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TMI Blog2021 (7) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT (A) observation with regard to the amount of ₹ 2,59,994/- is not a ground of appeal before us, no action is called for. Interest on the borrowed capital - Interest attributable from the period of the installation of the new Plant up to the date of start of commercial use of the Plant - HELD THAT:- Having gone through the entire factum of the case, owing to the similar determinative factum of put to use in ICDS IX, AS-16, the judicial pronouncements, provisions to Section 36 (1)(iii) and Explanation 8 to Section 43 (1), we hereby hold that the Interest has to be treated as Revenue Expenditure and need not be Capitalized. Accordingly, the disallowance is hereby directed to be deleted. - ITA No. 5909/Del/2017 - - - Dated:- 6-7-2021 - Sh. Kul Bharat, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. Arvind Kumar, Adv. For the Revenue : Ms. Rinku Singh, Sr. DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: The present appeal has been filed by the revenue against the order of the ld. CIT(A)-25, New Delhi dated 26.05.2017. 2. Following grounds have been raised by the revenue: 1. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (sundry creditors) on 23.01.2017. Thus, effectively, it can be said that the AO failed to avail opportunity given to him by the ld. CIT (A) which necessitated the ld. CIT (A) to adjudicate the matter based on the documents available before him. 7. The reconciliation statements with regard to the three parties are as under: a. Reconciliation Statement between balance as on 31.03.2010 as per books of Account of assessee and M/s Concast Exim Limited S. No. Particulars Amount Dr./(Cr.) 1 Balance of Appellant in the books of M/s Concast Exim Limited as on 31.03.2010 87,770,584 2 Custom Duty paid and shown in Ledger of M/s Concast Exim Limited in the books of Appellant (a) 29.12.2009 (Payment made for Custom Duty) (2,973,459) (b) 29.12.2009 (Payment made for Custom Duty) (1,779,140) (c) 29.12.2009 (Payment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Duty on Purchase) (270,302) (b) 31.03.2010, Voucher (Excise Duty on Purchase) No. FRK-0013 (799,690) Balance as per books of Fridon Kikalishvili (in INR) 6,468,652 Equivalent to USD 138171 c. Reconciliation Statement between balances as on 31.03.2010 as per books of Account of assessee and ACCL/ACCL(s) S. No. Particulars Amount Dr./(Cr.) 1 Balance of ACCL as on 31.03.2010 as per books of Appellant 486,531 2 Difference in Opening balance 7,816,103 2 Balance of Agarwal Transport Corp. Pvt. Ltd. adjusted by party (167,640) 3 Amount write off by the party as per ledger maintained by the party (Same is also written back by Appellant in next year) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and M/ s Fridon Kikalishvili shows that the assessee has stated that the Closing Balance of the assessee in books of M/ s Fridon Kikalishvili as on 31.03.2010 was USD 1,38,171 /- equivalent to ₹ 64,68,652 /- and that the Closing Balance of M/ s Fridon Kikalishvili in the Books of assessee as on 31.03.10 was ₹ 64,46,557 /-. A reconciliation Statement for the reason of difference between balance of assessee and M/ s Fridon Kikalishvili was submitted by the assessee. 12. In view of the entire facts of the case, we hold that no addition is called for on account of purchases from M/s Fridon Kikalishvili. 13. With regard to M/ s Agarwal Coal Corporation Pvt. Ltd. (ACCL), the Closing Balance of the assessee in books of M/s ACCL as on 31.03.10 was Nil, whereas Closing Balance of M/s ACCL in the Books of assessee as on 31.03.10 was ₹ 4,86,531 /-. It was stated that the copy of account for the F.Y. 09-10 shows that a sum of ₹ 73,88,469 /- was the opening credit balance as on 01.04.09, and a total payment of 78,75,000 /- was made to that party by the assessee, and thus, a Debit Balance of ₹ 4,86,531/- was outstanding in the Books of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trial Run was also an actual use and hence Interest for the period from the installation for Trial Run should be allowed as Revenue expenditure. The assessee relied upon the judgment of the Hon' ble Supreme Court of India in the case of Commissioner of Income Tax vs. Shri Rama Multi Tech Ltd., 2017(4) TMI 669. 21. There was no dispute that the Power Plant was used for Trial Run from the date of the installation to the date of the start of commercial use. The Assessing Officer has made the disallowance on the Ground that the interest incurred for the period before the commercial starting of the Power Plant had to be disallowed, without taking into account the period for Trial Run . 22. Heard the arguments of both the parties and perused the material available on record. 23. We have gone through the case law of Shri Rama Multi Tech Ltd (supra) relied upon by the assessee and find that neither the facts of the case nor the ratio laid down in the case are applicable to the instant case. 24. We have gone through the issue with relevance to the allowances claimed in the P L account whether it be depreciation or capitalization of interest with regard to the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Forging and Stamping Pvt. Ltd. [TS-5079 -HC- 1979], held that mere trial run of the machines would not be sufficient to conclude that the business had set up. 30. The Co-ordinate Bench of ITAT Kolkata in the case of ACIT v. Paharpur Cooling Towers P. Ltd [TS-5437- ITAT-1992] held that assessee had not only set up its business but also commenced production when it started its trial production and hence allowed the expenses on trial production i.e. after setting up of business but prior to commercial production. 31. We have also gone through the ICDS IX with relation to capitalization of borrowing costs. The main guidelines with regard to the capitalization of borrowing costs are as under: 1. The borrowing costs should be capitalized to an extent to which it is incurred during the reporting period on the borrowed funds, specifically for the purpose of acquisition, construction or production of qualifying asset. 2. The capitalization will commence from the date when the funds have been borrowed, in case funds have been borrowed for the purpose of acquisition, construction or production of qualifying asset. In case of inventory, it will commence from the date, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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