TaxTMI 
TaxTMI 
2005 (12) TMI 447
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....Rs. 2,35,000. The assessee claimed deduction in respect of the following expenses : (a)Legal fee for legal documentation of a loan of Rs. 200 lakhs from IDBI Rs. 20,000 (b)OBC-CC Renewal of limit processing charges Rs. 45,000 (c)IDBI Loan sanction charges @ 1.05% on Rs. 200 lakhs Rs. 2,10,000 Total : Rs. 2,75,000 3. While computing the assessment under section 143(3), the Assessing Officer called upon the assessee to show cause why the aforesaid expenses should not be treated and disallowed as capital expenditure. It appears that the assessee did not respond to the query and, therefore, the Assessing Officer came to the conclusion that the nature of the above expenses was capital, "as these have been incurred for ....
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....ful consideration of the matter, we are of the view that the case is governed by the principles laid down by the Supreme Court in India Cements Ltd. ( supra). In that case the assessee obtained a loan of Rs. 40 lakhs from Industrial Finance Corporation, which was secured by a charge on its fixed assets. In connection with the loan the assessee spent Rs. 84,633 towards stamp duty, registration fees, lawyer's fees, etc. and claimed the same as business expenditure. The Supreme Court held that the amount spent was not in the nature of capital expenditure, but was laid out or expended wholly and exclusively for the purpose of business and was, therefore, allowable as a deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922. In tha....
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..... Consequently, in the circumstances of the case, the expenditure was revenue expenditure within section 10(2)(xv)." 8. The conclusion of the Income-tax Authorities in the present case that since the loan was obtained from the IDBI for acquiring fixed assets and, therefore, the procurement expenses cannot be allowed as revenue expenditure, thus, runs contrary to the ruling of the Supreme Court in the case of India Cements Ltd. (supra). Therefore, notwithstanding the fact that the assessee did not give any reply to the query raised by the Assessing Officer, since the Departmental Authorities have proceeded on an erroneous legal premise, contrary to the judgment cited above, their conclusion cannot be upheld. 9. The Judgment of the Supr....
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....s Ltd. (supra) has not been cited before the Supreme Court presumably because the facts in both the cases before the Supreme Court were different and that the earlier judgment was not of relevance for deciding the controversy. In our view, therefore, the CIT (Appeals) was not justified in relying on the judgment of the Supreme Court in the case of Jonas Woodhead and Sons (India) Ltd. (supra) in upholding the dis-allowance of the Loan Procurement Expenses. 11. For the above reasons we delete the disallowance of the Loan Procurement Expenses and direct the Assessing Officer to allow the same as revenue expenditure under section 37(1) of the Act. The Grounds are allowed. 12. Ground Nos. 3 to 5 are directed against the addition of the Loa....
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....ficer except to the extent permitted by the Explanation below sub-section (2). It is submitted that the Explanation does not permit the Loan Procurement Expenses to be added back to the book profit, if the net profit shown by the P&L Account prepared as per the requirement of the Companies Act. The learned DR, however, strongly relied on the orders of the Income-tax Authorities. On a consideration of the matter, we are of the view that the judgment of the Supreme Court in Apollo Tyres Ltd. (supra) governs the present case. There is no dispute that the assessee's accounts are certified by the statutory auditors as having been properly maintained as per the requirements of the Companies Act. As held by the Supreme Court, the Assessing Officer....