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TMI Blog2015 (12) TMI 1553X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Therefore, this Tribunal is unable to uphold the order of the lower authority and accordingly, the order of the lower authority is set aside and the addition is deleted. Disallowance u/s 36(1)(iii) - contention of the assessee is that addition of one more windmill does not amount to extension, it is only an expansion of the business - addition one more windmill to the existing business - Held that:- This Tribunal is of the considered opinion that when the assessee is admittedly in the business of generation of electricity through windmill and made addition of one more windmill, it is an extension of such existing business of generation of electricity through windmill. Therefore, the capital borrowed is for acquisition of asset for extension of the existing business or profession. When the assessee paid interest on the borrowed capital, which was used for acquisition of asset for extension of the existing business of generation of electricity through windmill, this Tribunal is of the considered opinion that the interest cannot be allowed as deduction till the capital asset acquired by the assessee is put to use. In this case, admittedly, the capital asset purchased is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the recipient of the amount has submitted Form 15H on 10.04.2011. According to the Ld. counsel, the recipient of the amount informed the assessee in advance that she would provide Form 15H, therefore, the amount was credited to the account of Ms. M. Krishnaveni on 31.03.2011. According to the Ld. counsel, even in earlier assessment years, the said Ms. M. Krishnaveni used to file Form 15H and the assessee has paid the amount without deducting the tax. During the year consideration, Form 15H in fact was filed on 10.04.2011, before the due date for deposit of the TDS amount. Since the assessee was informed in advance, according to the Ld. counsel, the TDS was not made and in fact, the assessee has filed the TDS certificate subsequently. Therefore, there cannot be any disallowance. The Ld. counsel placed his reliance on the decision of the Jodhpur Bench of this Tribunal in ITO v. Pearl Organic Coatings [2004] 4 SOT 755, the decision of Mumbai Bench of this Tribunal in Karwat Steel Traders v. ITO [2013] 145 ITD 370/37 taxmann.com 190 and Delhi Bench of this Tribunal in Vijaya Bank v. ITO [2014] 49 taxmann.com 533/66 SOT 20 (URO). 3. On the contrary, Sh. P. Radhakrishnan, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the recipient since Form 15H is filed. When there is no requirement for deduction of tax in view of filing of Form 15H by the recipient on 10.04.2011, this Tribunal is of the considered opinion that there cannot be any disallowance under Section 40(a)(ia) of the Act. Therefore, this Tribunal is unable to uphold the order of the lower authority and accordingly, the order of the lower authority is set aside and the addition of ₹ 71,016/- is deleted. 5. The next issue arises for consideration is with regard to disallowance of ₹ 3,70,377/- 6. Shri G. Baskar, the Ld. counsel for the assessee, submitted that the assessee is in the business of generating electricity through windmill. During the year under consideration, the assessee has added one more windmill to the existing business. Therefore, according to the Ld. counsel, it was an expansion of business and not extension of business. Therefore, proviso to Section 36(1)(iii) of the Act is not applicable. However, the Assessing Officer found that the assessee has to capitalize the interest on the borrowed funds till the machinery is put to use. Referring to Section 36(1)(iii) of the Act, the Ld. counsel submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not) ; for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction : Explanation - Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause ; As rightly submitted by the Ld. D.R., the Parliament qualified the word extension with the word existing business or profession . Therefore, what is to be extended is existing business or profession. The contention of the Ld. counsel for the assessee is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot used the machinery in the year of borrowing. The Apex Court found that proviso to Section 36(1)(iii) will operate prospectively. Admittedly, the proviso to Section 36(1)(iii) of the Act is effective during the year under consideration. Therefore, unless the machinery is put to use, the assessee cannot claim deduction. Therefore, this judgment of the Apex Court is also not of any assistance to the assessee. 11. In view of the above discussion, we do not find any reason to interfere with the order of the CIT(Appeals) and accordingly, the same is confirmed. 12. The next ground of appeal is with regard to disallowance of ₹ 46,71,233/- being the amount paid to Life Insurance Corporation of India, towards Narasu's Spinning Mills Employees Group Gratuity Fund. 13. Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee has admittedly paid ₹ 46,71,233/- towards Employees Group Gratuity Fund to LIC. The assessee has also produced a copy of the receipt for payment of money before the Assessing Officer. According to the Ld. counsel, the payment of money is not disputed. Once the money is paid in the year out of the hands of the assessee, in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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