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M/s Vardhm an P olytex Ltd. Chandigarh Roa Ludhiana Vs. A.C.I.T. Circle 1 Ludhiana
September, 19th 2012
               IN THE INCOME TAX APPELL ATE TRIBUNAL
                 CHANDIG ARH BENCH `B', CHANDIG ARH

     BEFO RE SHRI T.R. SOOD, A.M AND M s. SUSHM A CHOWL A, JM

                          IT A No. 1002/Chd/2009
                       Assessm ent Year : 1998-99

M/s Vardhm an P olytex Ltd.           V             A.C.I.T. Circle 1
Chandigarh Road                                     Ludhiana
Ludhiana
 (Appellant)                                        (Respondent)

             Appellant by  :          Shri Subhash Aggarwal
             Respondent by :          Shri Manjeet Singh

             Date of hearing :                    12.09.2012
             Date of Pronouncement :               17.09.2012





                                 O R D E R



PER T.R.SOOD, A.M

     In this appeal the assessee has raised the following ground

of appeal.

     "That the ld. CIT(A)-I has erred in disallowing interest paid
     amounting of Rs. 1,15,69,020/- in respect of      borrowings
     used for expansion of existing business claimed u/s 36(1)(iii)
     of the Act inspite of the judgment of the Hon'ble Supreme
     Court in favour of the appellant."

2.   After hearing both the parties we find that during assessment
proceedings     it   was   noticed   that   the   assessee     had    borrowed
certain funds for setting up a new unit at Baddi and incurred
certain expenses including interest expenditure.            The AO raised a
query that why s uch expenses including interest should not be
capitalized.    It seems that the matter had traveled to the Tribunal
earlier and the Tribunal had remanded the issue to the AO
because      similar    issue   was       pending     before    the     Hon'ble
Jurisdictional High Court.       Later on Hon'ble Jurisdictional High
Court had also decided the issue against the assessee. However,
                                        2


while replying to the query it was represented that the assessee
had already preferred an SLP before the Hon'ble Supreme Court.
It was further submitted that since identical issue has already
been decided in favour of          the assessee in case of CIT V. Core
Health Care Ltd. 298 ITR 194 (S.C) therefore,                  later decision
should be followed. The AO did not agree with the submissions by
observing that the Hon'ble Jurisdictional High Court has decided
the   issue   against     the   assessee by following        the   decision    of
Hon'ble Supreme Court in case of Challapalli Sugars Ltd. and
another V CIT, 98 ITR 167.         He also observed that the decision of
Core Health Care Ltd. (supra) was distinguishable.


3.    On appeal before the ld. CIT(A), it was mainly submitted that
earlier Hon'ble Punjab & Haryana High Court did not follow the
decision of Hon'ble Gujarat High Court in case of DCIT V. Core
Health Care Lt d. 251 I TR 61 but lat er o n when t he dec ision of
Core Health Care Ltd. was confirmed by the Hon'ble Supreme
Court in 298 ITR 194 even Hon'ble Punjab & Haryana High Court
followed the same in the later decision in case of CIT V. Highway
Cycle Inds in ITA No. 402 of 2008.


4.    The ld. CIT(A) after detailed discussion held that as per the
directions of ITAT the AO had no option but to decide the issue on
the basis of the judgment of Hon'ble Jurisdictional High Court in
assessee's case arising out ITA No. 1 of 2003.                 Since Hon'ble
Jurisdictional     High   Court   has   decided    the   issue     against    the
assessee      in   assessee's     own   case,   therefore,   the    issue    was
decided against the assessee.


5.    Before us, the ld. counsel of the assessee submitted that the
issue is covered in favour of the assessee by the earlier decisions
of the Tribunal in ITA No. 758 of 2009 for AY 2001-02, ITAs No.
821 & 822 of 2009 and ITA No. 402 of 2008.
                                      3


6.    On the other hand, the ld. DR for the revenue relied on the
order of ld. CIT(A).





7.    After hearing both the parties we find that the Tribunal in
earlier years after going through the details followed the decision
of Hon'ble Supreme Court in case of Core Health Care Ltd. It was
also observed that since Hon'ble P unjab & Haryana High Court
has itself accepted the decision of Core Health Care Ltd. in case
of CIT V. Highway Cycle Inds. wherein identical issue was decided
against the Revenue by following the decision of Core Health Care
Ltd. Therefore,     we are of the opinion that the issue regarding
deduction on account of         interest u/s 36(1)(iii) for purchase of
assets which has not been put to use even then interest would be
deductible in the light of the decision of Hon'ble Supreme Court in
case of Core Health Care Ltd. (supra).           Therefore,    following the
decision, we decide the issue in favour of assessee.


8.    In the result, appeal of the assessee is allowed.


      Order pronounced on 17.09.2012



             Sd/-                                   Sd/-
       (SUSHM A CHOWL A)                        (T.R. SOOD)
       JUDICIAL MEMBER                      ACCOUNT ANT MEMBER

Dated :    17.09. 2012

SURESH

Copy to : The Appe lla nt/The Res ponde nt/T he CIT/T he CIT(A)/The DR
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