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TMI Blog2014 (11) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... d confirmed by Ld. CIT(A) could not be made in view of the facts and circumstances of the case – the AO is directed to delete the addition – Decided in favour of assessee. - I.T.A. No. 925 /Del/2011 - - - Dated:- 17-1-2014 - Shri U. B. S. BEDI And Shri SHAMIM YAHYA , JJ. For The Appellant : Shri Vikas Srivastava, Adv. For The Respondent : Sh. Gunjan Prasad, CIT DR ORDER PER U B S BEDI, JUDICIAL MEMBER: This appeal of the assessee is directed against the order passed by Ld. CIT(A) XVII, New Delhi dated 22.11.2010 relevant for the assessment year 2004-05 wherein in all six grounds were raised out of which, grounds No.,1, 5 and 6 are general which need no specific adjudication and the remaining grounds No.2, 3 and 4, which are effective grounds, are reproduced as under: 2) The ld. CIT(A), as well as Ld. A.O. have erred in law and on the facts and circumstances of the case by holding that a sum of ₹ 1,34,44,986/- being the take out assistance fees as capital expenditure, paid by the appellant in connection with the loan raised by it. The appellant submit that the it is entitled to a deduction of ₹ 1,34,44,986/- as revenue expenditure. 3) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho recorded assessee s submission in para 4.1 and 4.1.1 of his order, to plead that such expenditure was revenue expenditure and the same should be allowed. Ld. CIT(A) while considering but not accepting the plea of the assessee, has concluded to confirm the action of the A.O. as per para 4.2 of his order which is as under: 4.2 I have carefully considered the submissions made by Ld. A.R. and perused the assessment order passed by the A.O. The Hon'ble Supreme Court in the case of Assam Bengal Cement Co. Ltd. Vs CIT (1955) 27 ITR 34, 45 (S.C.) observed that; if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand, it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits, it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the A.O. is confirmed. This ground of appeal is rejected. 5. Still aggrieved, the assessee took up the mater in further appeal and raised grounds Nos.2 3 with regard to this issue. 6. Ld. counsel for the assessee at the very outset submitted that on absolutely similar facts, in assessee s own case, ITAT, Delhi Benches, Delhi vide its common order dated 20.04.2009 in I.T.A. No. 1683 and 2864/Del/2006 for assessment years 2002-03 and 2003-04 and I.T.A. No. 4765/Del/2010 for assessment year 2005-06, accepted the contention of the assessee and held that take out assistance fee paid by the assessee is allowable expense u/s 37(1) of the Act. Furthermore, Hon ble Allahabad High Court has also decided this issue in favour of the assessee and against the revenue in I.T.A. No. 44/2010 (assessment year 2002-03) 2730/2011 (assessment year 2003-04) and 316/2011 (assessment year 2005-06) dated 08.11.2012 reported in CIT Vs Noida Toll Bridge Co. Ltd. 255 CTR 88 (Alld.). Since, this issue is covered by the decision of Hon ble High Court in assessee s own case, therefore, appeal of the assessee is liable to be allowed which may be allowed and addition made by the A.O. and confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of zero coupon bonds amounting to ₹ 3,51,07,840/- (Rs.5,16,01,434 ₹ 1,64,93,594/-) is disallowed being capital in nature and added to the total income of the assessee company. 10. The assessee took up the matter in appeal and submitted before the first appellate authority that the assessee had amortized ₹ 5,16,01,434/- on zero bonds series B. This zero coupon bond were issued to the lenders as a compensation towards the present value of loss of interest form the documented rate as a part of the package of relief and concessions granted by the CDR empowered group of the corporate debt restructuring cell (CDR) of the banks financial institutions vide their approval letter No.CDR/421 dated 06.01.2003 and letter no.CDR/461 dated 16.01.2003. As per the scheme the appellant had issued series B zero coupon bonds of ₹ 100 each to banks, financial institutions and others which would be redeemed not later than March 31, 2014 towards the net present value of the sacrifice made by them way of reduction of interest rates form the contracted terms. Thus, ZCB is issued in order to compensate the loss of interest payable to them and accordingly the amortization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of ₹ 3,51,07,840/- should have been allowed as a tax deductible expenditure. However, the A.O. has erred in treating the above payment is capital in nature. It is relevant to note that the A.O. has treated the above amount of provision as capital in nature without giving any explanation or without bringing into notice any fact that the above payment is capital in nature. The A.O. has simply ignored the plea of the assessee without considering the facts and submissions made by the assessee. As per section 37(1) of the I. T. Act, 1961 in order to claim the expenditure under that section the following conditions should be satisfied: i) There should be an expense ii) The expenditure should not be covered by section 30 to 36 iii) It should not be in the nature of capital expenditure iv) It should not be personal expenditure of the assessee v) It should be in respect of the business carried on the assessee vi) It should have been expended wholly and exclusively for the purpose of such business. It should not have been incurred for any purpose that is an offence or is prohibited by any law. Therefore, if all the above conditions are satisfied then the expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter than March 31, 2014 towards the net present value of the sacrifice made by them by way of reduction of interest rates from the contracted terms. The zero coupon bond is issued in order to compensate the loss of interest payable to them and accordingly amortization of zero coupon bond is nothing but the payment of interest to them and it is deductible expenditure as per Section 37(1) of the it act being revenue in nature. The assessee had created the provision on a year to year basis on the principle of sinking fund by applying the weighted average interest rate on outstanding borrowing prior to restructuring as the discount rate and thereby arrive at the amount of the yearly charge. The assessee has obtained confirmation from professional experts with respect to appropriateness of the sinking fund method as well as the adequacy of the charge on a year to year basis to for the liability towards the ZCBs in the books. Accordingly, the P L account was debited with ₹ 5,16,01,434/- being the required amount of provision and the corresponding liability was recognized under the said secured loan. As this was expenditure pertaining to the period under consideration and it was c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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