:1: ASN ASN ASN IN IN IN THE THE THE HIGH COURT OF JUDICATURE AT BOMBAY HIGH COURT OF JUDICATURE AT BOMBAY HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.57 OF 2009 IN INCOME TAX APPEAL LODGING NO.2952 OF 2008 WITH INCOME TAX APPEAL LODGING NO.2952 OF 2008 The Commissioner of Income Tax-2. ..Appellant. V.s M/s. Cable Corporation of India Ltd. ..Respondent. Mr.Vimal Gupta u/by P.S.Sahadevan for the Appellant. Mr. B.D.Damodar for the Respondent. CORAM : F.I. REBELLO & R.S. MOHITE, JJ. DATE : 12TH FEBRUARY,2009. PC : 1. As we have heard the parties on merits and considering the cause shown, delay condoned. Office to register the appeal. INCOME TAX APPEAL LODGING NO.2952 OF 2008 1. By consent, heard forthwith. 2. Revenue is in appeal on the following question. (A) Whether on the facts and in the circumstances of the case and law, ITAT is right in allowing disallowance of interest claimed u/s. 36(1)(iii) on debentures capitalized in :2: the books of accounts? 3. The appeal is in respect of the assessment year 1998-99. The Assessing Officer on the facts of this case has disallowed the interest on debentures which admittedly was used for expanding the existing business of the respondent assessee. The finding recorded by the Assessing Officer was that the plant was commissioned on 27.3.1997. Production did not stabilize upto 31.7.1997 and only trial production was carried out during this period. The Assessing Officer therefore, held that the interest expenditure upto the date of commencement period had to be capitalised as costs of assets. Assessee as such would not be entitled to claim deduction of interest under Section 36(1)(iii). . In appeal CIT (A) observed that for the assessment year 1997-98 on the very issue and in identical facts and in respect of the very debentures the interest paid has been adjudicated and the claim of the appellant of the interest on debentures was to be allowed. In appeal before ITAT the order was confirmed. The tribunal also noted that CIT (A) had relied on the judgment of the Supreme Court in Dy. Commissioner of Income Tax Vs. Dy. Commissioner of Income Tax Vs. Dy. Commissioner of Income Tax Vs. Core Core Core Health Care Ltd. reported in 251 ITR 61. Health Care Ltd. reported in 251 ITR 61. Health Care Ltd. reported in 251 ITR 61. 4. Revenue has preferred this appeal for the assessment year 1998-99. The assessee also filed cross objections :3: in respect of some other disallowance for the year 1997-98. Both the appeals are being disposed off by this common order. The issue regarding the interest was considered for the assessment year 1997-98. The learned Tribunal accepted that there could be no dispute considering the finding by the Assessing Officer that the debentures were utilised for putting up the Nashik plant. The learned Tribunal relied upon the judgment of the Gujrat High Court in the case of Dy. Commissioner Dy. Commissioner Dy. Commissioner of of of Income Tax Vs. Core Health Care Ltd. reported in Income Tax Vs. Core Health Care Ltd. reported in Income Tax Vs. Core Health Care Ltd. reported in 251 251 251 ITR 61. ITR 61. ITR 61. The Gujrat High Court has relied upon the judgment of the Supreme Court in the case of Commissioner Commissioner Commissioner of Income Tax Vs. Associated Fibre and of Income Tax Vs. Associated Fibre and of Income Tax Vs. Associated Fibre and Rubber Rubber Rubber Industries (P) Ltd. reported in 236 ITR 471 Industries (P) Ltd. reported in 236 ITR 471 Industries (P) Ltd. reported in 236 ITR 471 (S.C.). (S.C.). (S.C.). 5. Section 36(1)(iii) before the proviso was added read as under: "The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in Section 28.... (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession." :4: 6. From the findings of the Assessing Officer itself, there is no dispute that the amount borrowed was used for the purpose of the business of the assessee. Once that be the case, in our opinion, considering the language of the section itself, we find no error in the conclusion of law arrived at by CIT(A) and ITAT. 7. For the aforesaid reasons, we find no merit in the appeal and therefore, the question of law as framed is answered in favour of the assessee and against the revenue. Appeal is disposed off accordingly. (R.S. MOHITE, J.) (F.I. REBELLED, J.)