2018 (1) TMI 1348 - HC - Income Tax

Disallowance on account of broken period interest - treated as capital expenditure - Held that - The issue urged by the Revenue herein stands concluded by the decision of this Court in CIT v/s. HDFC Bank Ltd., (2014 (8) TMI 119 - BOMBAY HIGH COURT) - No substantial question of law. Appeal admitted on the substantial question of law at (b) - Whether on the facts and in the circumstances and in law, the Tribunal was justified in deleting the disallowance made on account of depreciation of leased assets when the assets were not actually owned by the assessee and leased out, but the transaction was in the nature of finance only?

Summary

Issues:
1. Disallowance of broken period interest treated as capital expenditure by the AO.
2. Disallowance of depreciation on leased assets not owned by the assessee.

Analysis:

Issue 1: Disallowance of broken period interest
The appellant challenged the common order of the Income Tax Appellate Tribunal (the Tribunal) regarding the disallowance of broken period interest treated as capital expenditure. The Revenue raised the question of whether the Tribunal was justified in deleting this disallowance. The respondent's counsel, Mr. Suresh Kumar, referred to a previous decision of the Court in CIT v/s. HDFC Bank Ltd., where a similar issue was addressed. It was acknowledged that the issue in question had already been settled by the Court's previous ruling. Consequently, the Court held that the question did not present any substantial legal issue for consideration and therefore was not entertained.

Issue 2: Disallowance of depreciation on leased assets
Regarding the disallowance made on account of depreciation of leased assets not owned by the assessee, the Tribunal admitted the appeal on the substantial question of law pertaining to this issue. The Court directed the Registry to provide a copy of the order to the Tribunal for necessary action. The matter was scheduled to be heard along with other income tax appeals. The respondent's counsel waived the service for the respondent, indicating their cooperation in the legal proceedings.

This judgment from the Bombay High Court addressed two main issues related to income tax assessments for specific years. The first issue concerning the treatment of broken period interest as capital expenditure was dismissed due to a previous court decision, while the second issue regarding the disallowance of depreciation on leased assets was admitted for further consideration. The Court's detailed analysis and directions provided clarity on the legal standing of each issue, ensuring a fair and comprehensive review of the appellant's challenges.