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TMI Blog2017 (8) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... hich detailed queries and inquiries were raised and conducted by the Assessing Officer.” ITAT perused the queries raised by the AO and the reply given thereto by the Assessee, in respect of the dividend income received from OMIFCO. Therefore, the contention of the Revenue that no adequate enquiries in respect of the above issue were made was held to be ‘completely misplaced’. As regards the issue concerning the capitalization of interest, the Court finds again that the ITAT took note of the fact that detailed enquires were made by the AO in regard to the major additions to the fixed assets, capital work in progress, the manner in which the depreciation was claimed and the details of both secured as well as unsecured loans. The audited fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a de novo assessment. 4. The Pr CIT sought to order a de novo assessment on two issues. One pertained to the tax credit claimed by the Respondent/Assessee in respect of the dividend income received by its branch in Oman from Fertilizer Company SAOC ( OMIFCO ) under the laws of Oman. The other question concerned the capitalization of interest in terms of the proviso to Section 36 (1) (iii) of the Act. 5. The case of the Revenue is that the order of the AO, for the AY in question, was erroneous and prejudicial to the interest of the Revenue and, therefore, in terms of Section 263 of the Act and, more particularly, in view of the Explanation-2 inserted in the said provision with effect from 1st June, 2015, the Pr CIT was justified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings with regard to the tax credit on deemed dividend which would have been payable in Oman but for the exemption granted the assessee had filed detailed replies in response to the query which were duly considered by the Assessing Officer before allowing tax credit. (b) That. such credit was allowed by the Revenue for all the earlier years i.e. A.Ys.2006- 07 to 2009 '10, therefore, we have no hesitation in holding that there was complete application of mind on the part of the Assessing Officer and that the Assessing Officer has adopted a view consistent with the preceding years and, therefore, the Assessing Officer having taken a plausible view after full application of mind, the view of the learned Pro CIT cannot substitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or capitalization of expenses including interest expenses to both the fixed assets as well as capital work in progress. This method was forming part of the audited financial statements which were filed before the Assessing Officer as well. We also find that the free reserves were also more than sufficient to cover up the investment in fixed assets/capital work in progress. Further the assessee society has generated sufficient internal cash flows to meet with the cost of fixed assets as well as capital work in progress. In spite of this fact the assessee has capitalized a sum of ₹ 7.09 crores in the books of accounts. The learned Pr. CIT has also not disputed that the total investments were merely 10% of the interest-free funds availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as a result of the insertion of Explanation-2 in Section 263 of the Act with effect from 1st June, 2015. However, on this aspect, the ITAT has specifically held in para 17 of the impugned order as under: 17. Before concluding we would also like to deal with the recent insertion, of Explanation 2 to Section 263 of the Act. We have already held above that in respect of both the issues i.e. allowing credit of deemed taxes paid on dividend in Oman as well as capitalization of interest u/s 36 (1) (iii) detailed enquiries as well as verification have been made by the AO. Further it is also not the case of the Ld. Pr. CIT that the order is not in accordance with any instruction direction issued by the Board or is not in accordance with a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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