TaxTMI 
TaxTMI 
2022 (11) TMI 370
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....and other charges as revenue expenditure when the same was paid towards loan for acquisition of plant and machinery which is providing enduring benefit to the assessee? 2. Whether on the facts and circumstances of the case, the CIT(A) is correct in law in placing reliance on the decision of the Apex court in civil No. 4072-73 dated 06.04.2017 which is factually distinguishable from the instant case? 4. Facts of the case, in brief, are that the assessee is a company engaged in the business of developing and setting up of power projects. It filed its return of income on 26.09.2014 declaring total loss of Rs. 33,69,62,382/-. The case was selected for scrutiny under CASS and statutory notices u/s. 143(2) and 142(1) were issued to which the AR of the assessee appeared before the AO from time to time and filed the requisite details. 5. During the course of assessment proceedings, the AO noted that assessee has debited Rs. 22,60,370/- in the P & L account on account of amortization of ancillary borrowing costs, which he has added in the computation but again he reduced Rs. 2,20,30,806/- under the head "Borrowing costs incurred during the year (100% allowed as deduction.). On being ask....
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....r deduction claimed by assessee on account of sales tax was deductible as business expenses or not. Therefore facts of the quoted case are different from the instant case. 4. Assessee has also relied on Hon'ble Supreme court Judgment in case of DCIT vs. Gujarat Alkalies and Chemicals Ltd. In this regard it is submitted that in the quoted case the issue was allow ability of interest expenses when business was not commenced. Therefore facts of the quoted case are different from the instant case. 5. Further assessee has placed reliance on Delhi Tribunal judgment in case of ACIT vs. Goetze TP(India) Ltd. wherein it was held that upfront fee paid by assessee for processing of loan was revenue expenditure. However merely because part of upfront fee was treated as deferred revenue expenditure in the books of accounts would not be a ground for disallowing the same. While considering the allow ability of expenditure, the nature of expenditure was to be considered and not the entries made in books of accounts. In this regard it is submitted that in the quoted case, loan was obtained for general corporate purposes as per copy of agreement whereas in the instant case loan was taken for....
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....on the decision in India Cement (supra). In determining the nature of expenditure (revenue or capital) incurred for obtaining loan, it is irrelevant to consider the purpose of loan. The amount spent - stamp duty, lawyer fee, etc., for obtaining loan secured by charge on its fixed assets is as revenue expenditure, because the transaction was entered into directly to facilitate the business of the company and was made on ground of commercial expediency. Upfront fee is also related to loan for expansion of the business. In the facts and circumstances of the case, financial charges, legal and professional charges and upfront fees are allowable expenditure. AO is directed accordingly." 11. Referring to the decision of Hon'ble Gujarat High Court in the case of CIT vs. Shri Rama Multi Tech Ltd. vide Tax appeal No. 982/2015 order dated 01.02.2006, he submitted that the revenue has proposed '11' questions out of which question No. 6 by the revenue reads as under:- "Whether the Appellate Tribunal is right in law and on facts in allowing the expenses claimed by the assessee towards financial charges aggregating to Rs. 45,38,678/-, professional charges of Rs. 64,75,000/- and upf....
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....y. Even though it had capitalized the said amount and claimed depreciation before the Assessing Authority, however, in appeal, the respondent raised additional ground claiming deduction of the aforesaid amount on interest paid with some other expenditure on other items connected therewith as revenue expenditure. 4. The Commissioner of Income Tax (Appeals) vide order dated 5.3.2004 allowed the claim of the respondent-assessee only to the extent of interest amount of Rs. 2,92,45,670/- paid on loans taken by it for establishing the industry. He, however, disallowed the other expenditures, namely, financial charges. professional expenses, upfront fee etc. 5. The Revenue, feeling aggrieved by the said allowance, preferred an appeal before the Income Tax Appellate Tribunal which vide order dated 02.12.2004 upheld the order of the Commissioner of Income Tax (Appeals) insofar as it related to the allowance of the expenditure claimed towards payment of interest and also allowed expenditure on other items connected therewith. The High Court did not interfere in the appeal preferred by the Revenue on the ground that the Tribunal has followed the decision of the Gujarat High Court in the c....