DCIT, New Delhi V. M/s. Jubilant Energy Kharsang Pvt Ltd, New Delhi

ITA 1118/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1067 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 25-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1118/DEL./2015 (ASSESSMENT YEAR : 2010-11) DCIT, CIRCLE 13 (2), VS. M/S. JUBILANT ENERGY KHAR SANG PVT. LTD., NEW DELHI. 1517, 15 TH FLOOR, DEVIKA TOWER, NEHRU PLACE, NEW DELHI. (PAN : AABCE2251K) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI NAINA SOIN KAPIL, SENIOR DR DATE OF HEARING : 28.11.2018 DATE OF ORDER : 30.11.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DCIT, CIRCLE 13 (2), NEW DELHI (HERE INAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESEN T APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 09.12.2014 PASSE D BY LD. CIT (APPEALS)-VIII, NEW DELHI QUA THE ASSESSMENT YEAR 2 010-11 ON THE FOLLOWING GROUNDS INTER ALIA THAT:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF R S.1,32,00,000/- MADE BY THE AO BY WAY OF DISALLOWANCE ON A/C OF INT EREST FREE ICD ADVANCE BY THE ASSESSEE COMPANY) SOLELY RELYING ON THE SUBMISSION OF THE ASSESSEE COMPANY THAT INTEREST ON SUCH ICD ITA NO.1118/DEL./2015 2 WAS DULY CHARGED AND OFFERED TO TAX IN THE SUBSEQUE NT YEAR 2011- 12, WITHOUT VERIFYING THE FACTS IN THIS REGARD WHIC H WERE CONTRARY TO THE SUBMISSION MADE BY THE ASSESSEE COMPANY BEFO RE THE CIT(A). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF R S.1,32,00,000/- MADE BY THE AO BY WAY OF DISALLOWANCE ON A/C OF INT EREST FREE ICD ADVANCED BY THE ASSESSEE COMPANY ON THE GROUND THAT THERE WAS NO NEXUS BETWEEN INTEREST BEARING LOAN FUNDS AN D ICD ADVANCED BY THE ASSESSEE COMPANY FROM ITS OWN FUNDS WITHOUT APPRECIATING THE FACTS THAT EVEN OWN FUNDS OF THE A SSESSEE COMPANY WERE INTEREST BEARING FUNDS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE UPFRONT CH ARGES PAID FOR OBTAINING TERM LOAN FROM BANK IS COVERED WITHIN THE DEFINITION OF INTEREST GIVEN IN SECTION 2(28A) OF THE IT ACT AND HENCE ALLOWABLE AS REVENUE EXPENDITURE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE PROPORT IONATE INTEREST DISALLOWANCES FOR UPFRONT FEE PAYMENT OF RS.1,67,22,000/- TREATED IN THE NATURE OF INTEREST AND ALLOWED AS REVENUE EXPENDITURE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF R S.47,94,600/- MADE BY THE AO BY WAY OF DISALLOWANCES OUT OF TOTAL EXPENDITURE OF RS.59,93,250/- INCURRED TOWARDS PURCHASE OF DATA PACKAGE INTER-ALIA GIVING A FINDING THAT THE AO HIMSELF TRE ATED SUCH EXPENDITURE AS DIFFERED REVENUE EXPENDITURE, THUS G IVING A FINDING WHICH IS CONTRARY TO THE FINDING OF THE AO IN THIS REGARD WHO EXPLICITLY TREATED WHOLE OF SUCH EXPENDITURE OF RS.59,93,250/- AS CAPITAL IN NATURE AND DISALLOWED 4/5 OF SUCH EXPENDITURE (I.E. RS.47,94,600/-) IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 6. THAT THE ORDER OF THE LD. CIT (A) IS ERRONEOUS A ND IS NOT TENABLE ON FACTS AND IN LAW. 7. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS INTO THE BUSI NESS OF OIL & GAS EXPLORATION AND PRODUCTION. ASSESSING OFFICER NOTI CED THAT THE ITA NO.1118/DEL./2015 3 ASSESSEE HAS LENT UNSECURED INTEREST FREE LOANS TO THE TUNE OF RS.11,00,00,000/- TO M/S. JUBILANT OIL & GAS PVT. L TD.. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, AO MADE DIS ALLOWANCE OF RS.1,32,00,000/- @ 12% ON THE GROUND THAT THE SAID FUNDS WERE INTEREST BEARING IN NATURE. AO ALSO NOTICED THAT T HE ASSESSEE HAS PAID UPFRONT FEES OF RS.2,09,02,500/- TO THE CENTRA L BANK OF INDIA FOR DISBURSEMENT OF A TERM LOAN OF RS.200 CRORES. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, AO TREATED A SU M OF RS.2,09,02,500/- AS CAPITAL EXPENDITURE AND AMORTIZ ED THE SAME OVER A PERIOD OF FIVE YEARS AND THEREBY MADE DISALL OWANCE OF RS.1,67,22,000/-. AO ALSO NOTICED THAT THE ASSESSE E HAS PURCHASED DATA PACKAGE FROM DIRECTOR GENERAL OF HYDRO CARBON (DGH) FOR RS.59,93,250/-. DECLINING THE CONTENTIONS RAISED B Y THE ASSESSEE, AO PROCEEDED TO CONCLUDE THAT DATA PACKAGE PURCHASE D BY THE ASSESSEE IS CAPITAL IN NATURE AS ASSESSEE WILL DERI VE ENDURING BENEFITS FROM THE SAME AND AMORTIZED THE SAME FOR A PERIOD OF FIVE YEARS AND THEREBY DISALLOWED THE AMOUNT OF RS.47,94 ,600/-. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT (A) BY WAY OF AN APPEAL WHO HAS DELETED THE ADDITIONS BY P ARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COM E UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.1118/DEL./2015 4 4. ASSESSEE HAS NOT PREFERRED TO PUT IN APPEARANCE DESPITE ISSUANCE OF THE NOTICE AND CONSEQUENTLY, WE PROCEED ED TO DECIDE THE PRESENT APPEAL WITH THE ASSISTANCE OF THE LD. S ENIOR DR AS WELL AS ON THE BASIS OF DOCUMENTS AVAILABLE ON THE FILE. 5. WE HAVE HEARD THE LD. SENIOR DEPARTMENTAL REPRES ENTATIVE FOR THE REVENUE TO THE APPEAL, GONE THROUGH THE DOC UMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES B ELOW IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LD. DR FOR THE REVENUE CHALLENGING THE IMPUG NED ORDER CONTENDED THAT SINCE THE ASSESSEE HAS BEEN FOLLOWIN G MERCANTILE SYSTEM OF ACCOUNTING, THE LD. CIT (A) ERRED IN DELE TING THE ADDITIONS AND RELIED UPON THE ORDER PASSED BY THE A O. GROUNDS NO.1 & 2 7. UNDISPUTEDLY, THE ASSESSEE COMPANY HAS ADVANCED UNSECURED INTEREST FREE LOANS OF RS.11,00,00,000/- TO M/S. JU BILANT OIL & GAS PVT. LIMITED (JOGPL), ITS GROUP COMPANY. IT WAS TH E CASE OF THE ASSESSEE BEFORE LD. CIT (A)/AO THAT IN AY 2009-10, INTER- CORPORATE DEPOSIT (ICD) OF RS.11,00,00,000/- WAS AD VANCED TO JOGPL BY VIRTUE OF THE LOAN AGREEMENT DATED 01.04.2 008 ON THE TERMS THAT NO INTEREST WAS PAYABLE AND AS SUCH, NO INTEREST INCOME WAS OFFERED TO TAX IN THE RETURN OF INCOME. IT WAS FURTHER THE CASE ITA NO.1118/DEL./2015 5 OF THE ASSESSEE THAT ICD ADVANCE BY THE ASSESSEE CO MPANY WAS OUT OF OWN FUNDS AS THE SAME WAS ADVANCED MUCH PRIOR TO THE LOAN AVAILED OF BY THE ASSESSEE COMPANY FROM THE BANKS I .E. AMOUNT OF RS.5,00,00,000/- WAS ADVANCED ON 03.10.2008 AND AMO UNT OF RS.6,00,00,000/- ADVANCED ON 06.11.2008 WHEREAS ASS ESSEE HAS AVAILED OF THE LOAN OF RS.100 CRORES EACH FROM STAT E BANK OF INDIA AND CENTRAL BANK OF INDIA ON 16.02.2009 AND 25.06.2 009 RESPECTIVELY. 8. KEEPING IN VIEW THE FACTUAL POSITION, THE LD. CI T (A) HAS RIGHTLY DELETED THE ADDITION ON THE GROUNDS INTER A LIA THAT THE ASSESSEE COMPANY HAS ALREADY CHARGED THE INTEREST @ 8% ON ICD ADVANCE TO ITS GROUP COMPANY IN THE PREVIOUS YEAR R ELEVANT TO 2011-12 INCLUDING INTEREST ACCRUED UNDER ASSESSMENT YEAR UNDER CONSIDERATION; THAT DIFFERENTIAL INTEREST @ 4% (12% - 8%) HAS ALREADY BEEN DISALLOWED BY THE AO IN THE SUBSEQUENT YEAR 2011- 12; AND THAT THE ICD WAS ADVANCED PRIOR TO THE LOAN AVAILED OFF FROM THE BANK MEANING THEREBY THE SAME HAS BEEN ADV ANCED OUT OF OWN FUNDS BY THE ASSESSEE. SO, IN THE GIVEN FACTS AND CIRCUMSTANCES, WE FIND NO GROUND TO INTERFERE WITH THE FINDINGS RETURNED BY THE LD. CIT (A) DELETING THE ADDITION O F RS.1,32,00,000/-. HENCE, GROUNDS NO.1 & 2 ARE DETE RMINED AGAINST THE REVENUE. ITA NO.1118/DEL./2015 6 GROUNDS NO.3 & 4 9. UNDISPUTEDLY, THE UPFRONT AND SYNDICATION OF CHA RGES OF RS.2,09,02,500/- WAS MADE BY THE ASSESSEE COMPANY F OR AVAILING OF THE TERM LOAN OF RS.200 CRORES FROM STATE BANK OF I NDIA AND CENTRAL BANK OF INDIA RESPECTIVELY WHICH WAS CLAIME D AS REVENUE DEDUCTION. IT IS ALSO NOT IN DISPUTE THAT UPFRONT FEE IS PAID ONLY ONCE DURING THE TENURE OF THE TERM LOAN. IT IS THE CASE OF THE ASSESSEE THAT SUCH EXPENSES ON ACCOUNT OF UPFRONT C HARGES ARE ALLOWABLE U/S 36(1)(III) OF THE ACT READ WITH SECTI ON 2(28)(A) OF THE ACT IT IS ALSO NOT IN DISPUTE THAT INTEREST PAID O N THE MONIES BORROWED FOR PURPOSE OF BUSINESS IS ALLOWABLE DEDUC TION U/S 36(1)(III) OF THE ACT. 10. WHEN WE EXAMINE PROVISIONS CONTAINED U/S 36(1)( III) IN THE LIGHT OF THE DEFINITION OF INTEREST IN SECTION 2( 28)(A) OF THE ACT, IT CERTAINLY INCLUDES ANY SERVICE FEE OR OTHER CHARGES IN RESPECT OF MONEY BORROWED OR DEBT INCURRED. EVEN OTHERWISE, W HEN AO HAS ALLOWED THE INTEREST ON THE LOAN IN QUESTION AS REV ENUE EXPENDITURE THEN HOW THE UPFRONT FEE WHICH ALSO FORM THE PART OF THE INTEREST CAN BE DISALLOWED. THE LD. CIT (A) BY RELYING UPON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF PREMIER AUTOMOBILES LTD. VS. CIT 80 ITR 415 AND HONBLE RAJ ASTHAN ITA NO.1118/DEL./2015 7 HIGH COURT IN CASE OF CIT VS. SECURE METERS LTD. 32 1 ITR 611 HAS RIGHTLY HELD THAT UPFRONT CHARGES PAID BY THE A SSESSEE IS ALLOWABLE DEDUCTION BEING PART OF THE INTEREST AL READY ALLOWED BY THE AO AS REVENUE EXPENDITURE. FINDING NO ILLEGALI TY OR PERVERSITY IN THE DELETION OF ADDITION OF RS.1,67,22,000/- ON ACCOUNT OF DISALLOWANCE OF UPFRONT CHARGES PAID BY THE ASSESSE E FOR AVAILING THE LOAN OF RS.200 CRORES FOR BUSINESS PURPOSE, GRO UNDS NO.3 & 4 ARE DETERMINED AGAINST THE REVENUE. GROUND NO.5 11. THE LD. CIT (A) HAS DELETED THE ADDITION OF RS. 47,94,600/- MADE BY THE AO ON ACCOUNT OF PURCHASE OF DATA PACKA GES ON THE GROUND THAT THE SAME AMOUNTS TO DEFERRED REVENUE EX PENDITURE. UNDISPUTEDLY, THE ASSESSEE COMPANY HAS MADE PAYMENT OF RS.59,93,250/- TO DIRECTOR GENERAL OF HYDRO CARBON (DGH) FOR PURCHASING DATA PACKAGES WHICH WAS MANDATORY FOR TH E ASSESSEE COMPANY TO PARTICIPATE IN THE BID. THE REVENUE HAS NOT DISPUTED THE INCURRENCE OF THAT EXPENSES FOR BUSINESS PURPOS ES BUT ALLOWED THE SAME AS DEFERRED EXPENDITURE OVER A PERIOD OF F IVE YEARS. WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE W AS MADE TO INCUR THE MANDATORY EXPENSES HAVING BEEN PAID TO DG H FOR PARTICIPATING IN TENDER/BID PROCESS, NO ENDURING BE NEFIT, AS HAS BEEN ITA NO.1118/DEL./2015 8 OBSERVED BY AO, CAN BE MADE OUT. MOREOVER, AO HAS NOT DISPUTED THE NATURE OF THESE EXPENSES AS REVENUE EXPENSES. SO, WHEN THE INCURRENCE OF SUCH EXPENSES ARE ADMITTEDLY OF REVEN UE NATURE, THE SAME CANNOT BE CONSIDERED AS DEFERRED REVENUE EXPEN DITURE. SO, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION OF RS.47,94,600/- BY APPRECIAT ING THE FACTS ON RECORD. CONSEQUENTLY, GROUND NO.5 IS DETERMINED AG AINST THE REVENUE. GROUNDS NO.6 & 7 12. GROUNDS NO.6 & 7 ARE GENERAL IN NATURE, HENCE N EED NO SPECIFIC ADJUDICATION. 13. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2018. SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF NOVEMBER , 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.