2005 (1) TMI 593 - AT - Income Tax

Summary

Issues involved:
- Appeal by revenue for Assessment Years 1995-96 and 1996-97 against the order of ld. CIT(A), Mumbai regarding deduction of interest payment as revenue expenditure under section 36(1)(iii).

Detailed Analysis:
1. Issue 1 - Assessment Year 1995-96:
- The revenue appealed against the order directing the Assessing Officer to allow deduction of interest payment of Rs. 5,53,47,977 as revenue expenditure under section 36(1)(iii).
- The Assessing Officer disallowed the interest payment as the assessee had capitalized it for plant and machinery purchases, claiming depreciation.
- The assessee later sought deduction for the interest payment during assessment proceedings, withdrawing the claim for depreciation.
- The ld. AR argued that the assessee only claimed deduction for interest, not both depreciation and interest.
- Various decisions were cited, including ITO v. Shreyas Shipping Ltd., J.C.T. Ltd. v. Asstt. CIT, and Core Health Care Ltd. v. Dy. CIT.
- The Tribunal upheld the ld. CIT(A)'s decision, allowing the deduction for the interest payment, based on the method of accounting and relevant legal principles.

2. Issue 2 - Assessment Year 1996-97:
- The revenue raised similar grounds of appeal as in the previous year, contesting the deduction of interest payment of Rs. 7,78,22,167.
- The Tribunal, considering the identical facts from the previous year, upheld the decision to allow the deduction for the interest payment, in line with the assessment for the previous year.

Conclusion:
- The Tribunal dismissed the revenue's appeals for both Assessment Years 1995-96 and 1996-97, upholding the decision to allow the deduction for the interest payments claimed by the assessee as revenue expenditure under section 36(1)(iii). The judgments relied on the method of accounting, legal precedents, and the specific circumstances of the case to support the allowance of the deductions.