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TMI Blog2016 (12) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... While in view of the proviso to sub-section (iii) of section 36(1) of the Act, we find force in the alternate contention of the Assessee that interest attributable to the investment in new assets is required to be capitalized till the date the new assets is put to use, the rate of interest attributable to such advances is required to be applied @ 3%p.a. instead of 14% p.a. as per AO. The AO is accordingly directed to grant appropriate relief by computing the revised disallowance applying the rate at which the unsecured loans has been borrowed by the assessee. The AO may seek required details in this regard if he so considers it expedient.- Decided partly in favour of assessee. Disallowance of interest expenditure attributable to construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployees lodging boarding expenses at site, the assessee company had provided advance from time to time. The statement showing the complete details of expenses claimed had been filed before the Ld.CIT(A). Further it is submitted that disallowance made by Ld.A.O. and partly confirmed by CIT(A) is without any basis, evidences or specific findings. Therefore the same be not accepted and total advance site expenses claimed of ₹ 45,09,670/- be allowed now and the addition sustained of ₹ 2,25,484/- be deleted. 2. The Learned Commissioner of Income-tax(Appeals) has erred in confirming the disallowance of ₹ 1,11,183/- pertaining to interest expense out of total interest expense claimed. It is submitted that Term Loan of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining addition of ₹ 12,84,500/- be deleted now. 4. The order passed by the learned Commissioner of Incometax( Appeals) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now. 3. As per Ground No.1, the assessee has assailed the disallowance of ₹ 2,25,484/- out of total advance site expenses claimed at ₹ 45,09,670/-. The Ld.AR for the assessee submitted that for the purpose of meeting the employees lodging and boarding expenses at site, the assessee-company had provided advances from time to time. The statement showing details of expenses have also been filed before the lower authorities. The Ld.AR therefore contended that the estimation of disallowance at 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purportedly voluminous. In the circumstances, in the absence of complete details, we do not find any plausible reason to discredit the findings of the CIT(A) in this regard. Accordingly, ground No.1 raised by the assessee is dismissed. 6. The second ground relates to disallowance of ₹ 1,11,183/- out of interest expenditure. The Ld.AR for the assessee submitted that term loan of ₹ 78 lakhs bearing interest @ 14% p.a. had been disbursed by the bank in financial year 2007-08 which was utilized in the same year. It was thus contended that advances given for purchase of land during the year under consideration were out of internal accruals received in ordinary course only. It was further submitted by Ld.AR that total interest expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is accordingly directed to grant appropriate relief by computing the revised disallowance applying the rate at which the unsecured loans has been borrowed by the assessee. The AO may seek required details in this regard if he so considers it expedient. The ground No.2 is thus treated as partly allowed. 8. Ground No.3 concerns disallowance of ₹ 15 lakhs out of interest expenditure attributable to construction of the new building. The ld.AR for the assessee submitted that the assessee in the course of assessment proceedings suo motu offered ₹ 2,15,500/- towards disallowance out of interest expenditure attributable towards construction of new building. The adhoc disallowance of ₹ 15 lakhs out of interest expenditure s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zance of the fact that payment has been made for construction of the property in truncated manner. While we agree with the action of the AO that proviso to sub-section (iii) of section 36(1) of the Act is attracted in the circumstances as spelt, the AO ought to have appreciated the overall fund position instead of differential fund position. In view of the fact that unsecured loans of ₹ 6.65 crores bearing interest 3% p.a. is available with the assessee as claimed the benefit of low rate of interest as claimed by the assessee for the purpose of capitalization of interest costs in terms of section 36(1)(iii) of the Act cannot be denied. We therefore find force in the argument of the assessee. The AO is accordingly directed to apply the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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