AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 88
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.... B. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in deleting the addition of Rs. 123,75,65,807/- made on account of disallowance of interest on loan? C. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in deleting the addition of Rs. 107,50,16,411/- made on account of disallowance of depreciation? D. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in deleting the addition of Rs. 16,29,41,479/- made on account of disallowance of loan processing fee?" 2. After detailed hearing on 18.05.2023, we upheld the view taken by the learned Tribunal as regards the proposed question (A) and posted the matter for further hearing on the remaining proposed questions. The relevant part of order dated 18.05.2023 is extracted below: "6. According to us, insofar as the proposed question A is concerned, it arises out of facts which are not in dispute. This is evident upon perusal of the relevant part of the impugned order passed by the Tribunal dated 07.06.2019 which reads as follows: "7. We have heard bo....
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....circumstances leading to this appeal, as reflected from record and as pleaded by the appellant/revenue in the Memo of Appeal are succinctly recapitulated as follows. 4.1 The respondent/assessee, a Public Limited Company was incorporated in the year 2007 as a joint venture Company of Bharti Infratel Limited, Vodafone Essar Limited and Aditya Birla Telecom Limited with its main object being to share the telecom infrastructure amongst various telecom service providers in 16 telecom circles through 93,723 telecom sites, out of which 79,239 telecom sites were under indefeasible rights to use on 01.01.2009 and the remaining 14,484 sites were built and personalized by the respondent/assessee on its own during the financial year concerning the subject Assessment Year. 4.2 On 30.09.2009 the assessee filed its return of income, thereby declaring total loss of Rs. 452,16,70,660/- which was revised and the declared loss was pegged at Rs. 611,62,44,502/- including unabsorbed depreciation of Rs. 525,17,02,779/-. 4.3 Case of the respondent/assessee having been selected for scrutiny assessment, notice under Section 143(2) of the Act was issued to it. The Assessing Officer passed Assessmen....
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....d not put to use 50% of the towers erected by it for the purposes of its business, so the ad-hoc assumption in that regard was not sustainable. The additional evidence admitted by CIT(A) showed tower-wise details of the dates on which certificate of "ready for active installation" (RFAI) of towers was issued by an independent third party engineer as well as the service tax returns for the period ending September, 2008 and the period ending March, 2009 in respect of the towers erected by the respondent/assessee, so in view of the judgment of this Court in the case of Capital Bus Services vs CIT, 125 ITR 404, claim of the respondent/assessee with regard to the interest on the loan as well as the claimed depreciation were allowable as deduction. 4.4.2 Since the loan processing fee was admittedly incurred for borrowing funds to be utilized for acquisition of capital assets, entire amount instead of 1/5th thereof should have been capitalized. The decision of the Assessing Officer, treating the loan processing fee as deferred revenue expense was not in accordance with law. Besides, the Assessing Officer by mistake took the loan processing fee as Rs. 20.75 crore as against Rs. 21.875 c....
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....cases reported as CIT vs Gujarat Guardian Ltd., [2009] 177 Taxman 454 (Del); CIT vs Bharti Telenet Ltd., ITA Nos.1110/2011 (Del); Taparia Tools Ltd. vs JCIT, 372 ITR 605 (SC); PCIT vs Param Dairy Ltd., [ITA 50/2022; decided on 15.03.2022] (Del.); PCIT vs Bhadani Financiers Pvt. Ltd., 2021 SCC Online Delhi 4430; Capital Bus Services Pvt. Ltd. vs CIT [1980] 123 ITR 404 (Delhi); and Commissioner of Income Tax -IV New Delhi vs Insilco Ltd., (2010) 320 ITR 322 (Delhi). 7. The undisputed legal position as culled out of the above quoted judicial precedents is as follows. In view of the provisions under Section 43B(d) of the Income Tax Act, any sum payable by the assessee as interest on any loan from any financial institution shall be allowed as deduction to the assessee in the year in which the same is paid irrespective of the provisions in which the liability to pay such sum is incurred by the assessee according to the method of accounting regularly applied by the assessee. Where the assessee, following the mercantile system of accounting claims in the return of income deduction of upfront interest charges paid during the relevant financial year and the said upfront interest payment i....
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....Rs. 20.75 crores as against Rs. 21.875 crores, so accordingly additional disallowance was allowable @ 15% p.a. on the aggregate amount of disallowance. 8.2 The learned Tribunal while allowing the appeal of the respondent/assessee and dismissing the appeal of the appellant/revenue held that as regards the interest on loan and depreciation, there was no infirmity in the decision of the CIT(A), but as regards disallowance of upfront loan processing fee, though the same was amortized for accounting purposes over a period of time in the profit and loss account, the same in its entirety was allowable as deduction because funding is required in business from time to time and these are regular business expenses. 9. On the basis of material available on record, the learned Tribunal arrived at factual findings to the following effect. Construction of towers began in April, 2008 whereas the Indefeasible Right to Use (IRU) Agreement was executed on 01.01.2009, therefore, the Assessing Officer was factually incorrect in observing that the respondent/assessee commenced business through lease of towers under IRU Agreement. A telecom site is ready to use even before the suppliers of various ....