AI Drafter 
TaxTMI 
TaxTMI 
2022 (11) TMI 304
X X X X Extracts X X X X
X X X X Extracts X X X X
....asons that may be adduced at the time of hearing, this appeal may be allowed." 3. The Grounds of appeal filed by the Revenue are as under:- "(1) Whether the learned CIT(A) was correct in law and in facts in holding that the processing fees and interest paid by the assessee on the loan taken for new Hyderabad Hotel project was allowable as revenue expenditure, despite, the fact that new Hotel has not been put to use and hence the conditions of the 2 proviso to Section. 36(1)(iii) of the Act had not been fulfilled ? (2) Whether the learned CIT(A) was correct in law and in facts in holding that no I disallowance u/s 14A of the Act can be made because no exempt income has been earned during the year? (3) Whether the learned CIT(A) was correct in law and in facts in holding that salaries which had been transferred to work in progress in the books of accounts are allowable as revenue expenditure? (4) The Appellant craves leave to alter, amend or delete the above grounds of appeal or add any other grounds of appeal ?" 4. The brief facts of the case are that the assessee is engaged in the business of hospital industry filed its return of income on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the amount was added back into the total income of the assessee. The AO observed that the assessee has taken corporate term loan from IDBI bank and for which the processing and interest has been deduced at Rs.1,61,14,980/- in his computation of income. The assessee submitted that these expenses have been capitalized towards hotel project at Hyderabad and assessee was asked for substantiate with these amounts why the assessee has taken it as revenue expenditure. In response, written submission was filed by the assessee during the course of hearing wherein, it was stated that the company had taken a corporate loan of Rs.50 crores from IDBI bank towards augmenting the additional working capital requirements of the company. It was further submitted that the loans shown/taken were utilized by various units of the company and further submitted that since the loan was taken for the working capital requirement of the company, therefore, it is in the nature of revenue expenditure and the assessee cited various judicial precedents. The submission of the assessee were examined by the AO and he also relied on the judgment of Hon'ble Supreme Court in the case of India Cements Ltd., Vs. CIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the detailed written submissions and arguments of the assessee partly allowed the appeal of the assessee. 9. Feeling aggrieved from the order of the CIT(A), both parties are in appeal before the ITAT. We are taking the appeal of the assessee appeal first. 10. The ld.AR reiterated the submissions made before the lower authorities and further submitted that the credit card commission for the preceding assessment year 2010-11 has been decided by the Hon'ble bench of the Tribunal in assessee's own case in ITA No.846/Bang/2015 in favour of the assessee. Therefore, he requested that the same decisions may be followed. 11. The assessee did not press ground No.3 during the course of hearing, hence it is dismissed as not pressed. 12. The ld.DR relied on the order of the lower authorities. 13. After hearing the rival submissions, perusing the entire material on record and examining the orders of the lower authorities, we observe that the similar issue regarding credit card commission has been decided in assessee's own case in the assessment year 2010-11 in ITA No.846/Bang/2015, the relevant part of the order is as under which is decided in favour of the assessee:- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Section 40(a)(ia) automatically stood attracted. 13. We have perused the orders and heard the contentions of the Ld. DR. Grounds raised by the Revenue relies on CBDT notification No.56/2012, dt.3 1.12.2012 which exempts certain types of payment from deduction of tax at source. Said notification has been issued under powers vested on the central government vide Section 197A(1D) of the Act. No doubt one of the type of payments mentioned in the above circular is credit card/ debit card commission on transactions between merchant establishment and acquirer bank. Notification was effective from 01.01.2013. But in our opinion this notification cannot be construed in a manner to say that prior to 01.01.2013 charges deducted by the bank from credit card payments received from' customers of the assessee fell within the purview of Section 194H for warranting a deduction of tax at source. As mentioned by CIT (A), coordinate bench in the case of Tata Teleservices (supra) had clearly held that such payments were more in the nature of bank charges than in the nature of commission and Section 194H1of the Act would not be attracted. In such circumstances, we do not find any reason to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y reason for treating the amount differently in its financial statements and in the statement of computation. The appellant company has not been able to substantiate that the loan raised was actually utilized for the purpose of working capital of the company and not for the Hyderabad hotel project with supporting evidences. Although the purpose stipulated at the time of raising of the loan may be for the working capital of the company but the actual utilization of the amount for the purpose of working capital could not be substantiated. Banks are ultimately interested in whether the loans are backed by the security offered to them. Further observed that the judicial decisions cited by the appellant company during the assessment proceedings are different in facts of that of the appellant. In the decision of the Hon'ble Supreme Court in the case of India Cements Ltd. Vs. CIT, the issue was stamp duty paid on issue of debenture. Similarly other judicial decisions relied on by the appellant are also not relevant to the facts of the appellant company. During the appellate proceedings the AR submitted that upfront fees were paid to bank towards process fees for loans taken from them.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d not be an allowable deduction. As the Supreme Court judgement is latest and supersedes the Punjab & Haryana High Court, such expense need not be capitalized. According to these decisions, the upfront fees charged by the banks on process of loan are not a capital expenditure. It is similar to that of interest expense. Therefore, taking into consideration the authoritative pronouncements of Hon'ble Supreme Court in the case of Core Health as well as the decision of Honbie Madras High Court in the case of Shree Meenakshi Mills Ltd both interest and processing charges incurred by the appellant company and treating the same as revenue is fully justified notwithstanding the fact that the appellant has chosen to capitalize the same in books as per the Companies Act, 1956, whilst the claim for allowability is made under the Income Tax Act 1961. The ground is hereby allowed." 21. After going through above findings of the CIT(A), we do not find any infirmity in the order of the CIT(A) and this issue is also covered by the judgment of Hon'ble Supreme Court in the case of Vardhman Polytex Ltd. Vs. CIT reported in [2012] 25 taxmann.com 281 in favour of the assessee. Therefore, we dismi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ver a perusal of the Memorandum of the Finance Bill, 2022 reveals that it explicitly stipulates that the amendment made to section 14A will take effect from 1st April, 2022 and will apply in relation to the assessment year 2022-23 and subsequent assessment years. The relevant extract of Clauses 4, 5, 6 & 7 of the Memorandum of Finance Bill, 2022 are reproduced hereinbelow: "4. In order to make the intention of the legislation clear and to make it free from any misinterpretation, it is proposed to insert an Explanation to section 14A of the Act to clarify that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where exemptincome has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such exemptincome. 5. This amendment will take effect from 1st April, 2022. 6. It is also proposed to amend sub-section (1) of the said section, so as to include a non-obstante clause in respect of other provisions of the Income-tax Act a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t has been referred to by us as the 1999 Explanation). Section 5 of the Bill expressly stated that with effect from 1-4-2000, the substituted Explanation would read: "Explanation.-For the removal of doubts, it is hereby declared that the income of the nature referred to in this clause payable for- (a) service rendered in India; and (b) the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of employment, shall be regarded as income earned in India." The Finance Act, 1999 which followed the Bill incorporated the substituted Explanation to Section 9(1)(ii) without any change. 13. The Explanation as introduced in 1983 was construed by the Kerala High Court in CIT v. S.R. Patton [(1992) 193 ITR 49 (Ker.)] while following the Gujarat High Court's decision in S.G. Pgnatale [(1980) 124 ITR 391 (Guj.)] to hold that the Explanation was not declaratory but widened the scope of Section 9(1)(ii). It was further held that even if it were assumed to be clarificatory or that it removed whatever ambiguity there was in Section 9(1)(ii) of the Act, it did not operate in resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of UP., (1981) 2 SCC 585, 598 : AIR 1981 SC 1274, 1282 para 24]. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC 352, 354; CIT v. Podar Cement (P.) Ltd., (1997) 5 SCC 482, 506]. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are "it is declared" or "for the removal of doubts".' (emphasis supplied) 7. The aforesaid proposition of law has been reiterated by the Supreme Court in M.M. Aqua Technologies Ltd. v. CIT [2021] 129 taxmann.com 145/282 Taxman 281/436 ITR 582. The relevant portion of the said judgment is reproduced hereinbelow:- "22. Second, a retrospective provision in a tax act which is "for the removal of doubts" cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed v. State of Kerala [2000] 113 Taxman 470/245 ITR 360 and Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association [1992] 3 SCC 1, the present appeal is dismissed being covered by the judgment passed by the learned predecessor Division Bench in IL & FS Energy Development Co. Ltd. (supra) and Cheminvest Ltd. v. CIT [2015] 61 taxmann.com 118/234 Taxman 761/378 ITR 33 (Delhi). 10. Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the SLP filed in the case of IL & FS Energy Development Co. Ltd. (supra). 23. As mentioned earlier, there is nothing on record to suggest that the assessee has not earned any exempt income for the relevant assessment year. For the limited purpose of examination of the same, the matter is restored to the files of the AO. The AO on examination finds that there is no exempt income earned during the....