M/s. S B Packaging Ltd., New Delhi V. ACIT, New Delhi

ITA 4486/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52633 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 06-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 08-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: ASHU TANDO N
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH DELHI BENCH DELHI BENCH DELHI BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI K.G.BANSAL, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI K.G.BANSAL, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI K.G.BANSAL, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI K.G.BANSAL, AM ITA NO. ITA NO. ITA NO. ITA NO.4486/DEL/2010 4486/DEL/2010 4486/DEL/2010 4486/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 200 200 200 2004 44 4- -- -05 0505 05 M/S S.B.PACKAGING LIMITED, M/S S.B.PACKAGING LIMITED, M/S S.B.PACKAGING LIMITED, M/S S.B.PACKAGING LIMITED, 3 33 3 RD RDRD RD FLOOR, VARDHMAN PLAZA FLOOR, VARDHMAN PLAZA FLOOR, VARDHMAN PLAZA FLOOR, VARDHMAN PLAZA CORNER, INDER ENCLAVE, CORNER, INDER ENCLAVE, CORNER, INDER ENCLAVE, CORNER, INDER ENCLAVE, PASCHIM VI PASCHIM VI PASCHIM VI PASCHIM VIHAR, HAR, HAR, HAR, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AABCS3731Q. PAN : AABCS3731Q. PAN : AABCS3731Q. PAN : AABCS3731Q. VS. VS. VS. VS. ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -7(1), 7(1), 7(1), 7(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHU TANDON, CA. RESPONDENT BY : MRS.ANUSHA KHURANA, SR.DR. ORDER ORDER ORDER ORDER PER R.P.TOLANI, JM PER R.P.TOLANI, JM PER R.P.TOLANI, JM PER R.P.TOLANI, JM : : : : THIS IS ASSESSEES APPEAL. THE GROUNDS RAISED ARE AS UNDER:- 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN UPHOLDING THE ADDITIONS IN A SUM OF RS.7,83,869/- O N ACCOUNT OF PROCESSING FEES PAID TO THE BANK ON RENEWAL/ENHANCEMENT/FRESH CASH CREDIT/LETTER OF CRE DIT LIMIT. 2. THE LD.CIT(A) ALSO ERRED IN LAW IN UPHOLDING THE ADDITION IN COMPLETE DISREGARD TO THE VARIOUS JUDIC IAL PRONOUNCEMENTS. 2. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY CLAIME D IN ITS PROFIT & LOSS ACCOUNT A SUM OF `7,83,869/- FOR THE RELEVANT ASSESSMENT BEING THE AMOUNT OF PROCESSING FEE PAID TO ING VYSA BANK LTD. ON THE RENEWAL OF ITS CASH CREDIT/LETTER OF CREDIT LIMIT A ND ALSO ON OTHER FRESH TERM LOAN, LIMITS SANCTIONED DURING THE RELEVANT FI NANCIAL YEAR. THE AO ITA-4486/DEL/2010 2 DISALLOWED THE CLAIM ON THE GROUND THAT SINCE THE B ENEFIT OF THE LOAN IS NOT LIMITED TO ONE YEAR AND IS OF ENDURING NATURE, THE EXPENSES CANNOT BE ALLOWED. THE LEARNED CIT(A) UPHELD THE ADDITION . 3. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT T HE PROCESSING FEE WAS PAID BY THE ASSESSEE FOR ENHANCEMENT OF ALR EADY EXISTING CREDIT LIMITS. THE ASSESSEES CREDIT LIMITS WERE I NCREASED AS UNDER:- NATURE EXISTING LIMIT APPROVED LIMIT CASH CREDIT. RS.5.00 CRORE RS.5.50 CRORE INLAND/IMPORT LETTER OF CREDIT. RS.3.00 CRORE RS.3.50 CRORE TERM LOAN (NEW). -- RS.1.25 CRORE UPFRONT PROCESSING FEE OF RS.5 LACS WILL BE PAYABLE FOR ALL THE FACILITIES RENEWED AND SANCTIONED. 4. LEARNED COUNSEL CONTENDS THAT THE ASSESSEE WAS A LREADY AVAILING LOAN FACILITIES AND THE PROCESSING FEE FOR EARLIER LOANS WAS ALLOWED AS REVENUE EXPENDITURE. ENHANCEMENT OF INCREASE OF CR EDIT LIMIT WAS FOR BUSINESS PURPOSES AND THE PROCESSING FEE ASSUMES A CHARACTER OF EXPENDITURE FOR INCREASE IN THE PROFIT EARNING APPA RATUS AND WAS SQUARELY COVERED BY THE HON'BLE SUPREME COURT JUDGM ENT IN THE CASE OF INDIA CEMENTS LTD. VS. CIT 60 ITR 52. HON'BLE SUPREME COURT HELD THAT THE BORROWING FOR BUSINESS PURPOSE DID NOT RES ULT INTO ENDURING BENEFIT BY FOLLOWING OBSERVATIONS:- ON REFERENCE, THE HIGH COURT HELD THAT IT WAS TRUE THAT THE BORROWED MONEY WAS TO BE REPAID AND IT COULD NOT BE AN ENDURING ADVANTAGE IN THE SENSE THAT THE MONEY BECA ME PART OF THE ASSETS OF THE COMPANY FOR ALL TIME TO C OME; BUT, IT CERTAINLY WAS AN ADVANTAGE WHICH THE COMPANY DER IVED FOR THE DURATION OF THE LOAN AND UNDOUBTEDLY IT COU LD NOT HAVE BEEN FOR ANY PURPOSE OTHER THAN AN ADVANTAGE T O THE ITA-4486/DEL/2010 3 BUSINESS. IT FURTHER HELD THAT AT LEAST TO THE EXT ENT OF RS.25 LAKHS THAT AMOUNT WAS EXPENDED FOR PURPOSES OF A CA PITAL NATURE CLEARLY IN ORDER TO BRING INTO EXISTENCE CAP ITAL ASSETS, THAT THOUGH IT WAS VAGUELY STATED BY THE TR IBUNAL THAT THE OTHER SUM OF RS.15 LAKHS WAS UTILIZED AS W ORKING FUNDS, THERE WAS NO MATERIAL WHATSOEVER BEFORE THE TRIBUNAL TO JUSTIFY ITS COMING THE THAT CONCLUSION. THE HIGH COURT, THUS, RESTORED THE ITOS ORDER. 5. LEARNED DR IS HEARD. 6. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RELEVANT MATERIAL ON RECORD. IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE WAS ALREADY AVAILING BORROWING FACILITIES FROM BANK AND THE SAME WERE FOR THE DAY TO DAY BUSINESS OF THE ASSESSEE. THE PROCE SSING FEE IN QUESTION HAS ONLY BEEN PAID TO INCREASE THOSE BUSIN ESS LOANS. THE FINDING THAT IT IS THE BENEFIT OF ENDURING NATURE I S NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE IN VIEW OF THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF INDIA CEMENTS LTD. (SUPRA). IN VIEW THEREOF, WE HOLD THAT THE AMOUNT OF THIS PROCESSING FEE FOR ENHANCEMENT OF LOANS IS REVENUE EXPENDITURE ALLOWABLE TO THE ASSES SEE. ACCORDINGLY, THE ADDITION IS DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON CONCLUSION OF HEARING ON 7 TH SEPTEMBER, 2011. SD/- SD/- (K.G.BANSAL (K.G.BANSAL (K.G.BANSAL (K.G.BANSAL) )) ) (R.P.TOLANI (R.P.TOLANI (R.P.TOLANI (R.P.TOLANI) )) ) ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 07.09.2011. VK. ITA-4486/DEL/2010 4 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR