Case Law Details
DCIT Vs Hinduja Leyland Finance Ltd. (ITAT Chennai)
In the present case, entire expenditure has been incurred at the beginning of the sanctioning of term loan and also qualifies to be revenue expenditure. Therefore, in our considered view the decision of the Hon’ble Supreme Court in the case of M/s. Taparia Tools Ltd. (supra) is squarely applicable to the facts of present case and hence, we are of the considered view that learned CIT(A) was right on allowing deduction towards various expenses as revenue expenditure.
Having said so, let us examine the issue in another perspective of whether expenditure incurred by the assessee like stamp charges, loan processing fee on term loan, marketing fees, sourcing expenses, share issue expenses etc. are revenue expenditure or capital expenditure, which gives enduring benefit to the assessee. If you see nature of expenditure incurred by the assesse, all expenses are in the nature of revenue expenditure. In fact, the Assessing Officer never disputed the fact that those expenditure are in the nature of revenue expenditure. If expenses incurred by assessee are revenue in nature which does not give any enduring benefit to the assessee, then those expenditure should be allowed as deduction in the year of incurrence, irrespective of the fact that those expenditure are treated as prepaid expenses or deferred revenue expenditure in books of account of the assessee. If the expenditure incurred is capital in nature, then same needs to be capitalized in the books of account and depreciation should be allowed while computing profits of the year. In this case, if you see nature of expenditure incurred by the assessee there is no doubt of whatsoever that said expenditure are purely revenue expenditure, which does not give any enduring benefit or resulting in creation of asset either tangible or intangible. Therefore, these expenses are essentially revenue expenses and needs to be allowed when such expenditure has been incurred, but only requirement is whether said expenditure is incurred for the purpose of business or not. In this case, it is not a case of Assessing Officer that those expenditure are not revenue in nature and further, those expenditure are not incurred for the purpose of business of the assessee. Therefore, we are of the considered view that once Assessing Officer come to the conclusion that expenditure incurred by assessee are revenue in nature and further the same are incurred wholly and exclusively for the purpose of business, then the same needs to be allowed in the year of incurrence, irrespective of length of period for which finance is sanctioned. The learned CIT(A) after considering relevant facts has rightly held that expenditure incurred by the assessee are revenue in nature which does not give any enduring benefit to the assessee or resulting in creation of asset as tangible or intangible which needs to be allowed as deduction, when such expenditure has been incurred.
In this view of the matter and by respectfully following the decision of the Hon’ble Supreme Court in the case of M/s. Taparia Tools Ltd. (supra), we are of the considered view that learned CIT(A) was right in deleting additions made by the Assessing Officer towards disallowance of prepaid expenses and hence, we are inclined to uphold the findings of the learned CIT(A) and dismiss appeal filed by revenue.
FULL TEXT OF THE ITAT JUDGEMENT
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