizer ignoring the finding of the assessing officer that the interest expenses are not allowable u/s 36(1)(iii) of the I.T. Act. 2. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting disallowance of depreciation of Rs. 73,12,202/- on the basis of assessee's evidence of 3 sales invoices in respect of which opportunity was not granted to the assessing officer under rule 46A of the Income-tax Rules." 2005-06: "1. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting disallowance of interest expenses of Rs. 13,39,84,000/- on loans from Ministry of Chemical and Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores bearing interest of 14.50% for 10 years in 10 equal annual installments commencing from first anniversary from the date of drawing. The assessee claimed an amount of Rs. 12,91,84,505/- towards payment of interest to the Govt. of India in respect of working capital loan sanctioned to it by that department of which the assessee is a public sector Undertaking. The Assessing Officer disallowed the claim of assessee observing that the assessee has not actually paid interest to the Govt. of India and therefore, applying the provisions of section 43B added back the same to the total income of the assessee. The Assessing Officer also disallowed 50% of the depreciation on Bhatinda Plant observing that the plant at Bhatinda started functioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggest that the assessee did not use the borrowed funds for the purpose of business. In the event that the assessee maintains mercantile system of accounting, has provided interest on the loans from the Ministry in its accounts, and since, there is no evidence to suggest that interest on the loans have been waived by the Ministry, the disallowance of interest of Rs. 12,91,84,505/- invoking the provision of section 36(1)(iii) is not in order, no matter that interest has not been paid on the borrowings from the Government. In view of these findings, we do not find any infirmity in the conclusion arrived at by the ld.CIT(A) while deleting the disallowance of impugned interest. Accordingly, this issue is decided against the Revenue and in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e use of the asset. The Assessee shall be at liberty to place all evidence, if any, before the Assessing Officer in support of its claim. Needless to say, the assessee shall be afforded reasonable opportunity of being heard before deciding the issue afresh. Accordingly, the appeal of the Revenue is partly allowed for statistical purposes. 7. Adverting to the appeal of the Revenue for the assessment year 2005-06, we find that the only issue involved in this appeal is in respect of deletion of interest expenditure of Rs. 13,39,84,000/- on loans from Ministry of Chemical and Fertilizer. This issue has been decided in favour of the assessee while deciding the appeal of the Revenue for the assessment year 2004-05 in the foregoing part of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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