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TMI Blog2013 (8) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany to fulfill its needs for borrowed money is an allowable expenditure under section 37 of the Income Tax Act - Following decision of Madras Industrial Investment Corporation Limited v. Commissioner of Income Tax [1997 (4) TMI 5 - SUPREME Court] - Decided against Revenue. Deduction on restructuring of the term loan - Tribunal allowed deduction - Held that:- act of borrowing money was incidental to carrying on of the business, the loan obtained was not an asset or an advantage of enduring nature, the expenditure so made for securing the use of money for a certain period and it was irrelevant to consider the object with which the loan was obtained. Thus, when obtaining of a loan is not considered as an asset or an advantage of enduring nature, any expenditure incurred for reducing such loan burden or securing the borrowings, on more advantageous condition, can not be seen as resulting into a benefit of enduring nature so as to be categorized as a capital expenditure - Following decision of India Cements Limited v. Commissioner of Income Tax, Madras [1965 (12) TMI 22 - SUPREME Court] - Decided against Revenue. Deduction u/s 36[1](iii) - Held that:- Department had allowed such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the Tribunal was right in law in deleting the disallowance made of Rs. 9,00,10,279/being amount of deduction claimed u/s.36 (1)(iii) of the I. T. Act in respect of money borrowed and expended prior to the commencement of business ignoring the fact that proviso added to Section 36(1)(iii) of the I. T. Act was only classificatory in nature and was applicable to all pending proceedings ? VI. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance made on account of depreciation of Rs.1,61,23,149/claimed on certain assets since the said transactions are mere a financial arrangements and that the assessee is not engaged in leasing business ? VII. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in law in ignoring the fact that the assessee is not the owner of the assets and that the essence of the agreement is drawn for securing depreciation benefits for the lessor ? 2. With respect to Question [I], counsel for the Revenue pointed out that the Tribunal had relied solely on the decision in case of assessee for the earlier years, which has been challenged by the Revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , could not be considered as expenditure. On appeal appeal to the Supreme Court, the Supreme Court held that the liability to pay the discounted amount over and above the amount received for the debentures was a liability incurred by the company for the purposes of business in order to generate funds of its business activities. It was therefore revenue expenditure. 5. Thus, according to the law laid down by the Supreme Court, where the company undertakes to pay more amount than what it has borrowed, and liability to pay the excess amount undertaken to be paid by the company to fulfill its needs for borrowed money is an allowable expenditure under section 37 of the Income Tax Act. This question, therefore, is not required to be considered. 4. With respect to Question III, the assessee claimed deduction of a sum of Rs. 78.54 lakhs [rounded off] expended towards restructuring of the term loan by way of charges of Chartered Accountants firm and other related expenditure. The case of the Revenue was that by such restructuring of the loans, the assessee would earn enduring benefit spreading over a long period of time and the expenditure incurred in gaining such enduring benefit mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have been suddenly disallowed. We may refer to a decision of this Court in case of Saurashtra Cement Chemical Industries Ltd. V. Commissioner of Incometax, Gujarat, reported in [(1980) 123 ITR 669], wherein, in the context of successive claim of tax holiday, the Court held that the ITO was not justified in refusing to continue the benefit of such tax holiday granted to the assessee in the earlier years, without disturbing the relief granted for the initial years. We are conscious that the issue is not identical in nature. However, the Incometax Act recognizes the principle of consistency. In the present case, for as many as seven years, previously the Assessing Officer did not dispute certain claims and therefore, the Tribunal correctly interpreted that the Assessing Officer has sought to reopen the issue. 6. Question V pertains to deduction claimed by the assessee under Section 36[1](iii) of the Act. The Assessing Officer disallowed claim, upon which ultimately, the Tribunal in the impugned judgment, relying on the decision of the Supreme Court in case of Deputy Commissioner of Incometax V. Core Health Care Ltd., reported in (2008) 298 ITR 194, ruled in favour of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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