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TMI Blog2013 (12) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... His only objection was that the claim of expenses was on deferred basis. The advances were not doubted and the expenses were incurred during the year - The assessee had claimed less than the allowable expenditure, there was no justification for the disallowance under consideration - Decided against Revenue. Disallowance of debenture transfer fee, upfront fee and processing fee - Held that:- There was no controversy as to whether the expenditure was capital expenditure or revenue expenditure - The borrowed funds were utilized for working capital, and since these funds were utilized for the business purpose, no disallowance was made out of the interest paid on such borrowed funds - The Tribunal further found that the AO has accepted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the order of the learned CIT (A) in this regard was upheld." In Income Tax Appeal No. 293 of 2005, decided today, in respect of the same assessee, for the assessment year 1995-96, we have decided the issue in favour of the assessee. For the reasons given in Income Tax Appeal No. 293 of 2005 (CIT Vs. M/s. Dewan Rubber Industries Rithani Meerut), the question No.4 is decided in favour of the assessee and against the revenue. Question No. 5: "Whether on the facts and in the circumstances of the case the Tribunal was legally correct to hold that the addition of Rs. 2,58,813/- under head 'Preliminary Expenses' u/s 35-D of the Act could not be made, and also considering the facts that similar issues were sub judice before the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue is hereby decided against the department and in favour of the assessee. Ground No.6 is, therefore, rejected. Under Section 35-D of the Act, preliminary expenses has to be apportioned in ten successive previous years. Since disallowance was deleted by CIT (A) for the assessment year 1994-95 which was upheld by the Tribunal, and in respect to which no substantial question was found to be decided by the Court in Income Tax Appeal 293 of 2005 (CIT Vs. M/s. Dewan Rubber Industries Rithani Meerut), we find that the deletion of disallowance by the CIT (A) as upheld by the Tribunal, does not require any interference. The finding of the Tribunal has become final in respect of assessment year 1994-95. The question is thus decided in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration, which was only to the tune of Rs. 9082 crores; that consequently the deduction had to be worked out with reference to the capital employed; that as per Section 35 D, the explanation (b)(ii), the capital employed worked out to Rs. 31,60,50,000/-only, plus term loan of Rs. 24,98,000/-; that the deduction under Section 35 D for the year under consideration and the subsequent nine years worked out to Rs. 14,14, 625/-(1/10th deduction under Section 35D) 2-1/2% of capital employed of Rs. 56,58,50,000/- as against this the assessee had claimed Rs. 28,07,311/-; that as such, the disallowance worked out to Rs. 13,92,685/-; that under the Income Tax Act, there was no concept of deduction of deferred revenue expenditure. The disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of IT Act, 1961?" On this issue, the Tribunal held in para 14 as follows:- "14. The last ground, i.e., ground No.9, is against the deletion of disallowance of Rs. 38,76,541/- under the head "Capital Expenditure" on account of debenture transfer fee, upfront fee and processing fee. The raising term loans, which gave enduring benefit to the assessee company; therefore, the expenses were capital in nature. The learned CIT (A) deleted this disallowance, following the first appellate order for the assessment year 1997-98, holding that the expenditure related to the debenture etc. was being raising loans for the business purpose, allowable under Section 36 (I) (iii) of the Income Tax Act. 14.1 The stand of the assessee all through has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.3. In our view, the stand of the assessee is correct. The very basis of the disallowance is non-est. There is no controversy as to whether the expenditure was capital expenditure or revenue expenditure. The fees given were so given for borrowing funds, which were utilized for working capital. No disallowance was made out of the interest paid on such borrowed funds, therefore, since these funds had been utilized for the business purposes of the assessee. The A.O. has himself accepted that the interest bearing funds were entirely utilized by the assessee for its business purposes, therefore, the deletion of the disallowance is upheld. Apropos, the Tribunal's order for the assessment year 1997-98 in the assessee's own case (supra), the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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