The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) allowed the ground taken by the assessee with reference to the disallowance of interest of Rs. 2, 12,94,836/- as made by the AO.
In this case, the assessee company, M/s Intas Biopharmaceuticals Ltd, filed its income tax return ( ITR ) on 28/09/2012, declaring a total loss of (-) Rs. 22,42,39,525/- for the assessment year 2011-12. The assessment was completed u/s 143(3) on 09/02/2015 at a loss of (-) Rs. 16,99,42,180/-. The Assessment Officer (AO) disallowed certain claims made by the company while filing its ITR.
The assessee, who was aggrieved by the order of the AO, approached the Commissioner of Income Tax (Appeals) [CIT(A)]. However, it did not yield satisfactory results in favour of the assessee, and thus the assessee approached ITAT for relief.
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The assessee had taken various grounds in the appeal, and one of the grounds was that the CIT(A) had made an error in confirming the disallowance of interest expenses to the extent of Rs. 212,94,836/- considering the same to be capitalized on account Capital WIP of the assessee company.
The council of the assessee contended that the assessee had capitalized Rs. 3.02 crore of the total interest cost of Rs. 9.70 crore and interest of Rs. 6.6 crore only was claimed as a deduction in the profit and loss account. He further contended that the proportionate disallowance of interest on CWIP as calculated by AO was incorrect.
The bench, comprising Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member), found out that the AO had not provided a rationale for working out the proportionate interest disallowance on CWIP.
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The tribunal bench further observed that the presumption of the AO that only the interest-bearing funds were utilized towards CWIP, was incorrect.
The bench deleted the disallowance of interest of Rs. 2,12,94,836/- made by the AO under Section 36(1)(iii).
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