9911796707
TMI Blog2025 (4) TMI 1557X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions and perused the materials available on record. The assessee company is a Non-Banking Finance Company (NBFC) and had filed its original return of income u/s 139(1) of the Act for AY 2018-19 on 29.09.2018. It had filed revised return on 29.03.2019 declaring loss of Rs. 10,68,63,896/-. The case of the assessee was selected for complete scrutiny to examine the following issues:- i. Claim of Any Other Amount Allowable as Deduction in Schedule BP ii. Depreciation Claim iii. Investments/Advances/Loans iv. Refund Claim v. Business Loss vi. ICDS Compliance and adjustment vii. Expenses Incurred for Earning Exempt Income viii. Other Income Reported in Schedule A-OI not Credited to P&L Account 4. The assessment was completed u/s 143(3) read with Section 144B of the Act dated 15.09.2021 determining the total loss of Rs. 10,29,20,424/- after making an addition of Rs. 39,43,471/- on account of employees contribution towards PF and ESI which was remitted beyond the due date prescribed under the respective acts. This assessment was sought to be revised by the ld PCIT by invoking revision jurisdiction u/s 263 of the Act on the ground that the order of the ld AO is erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the assessee would be financing wherein the assessee would be deriving interest income on amount advanced as loan. The amount of loan would be advanced out of own funds or out of borrowed funds. Whenever the funds are borrowed, obviously the assessee would be paying the interest thereon. Hence, interest expenditure per se / finance cost becomes a raw material for the assessee being the finance company. On perusal of the 79 pages order of the ld PCIT passed u/s 263 of the Act, we do not find on any of the issues, the ld PCIT had whispered as to either no enquiries were made by the ld AO or the order of the ld AO is erroneous due to a particular fact not being examined by him. In our considered opinion, the ld PCIT had merely directed the ld AO to make fishing and roving enquiries on the details which are already placed on record either in the form of explanation given by the assessee or in the various notes on account disclosed in the financial statements or in the auditors" report enclosed in the financial statements. This fact is very clear from the directions given by the ld PCIT or grounds on which he has passed a revision order u/s 263 of the Act. The law is very well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f original assessment proceedings, a notice u/s 142(1) of the Act dated 22.03.2021 was issued to the assessee wherein specific enquiry was raised vide question No. 1 with regard to loan origination cost, details of other expenses of Rs. 43.11 crores which included legal and professional expenses at Rs. 15.19 crores vide Question No. 6 thereon. The assessee filed its reply on 07.04.2021 which was enclosed in pages 57-61 of the Paper Book. The assessee explained that legal and professional charges includes the payment made on account of services obtained from the various professional consultants, tax consultants, IT professionals and auditors, legal professionals etc. Further, these includes expenses incurred for obtaining IT consultants and outsourcing of manpower for support in various operations and other services. 10.2. With regard to loan origination cost, the assessee submitted that it incurred origination fee related for corporate deals / referred/ sourced through Clix Finance India Pvt. Ltd. Fee so incurred for the new loans disbursed are recognized as expenses over the tenor of the loan by applying the Internal rate of return (IRR). The method being consistently followed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in response to the said notice vide reply dated 07.04.2021 furnished the copy of agreement entered into between the assessee and Clix India Finance Ltd which is enclosed in Pages 232 to 238 of the Paper Book; copy of invoice wise details of top 10 Direct Selling Agents (DSA) which are enclosed in pages 239 to 244 of the Paper Book along with copy of sample agreement with DSAs together with copy of invoice sample basis which are enclosed in pages 245 to 287 of the Paper Book. 10.3. All these facts clearly proved that more than adequate enquires have been made by the ld AO with regard to legal and professional charges and loan origination cost in the assessment proceedings itself. Hence, it cannot be said by any stretch of imagination that adequate enquiries were not made by the ld AO. This is not the case of no enquiry by the ld AO qua the impugned issue. The ld PCIT had merely directed the ld AO to examine the allowability of the same u/s 37 of the Act in the light of the observation given by the auditors in the financial statements. The ld PCIT had not even stated as to why the observations made in the financial statements by the auditors have any adverse impact on the computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable as deduction in column 33 of schedule BP of the ITR. In response to the same, the assessee vide reply dated 08.01.2021 filed the complete break up amounting to Rs. 49.69 crores including the nature of expenses and justification for allowability of the said expenses with supporting documents which are enclosed in pages 184-191 of the Paper Book and pages 217 to 222 of the Paper Book. Further another notice was issued u/s 142(1) of the Act on 22.03.2021 by the ld AO specifically asking for details of other expenses of Rs. 43.11 crores vide question No. 6. The assessee furnished the reply dated 07.04.2021 giving the details of various expenses in a tabular form explaining the nature and the amount incurred under the respective head. The assessee also submitted that the revenue had increased three fold during the year from its business operations whereas the expenditure had increased only less than 2 fold during the year. Accordingly, it justified the claim of expenses to be in consonance with the revenue earned during the year. The assessee also gave the specific explanation with regard to year-end provision of Rs. 7.91 crores by drawing direct attention to Note No. 24 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the books or sources of which is not properly explained by the assessee. The total finance cost incurred of Rs. 40.35 crores is one of the major expenditure reflected glaringly in the face of the profit and loss account. Further, we find a specific query was raised by the ld AO vide notice u/s 142(1) of the Act dated 24.12.2020 vide question No. 5 specifically asking details of borrowings made by the assessee and interest paid thereon. The assessee filed its reply dated 08.01.2021 giving the complete details of long term and short term borrowings obtained from various banks and financial institutions together with the details of interest paid thereon. Hence, it cannot be said that the ld AO had made any enquiry on the finance cost of Rs. 40.35 crores. Accordingly, the ld PCIT erred in assuming revision jurisdiction u/s 263 of the Act qua this issue. Further, we also find the ld PCIT absolutely without any basis had concluded that the finance cost is not allowable as deduction. As stated earlier, the finance cost is the raw material for a finance company. How the raw material (interest paid in this case) be not allowed as deduction. It is not even the case of the ld PCIT that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his reply and also placing reliance on the decision of the Hon'ble Supreme Court which is in favour of the assessee had taken only plausible view and had allowed the depreciation to the assessee. How this could be treated as lack of enquiry by the ld AO. Further, we also find that the very same issue was also subject matter of adjudication in assessee's own case for AYs 2001- 02, 2003-04, 2004-05, 2005-06 in ITA No. 1357/Del/2005; 4256/Del/2016; 4206/Del/2011 and 13/Del/2012 respectively dated 29.08.2016 wherein, the very same issue was allowed in favour of the assessee by this Tribunal. Hence, there is absolutely no reason for the ld AO to take a divergent view in this regard. Very strangely the ld PCIT goes to conclude that the depreciation has not been correctly claimed which is without any basis and the decision of the Hon'ble Supreme Court in the case of ICDS Ltd had to be rejected without adducing any reasons. The directions given by the ld PCIT to the ld AO are merely to make fishing and roving enquiry which, in our considered opinion, is not permissible in proceedings u/s 263 of the Act. Hence, we have no hesitation to quash the assumption of revision jurisdiction u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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