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TMI Blog2025 (3) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... 961, ignoring the Explanation 1 to Section 147 of the Income Tax Act, 1961 ? iii) Whether on the facts and circumstances of the case, the Ld. CIT(A) erred to allow the appeal of the assessee and delete the addition of Rs. 2,52,48,177/- on account of disallowance of interest payments to NCRPB which is not as per law, because the same is not allowable to the assessee as per section 36 of the Income Tax Act, 1961. iv) Whether the Ld. CIT(A) is right in law in holding that disallowance under Section 14A, of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962 was not called for as the assessee has not earned any exempt income ignoring the legislative intent of the statue, further clarified vide Circular No. 5/2014 dated 11.02.2014 which provides for disallowance of expenditure even where the Assessee has not earned any exempt income in a particular year? v) Whether on the facts and circumstances of the case, the Ld. CIT(A) erred to allow the appeal of the assessee and delete the addition of Rs. 17,73,52,597/- on account of disallowance u/s 36(i)(iii) which is not correct as per law because the assessee has shown WIP amounting tc Rs, 543,22,40,378/- and on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax in the hands of the assessee. 6. During the appellate proceedings, the ld AR submitted that the issue regarding interest payment to NCR Planning Board was taken up during the original assessment proceedings and notice was issued by the AO and thereafter after considering the written submission and other details filed by the assessee, no addition was made in the hands of the assessee. It was further submitted that the amount represents the interest on the installment which accrued the till last date of the F.Y. However, the due date of which falls in the subsequent year and since the assessee following mercantile system of accounting, the interest charged in the account is an actual liability of the assessee ad not a provision on the basis of which the addition has been made by the AO and detail of interest working and the calculation was submitted before the Ld. CIT(A). Thereafter the Ld. CIT(A) considering the submission and documentation filed by the assessee recorded her finding wherein she has stated that it is an undisputed fact that the appellant has been following mercantile system of accounting and from the submission alongwith the basis of calculation filed by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns taken from the various banks and the financial institution and no loans has been raised for the purpose of making investment and no interest income has been earned by the assessee, the AO went ahead and made the disallowance of Rs. 77,57,69,043/- reiterating the position as taken while reopening the assessment by invoking the provision of Section 14A of the Act. 13. During the appellate proceedings, the assessee submitted that no loans has been raised by the assessee for making investment as loans has been raised for specific purposes and utilization for those purposes only. It was further submitted that investment in UHBVNL and DHBVNL have been transferred to assessee from erstwhile HSEB and thus question of investments from borrowed funds does not arise for consideration. It was further submitted that no exempt / tax free has been derived by the assessee from the investment made in its subsidiary company rather an amount of Rs. 166.75 crores has been derived by the assessee from investment made in BBMB and IP stations which forms part of taxable income. Lastly it was submitted that no new investment has been made during the year under consideration. The submissions so filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered by the decisions of Hon'ble Jurisdictional High Court as referred supra. In light of the same, the addition so made and upheld by the Ld. CIT(A) is hereby directed to be deleted. 17. In Ground No. 5, Revenue has challenged the deletion of addition of Rs. 17,73,52,597/- on account of disallowance under section 36(i)(iii) of the Act. 18. In this regard, briefly the facts of the case are that the AO observed that the assessee has shown capital work in progress for an amount of Rs. 5,43,22,40,378/- and has also debited a sum of Rs. 1,97,80,77,388/- in the P&L Account on account of interest on loans and since the capital has not been put to use by the assessee during the year under consideration, the proportionate interest amounting to Rs. 43,42,84,338/- should have been capitalized. However the assessee has only capitalized a sum of Rs. 25,69,31,741/-, hence the difference amount of Rs. 17,73,52,597/- was disallowed under section 36(1)(iii) of the Act. 19. During the appellate proceedings, the assessee submitted that the interest of Rs. 2,23,50,09,129/- being total interest charged was on account of various loans including working capital loans and the amount of interest pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard the rival contentions and pursued the material available on record. Nothing has been brought on record to rebut the findings of the ld CIT(A) who has rightly taken into consideration the accounting policy so adopted by the assessee in terms of allocation of interest expenditure, the actual expenditure so allocated by the assessee and further, there is nothing on record to demonstrate the basis of allocation as so determined by the AO which is clearly arbitrary and without any sound basis. In the result, we upheld the findings of the ld CIT(A) and the ground of appeal so taken by the Revenue is dismissed.
23. In light of above, where we have upheld the findings of the ld CIT(A) on merits of the additions as rightly deleted by him, Ground No. 1 & 2 the Revenue appeal wherein it has challenged the action of the Ld. CIT(A) wherein she has set aside the reopening of the assessment under section 147 of the Act have become academic in nature and we do not deem it necessary to adjudicate the same and the same are thus left open.
24. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on 28/02/2025. X X X X Extracts X X X X X X X X Extracts X X X X
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