Northern Arc Capital Limited, CHENNAI V. DCIT Corporate Circle 2(2), CHENNAI

ITA 2569/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1108 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 04-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Keywords: Business expenditure; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , # BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.2569/CHNY/2018 '' /ASSESSMENT YEAR : 2012-13 M/S.NORTHERN ARC CAPITAL LTD., ( FORMERLY KNOWN AS IFMR CAPITAL FINANCE LTD.) 10 TH FLOOR, PHASE-I, IIT-MADRAS RESEARCH PARK, KANAGAM VILLAGE, TARAMANI, CHENNAI-600 113. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2), CHENNAI-600 034 PAN: AACCI0979B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.P.CHIDAMBARAM, ADVOCATE /RESPONDENT BY : MR.S.BHARATH, CIT /DATE OF HEARING : 19.03.2019 /DATE OF PRONOUNCEMENT : 20 .03.2019 / O R D E R PER S.JAYARAMAN, AM: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNAI, IN ITA NO. 150 /CIT(A)-13/A.Y 2012-13 DATED 25.06.2018 FOR ASSESSMENT YEAR 2012- 13. 2. M/S . NORTHERN ARC CAPITAL LTD., THE ASSESSEE, IS ENGAGED IN THE BUSINESS OF NON-BANKING FINANCIAL ACTIVITY. WH ILE MAKING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2012-13, THE ASS ESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED THE PROCESSING FEE PAID AT 2,20,01,435/- AND HENCE CALLED FOR THE DETAILS. O N EXAMINATION OF THEM, 2 ITA NO.2569/CHNY/2018 A.O. HELD, INTER-ALIA, THAT ASSESSEE HAS AMORTIZED THE FINANCE CHARGES OVER A PERIOD IN THE BOOKS OF ACCOUNTS. THOUGH TH E PROCESSING FEES WERE INCURRED ON ACCOUNT OF BORROWINGS WHICH WOULD RUN OVER A PERIOD OF TIME, IT CANNOT BE DEBITED IN THE YEAR OF PAYMENT. ON MATCHING PRINCIPLES OF INCOME VERSUS EXPENDITURE, THE ASSESSEE WOULD BE ENTITLED TO PROPORTIONATE DEDUCTION SPREAD OVER A PERIOD OF TI ME OF THE TENURE OF LOAN. THEREFORE, HE ADDED BACK THE ENTIRE AMOUNT. A GGRIEVED , THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE L D.CIT(A) DISMISSED THE APPEAL. AGAINST THE ORDER OF THE CIT(A) , THE A SSESSEE FILED THIS APPEAL. 3. THE LD.AR SUBMITTED THAT THE ASSESSEE BEING NON -BANKING FINANCE COMPANY (NBFC), THE EXPENDITURE IN THE NAT URE OF PROCESSING CHARGES, BANK CHARGES, STAMPING CHARGES ETC. CLAI MED FOR AVAILING LOAN IS A REGULAR BUSINESS EXPENDITURE AND AS SUCH IT IS AN ALLOWABLE DEDUCTION U/S.37(1). THE IMPUGNED EXPENDITURE WAS I NCURRED DURING THE YEAR AND IT WAS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS . THEREFORE , IT IS ALLOWABLE DEDUCTION U /S.37(1). THE A.O AS WELL AS THE CIT(A) ERRED IN HOLDING THAT PROCESSIN G FEE ARE PREPAID IN NATURE WITHOUT APPRECIATING THE FACT THAT UNLESS O THERWISE ASSESSEE PAYS THE PROCESSING FEE PLUS APPLICABLE TAXES, IT S HALL NOT BE ELIGIBLE TO GET THE LOAN. IN THIS REGARD, THE LD AR INVITED O UR ATTENTION TO A COPY OF 3 ITA NO.2569/CHNY/2018 THE SANCTION LETTER DATED 07.06.2011 ISSUED TO TH E ASSESSEE BY M/S.THE RATNAKAR BANK LTD.,MUMBAI, WHEREIN UNDER T HE COLUMN PRICING IT IS STATED AS UNDER:- ROL: 11.50% (BR+2.50%) P.A. AT MONTHLY REST. THE B ANK HAS THE RIGHT TO SUBSTITUTE BASE RATE WITH ANY ALTERNATE RA TE OR TO CHANGE THE SPREAD OVER BASE RATE, AT ITS DISCRETION, OR AS MAY BE REQUIRED BY RBI/ STATUTORY DIRECTIVE. UPFRONT PROCESSING FEE OF 2.00% + APPL. TAXES THE LD AR SUBMITTED THAT UNLESS THE ASSESSEE PAY S UPFRONT PROCESSING FEE PLUS APPLICABLE TAXES, THE TERM LO AN WOULD NOT BE SANCTIONED AT ALL. SINCE THE ASSESSEE HAS ALREADY PAID THE IMPUGNED PROCESSING FEES, IT IS ELIGIBLE TO CLAIM THE SAME U /S.37(1) IRRESPECTIVE OF THE FACT THAT IT HAS AMORTIZED THIS EXPENDITURE I N ITS BOOKS OF ACCOUNT. IN THIS REGARD, THE LD.AR INVITED OUR ATTENTION TO THE DECISION OF ITAT., JAIPUR BENCH IN THE CASE OF DCIT VS. JAIPUR VIDYUT VITRAN NIGAM LTD. (2015) (58 TAXMANN.COM 163) (JAIPUR TRIB) WHEREIN, IN THE HEADNOTE, IT IS HELD AS UNDER:- IT : PAYMENT OF FRONT END FEES FOR AVAILING LOAN W AS ALLOWABLE AS REVENUE EXPENDITURE IN YEAR IN WHICH IT WAS PAID EV EN THOUGH ASSESSEE HAD WRITTEN OFF AMOUNT IN ITS BOOKS OVER A PERIOD O F TIME PER CONTRA, THE LD. D R SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4. WE HEARD THE RIVAL SUBMISSIONS AND FIND MERIT IN THE SUBMISSIONS MADE BY THE LD.AR . FOLLOWING THE RATIO OF THE JAIP UR BENCH OF THIS 4 ITA NO.2569/CHNY/2018 TRIBUNAL IN THE CASE OF DCIT VS. JAIPUR VIDYUT VIT RAN NIGAM LTD.,CITED SUPRA, WE HOLD THAT THE PAYMENT OF PROCESSING FEE FOR AVAILING THE LOAN IS ALLOWABLE AS REVENUE EXPENDITURE IN YEAR IN WHIC H IT WAS PAID, EVEN THOUGH THE ASSESSEE HAD WRITTEN OFF AMOUNT IN ITS BOOKS OVER A PERIOD OF TIME . THEREFORE, THE A O IS DIRECTED TO ALLOW THE ASSESS EES CLAIM. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWE D. ORDER PRONOUNCED ON 20 TH MARCH, 2019 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) (S.JAYARAMAN) ( ! / JUDICIAL MEMBER) ( ! / ACCOUNTANT MEMBER) /CHENNAI, $ /DATED 20 TH MARCH, 2019 SOMU () *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + () /CIT(A) 4. + /CIT 5. ) / /DR 6. 2 /GF