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2016 (4) TMI 312 - HC - Income TaxFees paid to Clubs - revenue v/s capital expenditure - Held that - The issue of membership fees paid to the Club being allowed as Revenue expenditure stands has concluded against the Revenue and in favour of the Respondent-Assessee by the decision of this Court in Otis Elevator Co. (India) Ltd. V/s. Commissioner of Income Tax (1991 (4) TMI 53 - BOMBAY High Court ) . Deductibility of interest payments - these payments were capitalized in the books of the company - Held that - The proviso to Section 36(1)(iii) of the Act which prohibits claiming interest expenditure in respect of amounts borrowed for acquisition of capital assets till such time as it is first put to use has to be capitalized was introduced into the Act by Finance Act 2003 with effect from 1st April, 2004. We are concerned with assessment year 1997-98 i.e. much before the proviso to Section 36(1)(iii) of the Act was introduced. Thus there was no prohibition to claiming of interest paid on funds borrowed for acquisition/purchase of capital asset till such time it is first put to use in the subject assessment year.Tribunal was correct in upholding the deductibility of interest payments. Qualification of accessories to a windmill for 100% depreciation - Held that - This Court on almost identical facts in CIT V/s. CTR Manufacturing Industries Ltd. (2016 (4) TMI 265 - BOMBAY HIGH COURT) has dismissed the Revenue s Appeal from the order of the Tribunal allowing the claim for depreciation at the full rate on windmills
Issues:
1. Allowance of membership fees paid to Clubs as revenue expenditure. 2. Deductibility of interest payments on capital assets. 3. Qualification of accessories to a windmill for 100% depreciation. Analysis: Issue 1 - Membership Fees Paid to Clubs: The Revenue challenged the allowance of membership fees paid to Clubs as revenue expenditure. However, the counsel for the Revenue acknowledged that a previous court decision had ruled in favor of such allowance. Citing the precedent set by Otis Elevator Co. (India) Ltd. V/s. Commissioner of Income Tax, it was concluded that this issue did not raise any substantial question of law and was not entertained. Issue 2 - Deductibility of Interest Payments: Regarding the deductibility of interest payments on capital assets, the Respondent-Assessee had claimed interest expenditure on the purchase/acquisition of capital assets under Section 36(1)(iii) of the Income Tax Act. The Assessing Officer disallowed this interest, but the CIT(A) allowed the deduction. The Tribunal upheld this decision, relying on previous judgments and the absence of any distinguishing features in the present case. Notably, the proviso prohibiting such deductions was introduced after the assessment year in question. Therefore, the deduction was deemed permissible, and the issue did not raise a substantial question of law. Issue 3 - Qualification of Windmill Accessories for Depreciation: The Respondent-Assessee claimed 100% depreciation on windmills, which was initially allowed at 25% by the Assessing Officer. The Tribunal, however, granted the full depreciation based on a previous decision and the necessity of certain items for the windmill's operation. The Revenue's challenge lacked information on any appeal against the Tribunal's decision. Additionally, the Tribunal's findings on the necessity of specific items for the windmill's functioning were upheld. The court dismissed the Revenue's appeal, emphasizing that the issue was essentially a finding of fact and did not present a substantial question of law. In conclusion, the High Court dismissed the Revenue's appeal under Section 260A of the Income Tax Act, 1961, concerning the aforementioned issues. No costs were awarded in the matter.
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