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TMI Blog2019 (5) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... n its Books of Accounts as consistently found by the authorities below. Therefore, the disallowance of said interest on borrowings under Section 36(1) (iii) of the Act was a natural consequence to follow. Disallowance u/s 14A - HELD THAT:- No Substantial Question of law arises for consideration, as the said issue has only been remitted back to the AO by Tribunal for ascertaining actual expenses incurred by the Assessee in earning the exempted income for the Assessment Year in question. Whether the Assessee incurred anything or not is the question of fact and the same has to be ascertained by the Assessing authority the same does not give rise to any Substantial Questions of law. - T.C.(A).No.233 of 2008 - - - Dated:- 21-3-2019 - Dr. Justice Vineet Kothari And Mr. Justice C.V. Karthikeyan For the Appellant : Mr.V.S.Manoj for Mr.K.Vaitheeswaran For the Respondent : Mr.T.Ravi Kumar for Ms.V.Pushpa Senior standing counsel JUDGMENT DR.VINEET KOTHARI, J. The Assessee has filed this Appeal raising the Substantial Questions of law arising from the order of the learned Income Tax Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid on borrowings made for setting up of the Haryana Unit to the extent of ₹ 2,75,70,802/- was allowable as a deduction from profits of assessee under Section 36(1)(iii) of the Income Tax Act, 1961 (in short 'the Act') because the Haryana Unit set up for manufacture of wide width strips is nothing but an expansion of the existing unit set up by the Assessee at Chennai for manufacture of narrow width strips and therefore it was a continuity of business expansion for Assessee in Haryana and hence the interest on such borrowings deserves to be allowed for the Assessment year in question, in the hands of the Assessee. He submitted, that the findings recorded by the Tribunal that such interest on borrowings to the extent of 2.72 crores which had been capitalised by the Assessee himself in the Books of Accounts maintained by the Assessee for his Haryana Unit, is an incorrect finding of fact. 6. On the third question of disallowance under Section 14A of the Act, it is submitted that the matter has been remitted back to the learned Assesseing Authority to ascertain the actual expenditure incurred during the Assessment year in the form of dividends, but, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up new projects During the year, the assessee has capitalised in the books interest of ₹ 272.02 lakhs paid on borrowings. This amount has however been fully claimed in the computation of income filed along with return. From the details furnished it is seen that the interest relates to loans taken for the projects set up to manufacture widewidth strips doorframes. The assessee has claimed the entire exependiture incurred on interest placing reliance on the case cited in 60 ITR 52 the Madras High Court decision in 24 ITR 412. It is seen that an amount of ₹ 218.81 lakhs has been incurred as interest on borrowings to set up a facility to manufacture widewidth. ₹ 53.21 lakhs has been incurred as interest on borrowings to set up a new project at Bawal, Haryana to manufacture doorframes from M/s.Maruti Udyog Ltd . The assessee has hitherto been manufacturing only narrow width strips. The new project set up was to manufacturing widewidth strips which is a new product. Similarly in the case of the new unit at Haryana, the assessee company had not ben manufacturing doorframes. The new unit there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer, the appellant was manufacturing only narrow width strips, the new project set up was to manufacture wide width strips which means, the appellant has started producing new product out of investment made from the loans taken. Similarly, a new unit has been set up at Haryana where the appellant-company was manufacturing door frames and the door frame is a new product for the Company. In view of the above, the Assessing Officcer held that the appellant-company has started new unit for producing a new product . In view of this, he rejected the appellant's claim and also held that the ratio of the decision cited in 60 ITR 52(SC) in the case of India Cements Ltd. V.CIT and 241 ITR 412 in the case of Kasturi Sons V. CIT (Madras) are not applicable to the facts of the appellant's case. 6.3. Before me, it is submitted that during the period relevant to asst.year 1998-99, the appellant-company capitalised the interest on capital expenditure spent on the facility to manufacture wide width strips and doorframes for Maruti Udyog Ltd. The interest upto the stage of commencement was capitalised in the books of account based on the spending and claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch loans should be allowed. The assessee also incurred interest on the loan borrowed for set up of project at Haryana. The AO disallowed this interest also on the ground that there was no commencement of the project. According to the assessee, this is also an expansion of the project. Now the question arising is that various activities carried by the assessee can be taken as one single activity or they represent distinct business. In our opinion, the project relating to manufacture of wide width strips and narrow width strips has to be treated as single integrated activity because there is not separate staff for this unit. There is interconnection and interdependency of these two units and common profit and loss registers were maintained. It is not the same in the case of unit of Haryana which is manufacturing door frames and which is a new project started by the assessee. The closure of the Haryana unit does not affect in any way the carrying on of business at Chennai . The business carried on by the assessee at Haryana cannot be said to be the same business as carried on at Chennai. In our opinion, the business carried on by the assessee at Haryana is a new ..... X X X X Extracts X X X X X X X X Extracts X X X X
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