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TMI Blog2023 (11) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... its profit loss account. On these aspects, the above cited judicial precedents clearly fortify the view taken by the learned Tribunal. The towers which were constructed subsequent to commencement of business of the respondent/assessee were so constructed admittedly during the year relevant to the subject Assessment Year. As laid down in the above cited judicial precedents, the expression used for the purposes of the business in Section 32(1) of the Act has to be construed liberally so as to include even passive user of the subject machinery (towers in the present case). It is nobody s case that the profits earned by the respondent/assessee had no nexus with the towers in question. Therefore, we find no infirmity in the view taken by the learned Tribunal on the basis of factual matrix, thereby allowing the amount of depreciation concerning the said towers to be deducted. Upfront payment of processing fee on the loan - revenue expenditure u/s 37 or capital expenditure - HELD THAT:- We have no hesitation to reiterate that it being undisputed that the loan in question was raised by the respondent/assessee only for the purposes of its business, merely because the loan pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant part of the impugned order passed by the Tribunal dated 07.06.2019 which reads as follows: 7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that at the time of incorporation, some of the employees from Bharti, Vodafone and Idea group companies were transferred to the assessee and were enrolled as full time employees . The assessee was required to pay exgratia/gratuity amount in terms of the terms and conditions of appointment for such employees. Sample employment contracts, details of all the employees transferred from Bharti, Vodafone and idea group companies, period of employees continuous service and the amount of gratuity paid were duly furnished before CIT(A). The CIT(A) called for the evidence produced by the assessee. In present case, gratuity was actually paid. The Ld. AR relied upon the decision of the Hon'ble Madras High Court in case of CIT vs. Premier Cotton Spg. Mills Ltd. (2003) 131 Taxman 79 (Mad.) wherein it was held that if the entire amount is not allowable under Section 36(1)(v), the balance amount would necessarily have to be allowed as a business expenditure under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r scrutiny assessment, notice under Section 143(2) of the Act was issued to it. The Assessing Officer passed Assessment Order dated 19.08.2011, thereby declaring the total loss of the respondent/assessee as Rs. 292,27,98,604/- as against the claimed loss of Rs. 611,62,44,502/-. Broadly speaking, on the issues now under consideration before this court, the findings delivered by the Assessing Officer were to the following effect. 4.3.1 During the relevant financial year, utilizing the interest bearing borrowed funds, the respondent/assessee claimed to have started constructing 14,484 towers, by which time it had taken few towers on lease from Bharti Airtel, Vodafone and Idea, and the construction of new towers was merely a part of the existing concern acquiring assets to expand the same business, so the interest component on the borrowed funds could only be capitalized i.e. added to the cost of the assets but could not be claimed for deduction as revenue expenditure under Section 36 of the Act. The Assessing Officer was of the view that all towers erected by the respondent/assessee might not have been put to use, therefore, in respect of the towers that in his opinion were not put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith law. Besides, the Assessing Officer by mistake took the loan processing fee as Rs. 20.75 crore as against Rs. 21.875 crore and accordingly made lesser amount of disallowance. 4.5 The above mentioned order dated 31.01.2014 of the CIT(A) was challenged by both sides in appeal before the learned Tribunal, which allowed appeal of the respondent/assessee and dismissed the appeal of the appellant/revenue, holding that so far as interest on loan and depreciation are concerned, there was no infirmity in the decision of the CIT(A); that so far as the disallowance of loan processing fee is concerned, the respondent/assessee had paid one time upfront processing fees of Rs. 21,87,50,000/- and the entire amount of loan processing fees was claimed as revenue expenditure, though amortized for accounting purposes over the period of respective loan by debiting an amount of Rs. 4,45,38,521/- to its profit loss account based on number of years for which loan was used in the subject Assessment Year and since funding is required in business from time to time, these expenses are regular business expenses, so claim of the respondent/assessee qua loan processing fee in its entirety was allowable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income deduction of upfront interest charges paid during the relevant financial year and the said upfront interest payment is shown by the assessee in accounts as deferred revenue expenditure to be written off over a period of number of years, the assessee would be entitled to deduction of the full amount in the Assessment Year in which it is paid. As per Section 36 of the Act, any amount on account of interest paid becomes an admissible deduction if the interest was paid on the capital borrowed by the assessee for the purposes of business or profession. While examining the issue of depreciation, the expression used for the purposes of business or profession in the provision under Section 32 of the Act has to be construed widely by including in it not only those cases where the buildings, machinery, plant etc are actively employed but also those cases where there is, what may be described as a passive user of the same in the business because of various reasons including that a machinery may well depreciate even where it is not used in the business and even due to non-user and being kept idle. 8. In the present case, as regards the claims of depreciation and interest on loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced business through lease of towers under IRU Agreement. A telecom site is ready to use even before the suppliers of various material are paid, hence no loan needs to be drawn when the site is under construction. The respondent/assessee had filed relevant evidence before the revenue authorities with regard to the expenses related to loan and there is no adverse finding to the effect that the said expenses were not utilized for business, therefore, the respondent/assessee rightly claimed the same as revenue expenses. 10. To recapitulate, the Assessing Officer had proceeded in the absence of the requisite material pertaining to the tower-wise details and the said material was provided subsequently at the first appellate stage and on the basis thereof the learned Tribunal passed the impugned order. 11. The issue pertaining to the depreciation and the interest on loan is similar to the issue of payment of upfront fee towards loan processing charges in the sense that the Assessing Officer opted to truncate the said charges proportionally for the reason that not all the towers might have been put to use as the tower-wise details had not been furnished and that the respondent/asse ..... 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