PER B. RAMAKOTAIAH, A.M. These four appeals are by Revenue wherein Revenue has raised common following grounds against the Orders of the CIT(A)-VI, Hyderabad dated 06.09.2013.

1.

“The Ld. CIT(A) erred in facts and law.

2. The Ld. CIT(A) ought to have confirmed the disallowance of interest on loans for purchase of machinery which was never put to use.

3. Any other ground that may be urged at the time of hearing.”

1.1. Since common issues are involved in these appeals, these are heard together and decided as under : ITA.No. 1820 to 1823/Hyd/2013 M/s. Ramcharan Oil Industries, Hyderabad

2. Briefly stated, assessee is carrying on the business of trading and manufacturing of edible and non-edible oils. Assessee acquired land and machinery from M/s. Surana Oils and Derivatives (India) Ltd. for a total consideration of Rs.3.07 crores in the Financial Year 2004-05 relevant for A.Y. 2005-06. However, due to certain administrative problems like pollution control certificates etc., assessee could not do any business in that unit. However, it gave the plant and machinery on lease to another company effective from 03.11.2008. Ld. CIT in A.Y. 2008-09 noticed that A.O. did not examine the issue of allowance of interest under section 36(1)(iii), initiated proceedings under section 263 and held that had assessee not diverted the funds for purchase of the assets in earlier year, assessee would not have borrowed funds and paid interest. Accordingly, the Ld. CIT set aside the assessment for that A.Y. Consequent to that, the A.O. has reopened the assessment in A.Y. 2007-2008 and followed the same in A.Ys. 2009-2010 and 2010-2011, also completing the assessment for A.Y. 2008-09 consequent to the orders under section 263. In all these years, the A.O. was of the opinion that the funds borrowed from State Bank of Hyderabad on which interest paid was for non- business purposes and accordingly, interest paid to that bank account in respective A.Ys as per the following table was disallowed. Financial Year Interest 2007-08 10,16,759 2008-09 16,58,364 2009-10 11,95,812 2010-11 7,76,096 ITA.No. 1820 to 1823/Hyd/2013 M/s. Ramcharan Oil Industries, Hyderabad

3. Ld. CIT(A) on considering assessee’s submissions held that assessee has not diverted any funds for non-business purposes and the purchase of property from M/s. Surana Oils and Derivatives (India) Ltd. was out of own funds and no part of the borrowals were utilized in acquiring the assets as evident from the realisation from Debtors, before obtaining/ utilizing loan from the bank. It was further noticed that assessee did put to use the assets acquired from the said company and infact, has leased assets in A.Y. 2009-2010 on which incomes were offered. He was of the opinion that In spite of reference of this information, A.O. did not controvert the claims of assessee. The Ld. CIT(A) was of the opinion that the phrase ‘put to use’ not only include active use but also passive use. Therefore, Ld. CIT(A) based on the facts held that interest claimed by assessee was proved to be expenses relatable to the business and as such cannot be disallowed invoking the provisions of section 36(1)(iii) of the I.T. Act, 1961. Revenue is aggrieved in all the assessment years as stated in the above ground.

4. Learned D.R. relied on the findings of the A.O. whereas, Ld. Counsel relied on the findings of the Ld. CIT(A). Not only that he has placed on record the order of ITAT in A.Y. 2008-09 on appeal against the order under section 263 of the CIT and also the finding of the A.O. in assessment order under section 143(3) read with section 147 of the Act dated

17.01.2014 allowing assessee’s claim in A.Y. 2011-2012.

5. We have considered the rival contentions and perused the details placed on record in the form of paper book in all the years. At the outset, there is a finding in the ITAT order for A.Y. 2008-09 in ITA.No.156/Hyd/2013 dated ITA.No. 1820 to 1823/Hyd/2013 M/s. Ramcharan Oil Industries, Hyderabad

04.07.2013 that CIT himself does not have any material on record to dispute the fact that no borrowed fund has been utilized for the purpose of acquisition of the plant and machinery and land. Consequent to that finding, the ITAT held that CIT cannot set aside the assessment for roving or fishing enquiry which is not permissible while exercising the jurisdiction under section 263. There are also findings that assessee has kept the machinery in running condition and has in fact later year in A.Y. 2009-2010 has leased out the machinery. Since acquisition of machinery is for the purpose of business and also on the finding that no borrowed fund was diverted for acquiring the above assets, the order under section 263 was set aside. Consequent to that, appeal against consequential order passed in A.Y. 2008-09 in the impugned appeals does not survive. Therefore, Revenue appeal for A.Y. 2008-09 becomes infructuous, in view of the Order of the ITAT setting aside the order under section 263.

6. In the remaining three assessment years, facts are similar. Since in the year of acquisition assessee could establish that it has not diverted any borrowed funds. Disallowance of interest on the loans obtained for working capital from State Bank of Hyderabad alone as was done by the A.O. is not proper when the facts indicate that the loan was utilized for the purpose of business. Therefore, on the facts of the case and also keeping the findings in the order under section 263 as well as ITAT order in A.Y. 2008-09, there is no merit in Revenue contentions. Further, as seen from the orders, the A.O. disallowed the interest paid from A.Y. 2007-08 to 2010-2011 on the reason that these borrowed funds were not utilized for the purpose of business. There is clear finding that the funds are used for the purpose of business and also a ITA.No. 1820 to 1823/Hyd/2013 M/s. Ramcharan Oil Industries, Hyderabad finding that assessee has put the assets to active use from A.Y. 2009-10 onwards. Therefore, Revenue raising the ground that machinery was never put to use is not correct on facts. The ground itself per se is wrong. In view of this, there is no merit at all in the Revenue ground in A.Ys. 2009-10 and 2010-11 as assessee put to machinery to active use in the years. Only for A.Y. 2007-08 assessee has not actively used the machinery but as already decided by the Ld. CIT(A) there is a passive use and there is not much of difference between ‘active and passive use’ as far as the phrase ‘put to use’ is concerned. There is also a finding that acquisition of machinery is for the purpose of business. Therefore, no part of interest can be disallowed under section 36(1)(iii) of the Act. For these reasons, we uphold the orders of the CIT(A) in A.Ys. 2007-08, 2009-10 and 2010-

11. As already stated by the Ld. Counsel, in A.Y. 2011-12 A.O. himself accepted assessee’s claim and no disallowance was made even when the assessment was reopened under section 147 for the specific purpose of disallowing interest.

7. In the result, appeals of Revenue are dismissed. Order pronounced in the open Court on 25.04.2014. Sd/- Sd/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 25 th April, 2014 VBP/- ITA.No. 1820 to 1823/Hyd/2013 M/s. Ramcharan Oil Industries, Hyderabad Copy to :

1. ACIT, Circle 7(1), 2 nd Floor, B-Block, I.T. Towers, A.C. Guards, Hyderabad.

2. M/s. Ramcharan Oil Industries, 15-2-449/7, Kishangunj, Hyderabad. C/o. Sri K.C. Devdas, C.A. 133/4, R.P. Road, Secunderabad-03.

3. CIT(A)-VI, 6A, I.T. Towers, A.C. Guards, Hyderabad-500004.

4. CIT-VI, Hyderabad

5. D.R. ITAT, ‘B’ Bench, Hyderabad.