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2013 (7) TMI 113 - AT - Income TaxExpenses incurred on substitution of high interest bearing NCD's - revenue v/s capital - explanation of the assessee that there was a programme of "debt re-structuring" by the company, therefore an expenditure was incurred on pre-payment of NCDs of Bank of Baroda, hence there was reduction in interest rate which had improved the profitability of the company thus allowable as a deduction u/s.37(1) Held that:- There is no provision in the act which subscribe the claim of deferred Revenue Expenditure in one year. Amortization of certain expenses are allowable only u/s.35D, 35DD & 35DDA. Otherwise an expenditure is allowable in the year expended wholly and exclusively for the purpose of business. With this legal background,that for AY 2002-03 the Tribunal has also commented that the assessee-company had not deferred the payment rather the entire payment was made in that year. Due to this reason, hereby held that by reducing the liability of interest as claimed by the assessee on account of "restructuring of debt" the assessee has gained the commercial benefit, therefore the incurring of the expenditure in question can be said to be expended wholly and exclusively for the purpose of the business. The same is allowable u/s.37(1). The assessee has to establish the evidence in respect of the payment of the amount of ₹ 5 lacs claimed to have been made in full on 29/07/2002, therefore restore this ground back to the stage of the AO for the limited purpose of verification of the fact of date of full payment, so as to allow the same in that year as per law. Cost incurred on replacement of core engine of Captive Power Plant - revenue v/s capital - assessee was not the owner of the machinery in question but was used as a leased hold property - Held that:- As decided in CIT vs. Madras Auto Service (P) Ltd. [1998 (8) TMI 1 - SUPREME Court] a leased assets cannot be held as a property belonging to the assessee, therefore the expenditure incurred on that property is in the nature of Revenue Expenditure - not in agreement with the view taken by the AO & CIT(A) considering the nature of the business carried on by the assessee as demonstrated from the "flow diagram" and hereby hold that the replacement expenditure was in respect of one of the part of the machinery, being required to be replaced after every 24000 running hours, hence nothing but a revenue expenditure and to be fully allowed in the year expended by the assessee - in favour of assessee. Deduction u/s.80HHC while computing book profit in accordance with provisions of section 115JB - MAT - disallowance of claim - Held that:- As decided in Bhari Information Technology [2011 (10) TMI 19 - Supreme Court of India] deduction claimed by the assessee under Section 80HHE has to be worked out on the basis of adjusted book profit under Section 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business - in favor of assessee. Depreciation in respect of leased out vehicles - Held that:- As decided in Shaan Finance (P) Ltd. [1998 (3) TMI 8 - SUPREME Court] where the business of the assessee consists of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purpose of business. In the present case, it is worth to mention that GNFC Ltd. has shown the lease rent as income in its hand under the head "business income". In the case of the lessor, i.e. GNFC Ltd. the issue has been consistently decided that the assets being under the ownership of GNFC Ltd., hence entitled for claim of depreciation and that the lease rent received from the assessee is required to be assessed as "business income". Thus the lease rent paid is in the normal course of business of the assessee on the leased assets, hence required to be allowed as deduction - in assessee's favour.
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