2014 (7) TMI 464 - AT - Income Tax

Tax Tribunal rules in favor of assessee for multiple assessment years, partially allowing appeals and dismissing Revenue's appeal.

DCIT (LTU), New Delhi Versus Indian Railway Finance Corpn. Ltd.

DCIT (LTU), New Delhi Versus Indian Railway Finance Corpn. Ltd. - TMI Issues Involved:1. Disallowance of expenses under Section 14A of the I.T. Act.2. Nature of Bond Servicing Expenses.3. Capital recovery on leased assets.4. Disallowance of bond issue expenses.5. Disallowance of prior period expenses.6. Disallowance of depreciation on office building.Issue-wise Detailed Analysis:1. Disallowance of Expenses under Section 14A of the I.T. Act:The sole ground in the assessee's appeals for A.Y. 2007-08 and 2009-10 pertained to the disallowance of expenses under Section 14A. Both parties acknowledged that Rule 8D was not applicable for A.Y. 2007-08 but was applicable for A.Y. 2009-10. The tribunal set aside the issue for both years back to the Assessing Officer to redecide, considering the Delhi High Court's decision in Maxopp Investment Ltd.2. Nature of Bond Servicing Expenses:The Revenue's appeals for A.Y. 2003-04 and 2006-07 contested the CIT(A)'s decision to treat Bond Servicing Expenses as revenue in nature. The CIT(A) allowed the assessee's claim, distinguishing it from the Supreme Court's decision in Brooke Bond India Ltd., and directed the Assessing Officer to allow the expenses as revenue expenditure under Section 37(1). The tribunal upheld the CIT(A)'s order, noting that the expenses were incurred yearly for servicing bonds and had no linkage with raising resources.3. Capital Recovery on Leased Assets:The Revenue's appeals for A.Y. 2006-07 to 2009-10 challenged the CIT(A)'s decision on capital recovery on leased assets. The tribunal noted that the issue had been restored to the Assessing Officer by the ITAT Delhi in an earlier order for A.Y. 2004-05. Following the ITAT's earlier order, the tribunal set aside the issue back to the Assessing Officer with similar directions.4. Disallowance of Bond Issue Expenses:The Revenue's appeals for A.Y. 2006-07 to 2009-10 contested the CIT(A)'s deletion of bond issue expenses disallowance. The tribunal noted that the issue had been decided in favor of the assessee by various ITAT orders and confirmed by the Delhi High Court. The tribunal dismissed the Revenue's ground, following the precedent that bond issue expenses are allowable as revenue expenditure.5. Disallowance of Prior Period Expenses:The Revenue's appeal for A.Y. 2006-07 challenged the CIT(A)'s decision on prior period expenses. The tribunal noted that the CIT(A) had restored the issue to the Assessing Officer, following an earlier ITAT order. The tribunal upheld the CIT(A)'s decision to restore the issue back to the Assessing Officer to determine the year of allowability.6. Disallowance of Depreciation on Office Building:The Revenue's appeals for A.Y. 2006-07 to 2009-10 challenged the CIT(A)'s decision to allow depreciation on the office building. The tribunal noted that the CIT(A) had referred to earlier ITAT orders and the Supreme Court's judgment in Mysore Minerals, which held that the assessee was entitled to depreciation. The tribunal upheld the CIT(A)'s order, following the precedent that the assessee is eligible for depreciation on the office building.Conclusion:The tribunal dismissed the Revenue's appeal for A.Y. 2003-04 and partly allowed the appeals for A.Y. 2006-07 to 2009-10 for statistical purposes. The assessee's appeals for A.Y. 2007-08 and 2009-10 were allowed for statistical purposes only. The tribunal's order was pronounced in open court on 18/06/2014.