2016 (11) TMI 527 - AT - Income Tax

Exemption u/s 11 - Application of income towards loan repayment to the bank - depreciation claim - whether the loan money was shown to have been utilized for acquisition of the asset? - Held that - On perusal of the statement of income filed for the assessment years 1992-93 to 1999-2000 during which the loan was received by the assessee, we find that apparently the loan under reference received from World Bank has not been shown as income in any of the year concerned. Further, we find from the statement of total income that the cost of fixed assets acquired during the relevant years has been claimed as application of income. In the note appended to depreciation chart for the assessment year 1992-93 enclosed along with the balance sheet and profit and loss account, it is mentioned that additions include assets amounting to ₹ 91,31,124/- (previous year ₹ 75,50,597/-) purchased under the Industrial Credit and Investment Corporation of India Ltd. (Technology Service Revolving Fund) Scheme. Similar notes have been provided in case of other assessment years involved. In the assessment years from 1992-93 to assessment year 1998-99, the depreciation provided in the books of accounts has been reduced from the expenditure claimed towards application of income, which means the depreciation has not been claimed as application of income. From the assessment year 1999-2000 onwards till the assessment year under consideration also the depreciation has not been claimed towards application of the income. In view of above observations, it is clear that the assessee has not shown the loans received as its income or receipt, in the year in which such loan was received by the assessee and, therefore, the repayment also cannot be allowed as an expenditure or application of income. Further, we find that loan money obtained has been shown as application on acquisition of fixed assets and, therefore, the assessee has already claimed loan as deduction or application of income and therefore, in our opinion, allowing application of repayment of loan will amount to double deduction. Thus as assessee has already been allowed cost of addition to asset acquired out of the loans as application of income in relevant years and therefore assessee cannot be allowed the repayment of loan as application of the income - Decided against assessee

Summary

Issues Involved:
1. Whether the assessee has claimed depreciation in any of the previous years.
2. Whether the loan money was shown to have been utilized for the acquisition of the assets.
3. Whether the repayment of the loan can be considered as an application of income.

Detailed Analysis:

1. Claim of Depreciation:
The Tribunal examined whether the assessee had claimed depreciation in any of the previous years. The assessee submitted detailed charts of total receipts and expenditures for the relevant years, asserting that depreciation was never claimed as an expenditure or application of income. The Tribunal confirmed that from the assessment years 1992-93 to 1998-99, depreciation provided in the books was reduced from the expenditure claimed towards the application of income, meaning depreciation was not claimed as an application of income.

2. Utilization of Loan Money for Asset Acquisition:
The Tribunal reviewed whether the loan money was utilized for acquiring assets. The assessee received a loan from the World Bank in 1990, with the final disbursement in March 1996. The Tribunal found that the loan received was not shown as income in any year concerned. The cost of fixed assets acquired during the relevant years was claimed as an application of income. The Tribunal confirmed that the loan money was shown as application on acquisition of fixed assets, thus the assessee had already claimed the loan as a deduction or application of income.

3. Repayment of Loan as Application of Income:
The core issue was whether the repayment of the loan could be considered an application of income. The Tribunal noted that the repayment of ?1,70,00,000 was towards the principal amount of an interest-free loan. The Assessing Officer and the Commissioner of Income-tax (Appeals) had disallowed this claim, arguing that it amounted to a double deduction, as the assets purchased with the loan were already treated as an application of income. The Tribunal upheld this view, stating that allowing the repayment of the loan as an application of income would indeed result in a double deduction, which is neither intended nor expressed by the legislature.

Additional Observations:
The Tribunal admitted additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, as directed by the Hon'ble High Court. The Tribunal also noted that the CBDT Circular No. 100, cited by the assessee, could not override the law as per the Supreme Court's ruling in CIT Vs. Rajendra Poddar Charitable Trust (1987) 164 ITR 666.

Conclusion:
The Tribunal concluded that the assessee had already been allowed the cost of addition to assets acquired out of the loans as an application of income in the relevant years. Therefore, the repayment of the loan could not be allowed as an application of income. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) and dismissed the appeal of the assessee.