2020 (10) TMI 1392

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....brevity), is directed against the order dated 05.12.2017 passed by the Income Tax Appellate Tribunal, Madras, 'B' Bench ('the Tribunal' for brevity) in I.T.A. No. 1858/Mds/2011 for the Assessment Year 2004- 05. The appeal was admitted on 23.08.2018 on the following Substantial Questions of Law for consideration: "(i) Whether the Tribunal was right in law in holding that the expenditure incurred during the year towards prepayment charges for substituting high cost debt for low cost debt is in the nature of interest as defined under Section 2(28A) of the Act and hence not allowable as deduction under Section 37 of the Act? And (ii)Whether the Tribunal was right in law in holding that the prepayment charges is in the nature....

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....ee decided to swap high interest bearing loan obtained from OIDB with a low interest bearing loan and this was accepted by the OIDB by liquidating the existing high cost loan and granted a fresh loan at a lower rate and to liquidate the old loan, it charged a fee of 2% on the loan outstanding as Reset Fee amounting to Rs. 13.48 crores and it was paid during the Financial Year relevant to the Assessment Year 2004-05. After the completion of the expansion of the project, in the Financial Year relevant to the Assessment Year 2004-05, the project was commissioned and the assets were capitalized. The assessee contended that this extent should not be capitalized and should be treated as a Revenue expenditure. The Assessing Officer did not agree w....