2012 (1) TMI 224

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..... or such finding has been given. The assessee has pointed out that most of the payments had been made in earlier years in which year there was no disallowance of interest. Therefore, in the earlier years, the payments were made from own funds. During the year, payment was only ₹ 10.06 lacs. Assessee had own funds of ₹ 3.95 crores and interest free borrowing of ₹ 7.92 crores. In addition, current year profit was itself ₹ 96.00 lacs. Considering these facts in our view source of current payment is easily explained from own funds. Therefore, when the payment for acquisition of assets have been made from own funds, there cannot be any case of disallowance of interest. We, therefore, set aside the order of CIT(A) and delet .....

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..... llowed the interest to that extent by capitalizing the same towards acquisition of new assets for expansion of business. The assessee disputed the decision of AO and submitted before CIT(A) that the assessee had made advance payments for acquisition of new premises. It was also submitted that the assessee had not used any borrowed funds for acquisition of premises as the assessee had sufficient funds of its own. The borrowings made during the year were export trading facilities which could not be used for any other purpose. It was also submitted that the AO had adopted total interest payment of ₹ 2.57 crores but actual payment was only ₹ 1.59 crores and balance amount of ₹ 98.00 lacs was bank charges. It was accordingly ur .....

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..... tentions carefully. The dispute is regarding disallowance of interest in relation to acquisition of asset for extension of business. Under the provisions of section 36(1)(iii), any interest on borrowings made for acquisition of assets for extension of existing business is required to be capitalized till the asset is first put to use. In this case, assessee had made total advance payments of ₹ 1,53,25,5000/- for acquisition of two new premises out of payment made during the year was ₹ 10,06,000/- and balance payment had been made in the earlier years. Authorities below have proceeded with the presumption that the assets had been acquired from borrowed funds. However, no basis for such finding has been given. The assessee has poin .....

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