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2015 (4) TMI 504 - HC - Income TaxClaim of revenue expenditure in the course of assessment proceedings without revising the return of income (a) - Claim of Lease rent paid during the period in which production not commenced (b) - Allowance of interest on hire purchase (c) - Held that - Following judgment of Arvind Products Ltd. 2010 (3) TMI 828 - Gujarat High Court , we answer question (A) in affirmative and held that the Appellate Tribunal was right in law in confirming the order of the CIT(A) allowing the claim of ₹ 2,38,77,468/as revenue expenditure made for the first time in the course of assessment proceedings by filing a letter dated 01.02.1994 without revising the return of income. Following judgment of Nirma Ltd. 2014 (10) TMI 388 - GUJARAT HIGH COURT , We, therefore, answer question (B) in affirmative and in favour of the assessee and against the Revenue, holding that the Appellate Tribunal was right in law in holding that lease rent paid under an arrangement with Gujarat Lease and Financials Ltd. for imported machinery and equipments for establishing a new Soda Ash Plant by the assessee, manufacturing caustic soda, for the period the new plant had not commenced production, was revenue expenditure. Following judment of Gujarat Alkalies and Chemicals Ltd. 2008 (2) TMI 11 - SUPREME COURT OF INDIA , We, therefore, answer question (C) in affirmative and in favour of the assessee and against the Revenue and held that the Appellate Tribunal was right in law in confirming the order of the CIT(A), whereby he had deleted the disallowance of interest on hire purchase in relation to new Soda Ash Plant and interest and commitment charges in relation to expansion of Chloromethane Plant. - Decided against the revenue.
Issues:
1. Challenge to the order of the ITAT by the Revenue. 2. Disallowances and additions made to the income of the assessee. 3. Questions of law framed by the Court regarding revenue expenditure, lease rent, and disallowance of interest on hire purchase. Issue 1: Challenge to ITAT Order The High Court dealt with an appeal by the Revenue challenging the ITAT's order dated 24.05.2006 in ITA No.745/Ahd/2001 for the A.Y. 1991-92, where the Tribunal dismissed the appeal filed by the Revenue. Issue 2: Disallowances and Additions The assessee filed its return of income declaring total income at 'Nil' for the relevant year. The AO made additions/disallowances to the income, and the CIT(A) partly allowed the appeal. The Revenue, being dissatisfied, approached the Tribunal resulting in the impugned order. Issue 3: Questions of Law The Court framed three questions of law: - Whether the Tribunal was right in allowing a claim of revenue expenditure without revising the return of income. - Whether lease rent paid for establishing a new Soda Ash Plant was revenue expenditure. - Whether the Tribunal was correct in deleting the disallowance of interest on hire purchase and commitment charges. The Court analyzed each question separately. For question (A), the Tribunal's decision was upheld based on relevant case law. Similarly, for question (B), the Court relied on precedent to support the Tribunal's decision regarding lease rent as revenue expenditure. Finally, for question (C), the Court referred to a Supreme Court decision to support the Tribunal's decision on interest and commitment charges. In conclusion, the Court dismissed the appeal, answering all three questions in favor of the respondent-assessee and against the appellant-Revenue. The judgment provided detailed reasoning and legal interpretations supporting the decisions on each issue raised in the appeal.
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