2016 (2) TMI 424 - AT - Income Tax

ITAT Delhi affirms CIT(A)'s decisions, distinguishing capital from revenue expenditures.

DCIT, Circle -1 (1), New Delhi Versus M/s. Alcobex Metals Ltd

DCIT, Circle -1 (1), New Delhi Versus M/s. Alcobex Metals Ltd - TMI Issues:1. Deletion of addition on account of processing and consortium fee paid to bank.2. Deletion of addition on account of stamp duty charges paid for debenture certificates.Issue 1: Deletion of addition on account of processing and consortium fee paid to bank:The appeal by the revenue challenged the deletion of an addition of &8377; 28,42,760/- as processing and consortium fee paid to a bank by the assessee company. The Assessing Officer considered this expenditure as capital in nature, as it was paid for processing various loans and CDR packages. However, the CIT(A) held that such expenditure is revenue expenditure, leading to the revenue's appeal. The revenue contended that the expenses were capital in nature, especially since they were disputed by the appellant company. The CIT(A) based the deletion on the fact that processing a loan cannot be capital in nature and relied on judicial precedents. The ITAT Delhi concurred with the CIT(A), emphasizing that expenditure towards a loan is a revenue expenditure, as held by the Apex Court in relevant cases. The ITAT also noted that the liability had been acknowledged, and the amount was credited to the suspense account, hence rejecting the revenue's appeal.Issue 2: Deletion of addition on account of stamp duty charges paid for debenture certificates:The second ground of appeal pertained to the deletion of an addition of &8377; 15,75,045/- for stamp duty charges paid for debenture certificates. The Assessing Officer disallowed this expenditure based on certain judgments, but the CIT(A) allowed the deduction, leading to the revenue's appeal. The revenue argued that the CIT(A) failed to differentiate between partly and fully convertible debentures, claiming that expenses for fully convertible debentures should be considered capital in nature. The ITAT Delhi, however, upheld the CIT(A)'s decision, stating that debentures represent loans and any expenditure related to raising loans is eligible for deduction. Citing relevant case law and a coordinate bench decision, the ITAT concluded that the stamp duty charges for debentures are revenue in nature, rejecting the revenue's appeal.In conclusion, the ITAT Delhi dismissed the appeal filed by the revenue, affirming the CIT(A)'s decisions on both issues related to the deletion of additions on account of processing and consortium fee paid to the bank and stamp duty charges for debenture certificates. The judgment emphasized the distinction between capital and revenue expenditures based on legal precedents and upheld the deductibility of the expenses incurred by the assessee company.