The only question on which the leave has been granted by this Court’s order dated 31st August, 2007 is as follows:
“When the assessee had itself capitalised the interest and other expenditure incurred towards creation assets. Whether the CIT(A) and the Tribunal were right and justified in allowing the assessee to claim the said expenditure as revenue expenditure without any just cause?” Briefly stated, the facts of the present appeals are as follows:
Briefly stated, the facts of the present appeals are as follows:
The respondent is a public limited company. For the assessment year 2000- 01 it had incurred an expenditure of Rs. 3,37,84,348/- towards payment of interest on loans taken and other items for setting up the industry. Even though it had capitalised the said amount and claimed depreciation before the Asseessing Authority, however, in appeal, the respondent raised additional ground claiming deduction of the aforesaid amount on interest paid with some other expenditure on other items connected therewith as revenue expenditure.
The Commissioner of Income Tax (Appeals) vide order dated 5.3.2004 allowed the claim of the respondent-assessee only to the extent of interest amount of Rs. 2,92,45,670/- paid on loans taken by it for establishing the industry. He, however, disallowed the other expenditures, namely, financial charges, professional expenses, upfront fee etc.
The Revenue, feeling aggrieved by the said allowance, preferred an appeal before the Income Tax Appellate Tribunal which vide order dated 02.12.2004 upheld the order of the Commissioner of Income Tax (Appeals) insofar as it related to the allowance of the expenditure claimed towards payment of interest and also allowed expenditure on other items connected therewith. The High Court did not interfere in the appeal preferred by the Revenue on the ground that the Tribunal has followed the decision of the Gujarat High Court in the case of CIG Vs. Core Health Care (2001) 251 ITR 61.
Feeling aggrieved, the Commissioner of Income Tax has preferred the present appeal.
We have heard learned counsel for the parties.
We find that this Court in the case of Deputy Commissioner of Income Tax, Ahmedabad Vs. Core Health Care Ltd. (2008) 2 SCC 465 has affirmed the view taken by the Gujarat High Court.
In this view of the matter, we are of the considered opinion that the Income Tax Appellate Tribunal was justified in allowing the expenditure of Rs. 3,37,84,348/- towards the interest paid on the loans taken and expenditure on other items connected connected herewith for establishment of the unit, while affirming the order of the Commissioner of Income Tax (Appeals).
Learned counsel for the Revenue-appellant submitted that the respondent cannot claim depreciation on the amount of interest which has been allowed as revenue expenditure and therefore, the depreciation referable to such interest expenditure be reversed. Learned counsel for the respondent however submitted that there is nothing on record that depreciation on this amount has been taken by the respondent.
Be that as it may, if as a fact the respondent has taken any depreciation on the amount of interest and other items which has been allowed as revenue expenditure that much depreciation should be reversed by the assessing authority.
Subject to the aforesaid observations, the appeals fail and the same are dismissed.
Civil Appeal Nos. 6391 and 8336 of 2013
List these appeals next week.