9911796707
TMI Blog2016 (10) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... ow this ground of appeal of the assessee. Addition on under invoicing of sale of scrap - Held that:- Flat rate of ₹ 8000 per MT of scrap adopted by the Assessing Officer to compute the unaccounted income is not correct. He stated that the ratio of cash part of the consideration in sale of scrap has been found to be 15% as mentioned in the statement of the Managing Director recorded on 19-02-2008. The Ld. Commissioner of Income Tax(A) further stated that as per schedule 2 of the audited accounts of the assessee the total income from scrap sale is ₹ 20,66,760/- and he determined the unaccounted cash received @ 15% at ₹ 310014/-. The Ld. Commissioner of Income Tax (A) accordingly restricted the addition to ₹ 3,10,014/-. The Ld. counsel contended that the statement on the basis of which the addition was made not relevant to the year under consideration. On the other hand, the ld. Departmental representative relied on the order of the lower authorities. We have heard both the sides and perused the material on record. We find The Ld. Commissioner of Income Tax(A) has correctly sustained the addition up to ₹ 3,10,014/- out of the total addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2.2007 and building [Rs.67,49,272] on 31.8.2006, however, the assessee, had not capitalised the interest on loans taken from banks and others attributable to these fixed assets. The assessing officer asked the assessee to show cause as to why interest on capital work in progress of plant and machinery and building should not be capitalised from the period 1.4.2006 till the date of capitalization of these assets. The assessee stated that it has substantial funds of its own in the form of reserves and surplus and share capital. These monies were non-interest bearing and utilised towards the long term investments of the company as appearing in its balance sheet. The assessee further stated that additions to work-in-progress of factory building at ₹ 2,65,706 and plant and machinery at ₹ 2,86,562 were made during the year out of the funds available with the company. After considering the detail provided by the assessee, the assessing officer stated that no doubt during the year under consideration the assessee has made addition to capital work-in-progress at ₹ 5.52 lakhs only, however, there was an opening balance of capital work-inprogress at ₹ 1,80,50,823, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set till the date on which such asset was first put to use, shall not be allowed as deduction. This proviso clearly cast an obligation on the assessee to keep complete and accurate details of sources of funds which have been utilized for acquisition of an asset for extension of existing business or profession. When AO asks the assessee to explain as to whether any capital has been borrowed for acquisition of a capital asset, then the assessee must be in a position to explain the utilization of borrowed capital and also the sources of funds utilized for acquiring the capital asset. A general explanation, as being advanced by the appellant in the present case, will not do. Moreover,, the appellant has paid interest on term loan as well as unsecured loan. The term loan is availed off for acquisition of fixed assets. Hence the interest on such loan utilized for acquiring the opening WIP and addition to the WIP during the year till the putting to use of the fixed asset, has to be capitalized. So far as other loans are concerned, the appellant has failed to demonstrate their utilization with the help of entries in its books of accounts. Also, it has not explained that the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secured Loans 2,15,14,354 1,73,71,363 2,47,20,732 2,95,12,392 Unsecured Loans 0 1,00,000 1,07,94,319 1,19,44,301 Capital WIP 14,88,029 1,54,94,775 1,80,50,823 0 On the other hand, Ld. departmental representative relied on the order of the lower authorities. 5. We have heard both the sides and perused the material on record carefully. We find from the perusal of the audited accounts of the company that the assessee has received ₹ 1,25,00,000/- towards share capital during the previous year relevant to the assessment year 2005-06.and the capital WIP increased from ₹ 14,88,029 to ₹ 1,54,94,775 in the same year. We also noticed that there was increase of only ₹ 25,56,048/- in the WIP in the A. Y. 2006-07 and no increase in the capital WIP in the A. Y. 2007-08. It is evident from the above stated facts and circumstances that the assessee company has its own substant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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