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TMI Blog2012 (2) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial institution against installation of machinery during the year under consideration. This contention was also raised before the AO. The AO failed to give specific finding on this aspect and, hence, ld. CI T(A) held that it cannot be presumed that any interest bearing funds, have been invested, in the capital work, in process, shown by the assessee. Ld. CIT(A), found the cases relied upon by the AO as distinguishable, factually and materially. We do not find any infirmity in the findings of the ld. CIT(A) and, hence, findings of the ld. CIT(A) are upheld and ground of appeal raised by the revenue is dismissed. Disallowance of interest u/s 36(1)(iii) - Held that:- Advances by company were out of its own funds of share capital or out of mixed funds, not sufficient to discharge the onus- Decided in favour of revenue - ITA No.920/CHD/2009 - - - Dated:- 8-2-2012 - SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER JJ. For the Appellant : Smt.Jaishree Sharma For the Respondent : Shri Sudhir Sehgal ORDER PER MEHAR SINGH, AM These two appeals filed by the revenue, are directed against the order of the CIT(A) Ludhiana passed u/s 250(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted to ₹ 64 lacs. Such amount was treated as unexplained investment, being not recorded in the books of account of the assessee and was accordingly, added to the total income of the appellant. 5. The ld. CIT(A), deleted the impugned addition of ₹ 64 lacs, made by the AO. Ld. CIT(A), observed that the document in question was found during the course of survey, at the assessee's premises, from the possession of Joint Managing Director, Shri Gurlal Singh Grewal, who made an attempt to destroy the document by tearing it off. Ld. CIT(A) agreed with the observation of the AO that the impugned document might be containing some transactions, having tax implication. However, Ld. CIT(A), on the basis of the submissions filed by the assessee, found that the impugned addition was made on the basis of conjectures and surmises, as document was found from the possession of Shri Gurlal Singh Grewal and it belonged to him, as contended by the assessee in the course of assessment proceedings. The relevant findings of the CIT(A), are reproduced hereunder : In view of the facts and circumstances and just the denial of Shri Gurlal Singh Grewal and without his specifically sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of entries in the impugned document , cannot be said to be justified . It may be mentioned here that as pointed out in the written submissions of the ld. Counsel also, the AO who framed the assessment of the company has also intimated the AO of Shri Gurlal Singh Grewal with regard to taking action on the basis of impugned document. In view of the above discussed facts and circumstances on the basis of evidence whatsoever available adverse inference if an y, could only be considered in the hands of Shri Gurlal Singh Grewa l . Keeping in view the totality of the facts and circumstances as above , addition made in the hands of the appellant cannot be sustained. The addition made by the AO of ₹ 64/- is therefore, deleted. 6. In the course of present appellate proceedings, ld. 'AR' filed assessment order passed by Priyanka Singla, ACIT-VI, Ludhiana on 31.12.2010 u/s 143(3) read with Section 147 of the Act for the assessment year 2006-07 in the case of Shri Gurlal Singh Grewal, whereby the addition on account of unsecured investment in unsecured loan, amounting to ₹ 64 lacs was made u/s 69 of the Act. The relevant part of the said assessment order, as contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earned by the assessee on the addition of ₹ 64 lacs made by the AO which was subsequently deleted by the CIT(A). The CIT(A) also deleted the impugned addition in view of his findings on the deletion of ₹ 64 lacs, made by the CIT(A). The ground of appeal, being consequential in nature, we are in complete agreement with the findings of the CIT(A), and hence, the same are upheld. Thus, this ground of appeal of the revenue is dismissed. 9. In Ground No.3, revenue contended that CIT(A) erred in law and on facts in deleting addition of ₹ 7,12,323/- made on account of capitalization of interest on capital work in process in view of the provisions of Section 36(1)(iii) and explanation 8 to Section 43(1) of the Act. The AO found that as per audit report annexed to the return of income, capital work in progress amounting to ₹ 5,84,18,030/- was outstanding as on 31.3.2006. The assessee raised both secured and unsecured loans, which as on 31.3.2006 amounted to ₹ 9,51,81,376/- and ₹ 6,67,50,000/- respectively. An amount of ₹ 1,53,81,376/- was claimed in the profit and loss account as interest expenditure for the year under reference. The AO observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e details of loans and advances, an advance of ₹ 6,56,539/- was outstanding against the associate concern. On the other hand, assessee was paying interest on unsecured loans raised by it @ 11%. Therefore, AO made the disallowance of ₹ 72,219/- following the decision of the Hon'ble jurisdictional High Court in the case of CIT V Abhishek Industries Ltd. 286 ITR 1 (P H). 11. We have gone through the findings of the ld. CIT(A) carefully and found that the deletion made by the CIT(A) is founded on misinterpretation of the ratio laid down by the Hon'ble jurisdictional High Court in the case of Abhishek Industries (supra), head-notes of the same are reproduced hereunder : BUSINESS EXPENDIT URE-INTEREST ON BORROWED CAPIT AL-CONDIT ION PRECEDENT FOR GRANT- BORROWED CAPITAL MUST BE USED FOR BUSINESS PURPOSES-LOANS ADVANCED INTEREST-FREE TO SISTER CONCERNS WHILE PAYMENT OUTSTANDING ON BORROWINGS BY COMPANY-INFERENCE THAT ADVANCES WERE FROM BORROWED FUNDS AND FOR NON-BUSINESS PURPOSES-ONUS ON ASSESSEE TO SHOW BORROWINGS USED FOR BUSINESS PURPOSES-NOT ON REVENUE TO SHOW NEXUS BETWEEN BORROWINGS AND ADVANCES-THAT ADVANCES BY COMPANY WERE OUT OF IT S OWN FUNDS OF SHARE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n stated that las t year, the amount of ₹ 3,96,725/- was disallowed as interest income earned out of the books of account in respect of certain notings on one piece of paper f ound during the course of survey conducted on 22.2.2006. 17. A perusal of the findings of the ld. CIT(A), as reproduced above, clearly reveals that the impugned addition is consequential in nature and hence, in view of the findings recorded by the ld. CIT(A) and decision of the ITAT in assessee's own case for assessment year 2006-07, the ground of appeal is dismissed. 18. In Ground No.2, revenue contended that ld. CIT(A) erred in deleting addition of ₹ 10,00,909/- made on account of capitalization of interest on capital work in progress, in view of the provisions of Section 36(1)(iii) and explanation 8 to Section 43(1) of the Income-tax Act. The identical issue has been adjudicated by the Bench in assessee's appeal for the assessment year 2006-07, against the revenue and in favour of the assessee. Findings of the ld. CIT(A) in respect of such issue, as contained in para 3.11 of the order passed by him for the assessment year 2007-08, are reproduced hereunder : 3.11 I have gon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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