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TMI Blog2021 (7) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... lature in its wisdom has used the terms differently under various provisions of the Act itself and therefore, the words cannot be used synonymously. In this connection reference may be made to Section 80- IC(2)(b) and Section 80-IE(2)(ii) where the expression expansion is used and substantial expansion is defined as increase in investment in plant and machinery by a specified percentage of book value of plant and machinery. In Section 35D(1)(ii) and proviso to Section 36(1)(iii) (prior to its amendment in the year 2015), the legislature has employed the expression extension . Therefore, prior to its amendment the extension of business was covered under Section 36(1)(iii) of the Act and not the expansion of business. In the instant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was interest on the borrowed capital on the ground that it was utilized towards work in progress. In respect of the assessment year 2014-15, the appellant filed its return of income declaring a loss of ₹ 1,15,86,245/- which was taken up for scrutiny and an order of assessment dated 05.12.2016 was passed disallowing a sum of ₹ 1,37,31,128/- which was a interest on borrowed capital. The assessee filed appeals before the Commissioner of Income Tax (Appeals) [henceforth referred to as CIT(A) ]. CIT(A) passed an order dated 23.07.2018 in respect of the assessment year 2013-14 and set aside the disallowance by relying upon its own order in the case of the appellant for the assessment years 2011-12 and 2012-13. The CIT(A) in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the investments were made from interest free funds available with the assessee. [See: RELIANCE INDUSTRIES LTD., SUPRA]. The assessee had made investment by way of share application money in one of its foreign subsidiaries i.e., A.N.Coffeeday. The investment which was made as on 31.03.2009 and 31.03.2010 was for an amount of ₹ 14,32,75,766/- and ₹ 17,47,54,752/- respectively. The assessee held its own funds to the extent of ₹ 17,47,54,752/- which were far in excess of the investment made in A.N.Coffeeday. Therefore, the presumption in law arises that the investments were made out of non interest bearing funds and burden was on revenue to snow that investments were made out of borrowed funds. The revenue has not disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be at all appropriate to allow the position to be changed in subsequent year. For the aforementioned reasons, the substantial question of law No.1 is answered in the negative and in favour of the assessee. 11. Now we may advert to the claim of the assessee in respect of upholding the disallowance of ₹ 7,97,70,326/- as interest on capital attributable to capital work in progress relying on proviso Section 36(1)(iii) of the Act. The assessee is in the business of manufacture and trade in coffee and allied products. It has more than 1000 coffee shops with brand name Caf Coffee Day . The assessee had capital work in progress of ₹ 59,41,92,500/- as on 31.03.2010 which represented various coffee shops being set up which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, which reads as under: 36. (1) The 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: 13. The word expansion and extension connote different meaning and legislature in its wisdom has used the terms differently under various provisions of the Act itself and therefore, the words cannot be used synonymously. In this connection reference may be made to Section 80- IC(2)(b) and Section 80-IE(2)(ii) where the expression expansion is used and substantial expansion is defined as increase i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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