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TMI Blog2016 (8) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... s and processing fee borne by the assessee at this stage were be compensated subsequently by payment of lower amount of interest. In any case, so long as the expenses incurred by the assessee are genuine and not part of any colorable device to make tax evasion, then such expenses should be allowed under the relevant provisions of the Act. The legal position is clear that these payments are allowable u/s 24(b) and therefore, AO is directed to grant the benefit of the same the disallowance made by the AO is directed to be deleted. - Decided in favour of assessee Claim of maintenance charges recovered by the assessee from its tenants - Held that:- a claim can be allowed to assessee which is valid as per law and made by the assessee in accordance with law and in a complete and rightful manner. In case the assessee wants its income to be assessed under different head as per the provisions of law, then, the minimum duty expected from the assessee is to at least file a revised computation sheet of income offering the income in proper heads and making appropriate claims against each and every head separately. This exercise is not expected to be done by the AO on behalf of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities erred in relying on the decision of the Supreme Court in case of Goetze India Limited (284 ITR 323). 9. Both the lower authorities erred in holding that for raising a new claim, a revised return is to be mandatorily filed. 10. The learned Commissioner of Income Tax (Appeals) erred in holding that the amount recovered by the appellant in respect of Common Area Maintenance charges cannot be assessed separately under the head Income from other Sources . 2. The assessee also filed following additional grounds which were admitted with the consent of both the parties. 1. The learned Commissioner of Income-tax (Appeals) erred in not directing the Assessing Officer to grant full TDS credit on the basis of original TDS certificates which had been furnished to the Assessing Officer at the time of scrutiny assessment proceedings. 2. Without prejudice, the Appellant submits that the Assessing Officer be directed to grant TDS credit on the basis of TDS credit appearing presently in Form No. 26AS. 2. During the course of hearing, arguments were made by Shri Nitesh Joshi, Shri M.M. Golvala, Authorised Representative (AR) on behalf of the Assessee and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid by the loan applicant but no loans were actually sanctioned by the banks and therefore, no interest was paid by the loan applicant. On the other hand pre-payment is perceived as a risk, because such prepayment of loan is often linked with restructuring of loan through cheaper re-f inancing and therefore, the loaner bank is deprived of the projected cash inflow in respect of a loan already sanctioned by the bank. The pre-payment penalty is not with reference to interest but with reference to parting fees/penalty levied by the old bank from the loan applicant, when the loan applicant moves from old bank to the new bank for better or convenient prospects. 5.2.8. Having regard to facts and circumstances of the case and in the light of the aforesaid decisions, the processing charges and the pre-payment penalty, penalty are held not allowable deduction u/s 24 (b) of the Act. The case laws relied upon by the appellant are distinguishable from the facts and circumstances of the present case, hence they are not squarely applicable in this case. In view of the above, the disallowance of processing charges of ₹ 1 crore and of pre-payment penalty of ₹ 1,32,44,633/- made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue to be decided by us is whether prepayment charges and processing fee shall form part of the word interest as used in section 24(b) of the Act. For this purpose, we need not labour much as the term interest has been defined in section 2(28A) as under: Interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised; 4.7. Perusal of the above said definition shows that the term interest has been defined in a manner giving it a wider scope. It clearly shows that the term interest shall include any services fee or other charges in respect of moneys borrowed and it goes to the extent of saying that any charges in respect of any credit facilities which has not been utilized. If we carefully analyse this definition, we find the answer right here in this definition. The processing fee charged by Axis Bank is nothing but service fee charged by the bank and therefore it is clearly allowable as per plain provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and connected documents involves a service rendered by him to the borrower. By virtue of the definition of the word interest , the processing fee, which perhaps may not otherwise fall to be considered as interest, is to be treated as interest and allowed as a deduction under section 24(b) of the Act. If we may say, that with respect, the CIT(A) would appear to have lost sight of the fact that it is by definition of the word interest that the processing fee is to be treated as interest and the fact that the processing is done before the grant of the loan cannot be put against the assessee in the light of the definition. The assessee s contentions are also supported by the order of the Single Member, Pune Bench in the case of Chintamani Hatcheries (P) Ltd. vs. DCIT (2000) 75 ITD 116 (Pune) (SMC), where it has been held that processing fee for obtaining a loan is a service fee and has to be allowed as interest in view of the definition in section 2(28A). The Circular No. 202, dated 5th July 1976, issued by the CBDT (copy filed) while explaining the provisions of section 2(28A) also clarify the position. We therefore accept the assessee s claim based on section 2(28A) and dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained loan from HDFC Limited for acquisition of property. Later on it arranged the money from other sources and repaid the loan which was taken for acquisition of property. The bank accepted the early repayment of loan on receipt of prepayment charges. By such repayment, the assessee managed to wipe out its interest liability in respect of the loan, which would have otherwise qualified for deduction u/s 24(b) during the continuation of loan. It is obvious that these prepayment charges have live and direct link with the obtaining of loan which was availed for acquisition of property. It is beyond our comprehension as to how the amount paid as interest for the loan taken is allowable as deduction but the amount paid as prepayment charges of the very same loan is not deductible. In our considered opinion the payment of such `prepayment charges cannot be considered as de hors the loan obtained for acquisition or construction or repair etc. of the property on which interest is deductible u/s 24(b) of the Act. Both the direct interest and prepayment charges are species of the term `interest . We, therefore, set aside the impugned order on this issue and order for the grant of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts are allowable u/s 24(b) and therefore, AO is directed to grant the benefit of the same the disallowance made by the AO is directed to be deleted. Thus, ground nos. 1 to 6 are treated as allowed. 5. Ground No.7 to 8: in these grounds the assessee has made claim of maintenance charges, amounting to ₹ 3,70,62,516/- recovered by the assessee from its tenants. 5.1. The brief facts as narrated before us by the parties are that in all the earlier years, the impugned year as well as subsequent years, though the assessee has been showing its total income under the head income from house property , but by way of note given in the computation sheet, the assessee has stated that the assessee company reserves its right to claim common area maintenance charges amounting to ₹ 3,70,62,516/- as deduction to arrive at the annual value u/s 23 relying upon the Mumbai Tribunal judgment in the case of Sharmila Tagore vs. JCIT 93 TTJ 483 (Del). It is an admitted fact that neither in the earlier years nor in the subsequent years this claim has ever been exercised by the assessee or has ever been allowed by the AO. During the assessment proceedings of the impugned year, the AO refuse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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