Revenue appeal partially allowed: Guarantee commission benchmarked, service charges as business income, additional depreciation upheld.

The Tribunal partly allowed the revenue's appeal by directing the benchmarking of the guarantee commission at 1% of the outstanding guarantee amount, confirmed the treatment of service charges as business income, and upheld the allowance of balance additional depreciation. The appeal of the revenue was ultimately dismissed.

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Issues Involved:

1. Deletion of upward adjustment under section 92CA(3) of the I.T. Act.
2. Treatment of service charges as business income instead of house property income.
3. Allowance of balance additional depreciation on assets put to use in an earlier financial year.

Issue-wise Detailed Analysis:

1. Deletion of Upward Adjustment under Section 92CA(3):

The first issue pertains to the deletion of an upward adjustment of Rs. 1,28,07,543/- by the Ld. CIT(A) under section 92CA(3) of the I.T. Act. The Tribunal noted that a similar issue had arisen in the assessee's own case for A.Y. 2011-12 and 2012-13, where the assessee had charged a guarantee commission at 0.38% of the outstanding guaranteed amount. However, the TPO/AO assessed the corporate fee at 3%. The Ld. CIT(A) deleted the ALP adjustment on the corporate guarantee fee, and the Tribunal, upon appeal by the Revenue, benchmarked the guarantee commission at 1% of the outstanding guarantee amount. Following this precedent, the Tribunal directed that the guarantee commission be benchmarked at 1% of the outstanding guarantee amount, thereby partly allowing Ground No. 1 of the revenue's appeal.

2. Treatment of Service Charges as Business Income:

The second issue involves the treatment of service charges as business income instead of house property income. The Tribunal observed that this issue was no longer res integra, as the Hon'ble Calcutta High Court had upheld the decision of the Tribunal and Ld. CIT(A) in the assessee's own case for A.Y. 2006-07, treating the service charge received as business income. The Ld. CIT(A) had followed this precedent and relied on the decisions of the Jurisdictional High Court in the cases of CIT vs Model Mfg. Co. and CIT vs Russel Properties Pvt. Ltd. The Tribunal confirmed the order of the Ld. CIT(A), allowing the treatment of service charges of Rs. 2,29,16,880/- as business income, thus dismissing this ground of appeal of the revenue.

3. Allowance of Balance Additional Depreciation:

The third issue concerns the allowance of balance additional depreciation amounting to Rs. 6,36,83,752/- on assets put to use in the earlier financial year. The AO had disallowed the claim, stating that there was no provision in the Act for claiming the balance 50% of additional depreciation in the subsequent financial year. The Ld. CIT(A) allowed the claim, noting that the Act had been amended by the Finance Act, 2015, which was in the nature of a welfare measure. The Tribunal upheld the Ld. CIT(A)'s decision, referencing the Hon'ble Karnataka High Court's judgment in CIT vs Rittal (India) Ltd., which allowed the balance 10% additional depreciation in the subsequent assessment year. The Tribunal also noted similar decisions by the Coordinate Bench in Century Enka Ltd. vs DCIT and Birla Corporation Ltd. vs DCIT. Consequently, the Tribunal dismissed this ground of appeal.

Conclusion:

In conclusion, the Tribunal partly allowed the revenue's appeal regarding the upward adjustment of the guarantee commission, confirmed the treatment of service charges as business income, and upheld the allowance of balance additional depreciation. The appeal of the revenue was dismissed.

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