Simbhaoli Sugar Mills Ltd. v. ACIT
ITA Nos. 2856 and 2857 (Delhi) of 2005
A.Ys. 2000-01 and 2001-02
Dated : 11-5-2007
S. 36(1)(iii) read with S. 43(1) of the Income-tax Act, 1961
— Interest on capital borrowed for acquiring machinery required to be used for
its business is eligible for deduction u/s.36(1)(iii), irrespective of fact
whether machinery was put to use or not in accounting year.
The AO and the CIT(A) held that since machinery acquired by
the assessee was not put to use in the year under consideration, the assessee in
view of Explanation 8 to S. 43(1), was not entitled to claim deduction
u/s.36(1)(iii) in respect of interest paid
on the capital borrowed for acquiring the machinery.
The Tribunal allowed the assessee’s claim. The Tribunal noted
as under :
(1) In view of a catena of decisions of the Supreme Court
and various High Courts on the question of allowability of interest
u/s.36(1)(iii), it is clear that the expenditure incurred on interest on
capital borrowed for acquiring the machinery required to be used for the
business of the assessee is eligible for deduction u/s.36(1)(iii),
irrespective of the fact whether the machinery was put to use or not in the
accounting year relevant to assessment year under consideration.
The Tribunal referred to the following cases :
(a) CIT v. Associated Fibre & Rubber Industries (P.)
Ltd., (1999) 236 ITR 471/102 Taxman 700 (SC)
(b) CIT v. Modi Industries, (1993) 200 ITR 341/68
Taxman 114 (Delhi)
(c) CIT v. Dalmia Cement (Bharat) Ltd., (2000) 242
ITR 129/109 Taxman 363 (Delhi)
(d) CIT v. Orissa Cement Ltd., (2003) 260 ITR 626
(Delhi)
(e) CIT v. J. K. Synthetics Ltd., (1988) 169 ITR
267/22 Taxman 260 (All.)
(f) ITO v. Malwa Vanaspati & Chemical Co. Ltd.,
(1997) 226 ITR 253/92 Taxman 262 (M.P.)
(g) CIT v. Bhillai Iron Foundry (P.) Ltd., (1998)
234 ITR 661 (M.P.)
