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Income Tax Appellate Tribunal - Delhi

G.S. Pharmbutor Pvt. Ltd., Meerut vs Dcit Circle-10(1), New Delhi on 14 February, 2023

         THE INCOME TAX APPELLATE TRIBUNAL
              DELHIBENCH 'C', NEW DELHI
            Before Sh. C. M. Garg, Judicial Member
           Dr. B. R. R. Kumar, Accountant Member
       ITA No. 1541/Del/2019 : Asstt. Year: 2013-14
G. S. Pharmbutor Pvt. Ltd,             Vs.   DCIT,
C/o Kashyap & Co, CA 214, Citi               Circle-10(1),
Center, Begum Bridge Road, New               New Delhi
Delhi-110019
(APPELLANT)                                  (RESPONDENT)
PAN No. AAACG2925P

                 Assessee by : Sh. P. S. Kashyap, CA
                 Revenue by : Sh. Anuj Garg, Sr. DR
Date of Hearing: 08.02.2023       Date of Pronouncement: 14.02.2023


                              ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

The present appeal has been filed by the assessee against the order of the ld CIT(A)-4, New Delhi dated 28.12.2018.

2. The assessee has raised the following grounds of appeal:

"1. That the Ld. A .O has erred in law as well as on facts in making addition o f Rs 3,36,00,000/- on account of disallo wance of inte rest u/s 36(1 )(iii) on account o f investment in co nvertible debentures. The action of Ld. A .O in making addition is bad in law and against the facts and circumstances o f the case.

2. That the Ld. A O has erred in law as well as on facts in making disallo wance of Rs. 1,99,83,172/- on account o f interest on borro wed funds. I n first appe al Ld CIT(A) has restricted the disallo wance to Rs. 1,55,01,937/-. The action o f Ld. A .O in making addition is bad in law and against the facts and circumstances o f the case ."

2 G. S. Pharmbutor Pvt. Ltd Disallowance of Interest u/s 36(1)(iii):

3. Suffice it to state that, the AO disallowed interest on borrowings which has been confirmed by the ld. CIT(A). The same issue has been dealt by the Tribunal in extenso in the order dated 08.1.2021 in assessee's own case for the A.Y. 2015-16 in ITA No.6716/Del/2018. In the absence of any change in the facts of the case and legal proposition, we decline to support the rationale of the ld. CIT(A) on this issue.

Disallowance of Interest:

4. The assessee incurred expenditure of Rs.13.15 crores in capital work in progress on cumulative basis. During the year under consideration an amount of Rs.9.7 crores has been added to work in progress. The AO disallowed Rs.1.99 crores on account of the interest paid. The AO held that the interest on borrowed funds utilized on work in progress needs to be disallowed. The ld. CIT(A) restricted the disallowance to Rs.1.55 crores. It was argued before us that the assessee has earned an amount of Rs.5.27 crores from the advances given and also paid an interest of Rs.5.78 crores. In that case, the net interest incurred would be Rs.50,99,073/- which needs to be disallowed being the interest incurred on specified business loans which are not directly related to any specific purpose. Hence, the case is being remanded to the file of the AO with direction to re- compute the disallowance after taking into consideration the own funds available in the form of share capital and reserves & surplus that the funds utilized for non-business purposes be re- computed after deducting the amount of the own funds available as per the balance sheet.

3 G. S. Pharmbutor Pvt. Ltd

5. In the result, the appeal of the assessee is allowed for statistical purpose.

Order Pronounced in the Open Court on 14/02/2023.

              Sd/-                                Sd/-
      (C. M. Garg)                     (Dr. B. R. R. Kumar)
     Judicial Member                    Accountant Member
Dated: 14/02/2023

*Subodh Kumar/AK, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
                                             ASSISTANT REGISTRAR