Religare Finvest Ltd. Vs DCIT (ITAT Delhi)
The appeals before the Income Tax Appellate Tribunal involved cross appeals by the assessee and the Revenue for Assessment Years 2012-13, 2013-14, 2014-15, and 2015-16, raising issues relating to disallowance under Section 14A, depreciation on finance lease assets, support service fees and reimbursement expenses, bad debts written off, and interest on Compulsorily Convertible Debentures (CCDs).
On the issue of disallowance under Section 14A, the Tribunal noted that the investments in Karnataka Bank shares had been made out of the assessee’s own funds, following its earlier decisions in the assessee’s own case. It held that no disallowance of interest expenditure could be made under Rule 8D(2)(ii) where borrowed funds were not used for making the investments. Accordingly, the assessee’s appeals on this issue were allowed and the Revenue’s corresponding grounds were dismissed.
Regarding depreciation on vehicles given on finance lease, the Tribunal relied on its earlier decision for Assessment Year 2011-12 and the Supreme Court’s ruling in ICDS Ltd. v. CIT. It held that the lessor is entitled to claim depreciation on leased assets under Section 32. Following the earlier precedent, the Tribunal deleted the disallowance of depreciation claimed by the assessee.
The dispute concerning support service fees and reimbursement of expenses related to payments of ₹79.81 crore made by the assessee to various group companies. The Assessing Officer had disallowed 25% of the expenditure, alleging that the assessee failed to justify the business purpose, reasonableness of the payments, cost allocation, and reimbursement details. The assessee produced extensive documentary evidence before the Assessing Officer and the Commissioner (Appeals), including employee details, agreements, invoices, debit notes, emails evidencing services, and TDS certificates. The Tribunal observed that the Commissioner (Appeals) had confirmed the disallowance without examining or referring to these documents. Holding that the evidence required proper verification, the Tribunal remanded the issue to the Commissioner (Appeals) for fresh adjudication after considering all documents and providing the assessee an opportunity of being heard. The ground was allowed for statistical purposes.
