2015 (10) TMI 818 - HC - Income Tax

Disallowance of loan acquisition costs - Disallowance of expenditure incurred on the issue of non convertible debentures and commercial papers by considering it to be deferred revenue expenditure - ITAT allowed asessee s case - Held that - Although a statement has been made in the memorandum of appeal that appeals are learned to have been filed in this Court by the Revenue in respect of the ITAT s orders for AYs 2003-04 and 2004-05, Mr N. P. Sahni, learned Senior Standing Counsel, candidly states that he has no details of any of those appeals having been listed before this Court after having been numbered. The Court notes that the orders of the ITAT for AYs 2003-04, 2004-05 and 2005-06 were passed more than three years ago on 20th April, 2012. If since then any appeal had been filed with the Revenue and had been listed before the Court, it is unlikely that those details would not be available with either the Revenue or the Assessee. The Court, in this circumstance, proceeds on the basis of the statement made on behalf of the Assessee that, till date there is no information regarding any appeals having filed by the Revenue in respect of the orders of the ITAT for the earlier said AYs. The Court notices that in respect of other items of expenditure incurred by the Assessee for AYs 2001-02 and 2002-03, for e.g., the expenditure incurred on advertisement and publicity, the stand of the Revenue that they should be treated as deferred revenue expenditure was not accepted by this Court. In its decision in CIT v. Citi Financial Consumer Finance Ltd. (2011 (3) TMI 622 - Delhi High Court) for AYs 2001-02, 2002-03, the Court held that in the income-tax law, there is no concept of deferred revenue expenditure. Once the Assessee claims the deduction for the whole amount of such expenditure, even in the year in which it is incurred, and the expenditure fulfils the test laid down under Section 37 of the Act, it has to be allowed - No substantial question of law - Decided against revenue.

Summary

Issues:
1. Disallowance of loan acquisition costs
2. Disallowance of expenditure on non-convertible debentures and commercial papers

Analysis:
The High Court heard an appeal by the Revenue against the Income Tax Appellate Tribunal's order for Assessment Year 2006-07. The Revenue raised two issues: disallowance of a substantial sum related to loan acquisition costs and disallowance of expenditure on non-convertible debentures and commercial papers as deferred revenue expenditure. The Assessee's Senior Counsel highlighted the ITAT's acceptance of the Assessee's stand on these issues in previous years. The Revenue claimed to have filed appeals for earlier years but failed to provide details or evidence of listing before the Court. The Court noted the absence of a concept of deferred revenue expenditure in income-tax law, citing a previous decision that once an Assessee claims deduction for such expenditure fulfilling Section 37 requirements, it must be allowed.

In the present case, the Court found no substantial question of law, leading to the dismissal of the appeal. The Court emphasized the lack of evidence of appeals filed by the Revenue for earlier years, supporting the Assessee's position based on ITAT's previous acceptance. Additionally, the Court referenced a precedent rejecting the concept of deferred revenue expenditure in income-tax law, reinforcing the Assessee's entitlement to claim deductions for incurred expenditure meeting statutory criteria without deferral. Consequently, the Court upheld the ITAT's decision, dismissing the Revenue's appeal.