2016 (7) TMI 1011 - ITAT MUMBAI

Processing fees for acquiring the term loans from the Banks - nature of expenditure - revenue or capital - Held that:- The assessee being an investment & finance company and a promoter of new companies and having interest in the business of these companies has made the investments for business purposes for having control over these subsidiary and associated companies, hence, in the light of the proposition of law laid down by the Hon’ble Bombay High court in the case of “CIT, Panaji, Goa vs. Phil Corpn. Ltd.”(2011 (6) TMI 187 - BOMBAY HIGH COURT ), Hon’ble Delhi High Court in the case of “Eicher Goodearth Ltd. vs. CIT” (2015 (5) TMI 685 - DELHI HIGH COURT) and the Hon’ble Supreme Court in “S.A. Builders vs. CIT” (2006 (12) TMI 82 - SUPREME COURT), no interest disallowance is attracted u/s 36(iii) of the Act. On the same analogy, the processing fees paid by the assessee for obtaining such loans is also allowable as business expenditure. More over the issue is covered with the decision of the Hon’ble Supreme Court’ in the case of India Cements Ltd. v. CIT [1965 (12) TMI 22 - SUPREME Court] wherein the Supreme Court held that the expenditure in raising loans or issuing debentures would be revenue in nature, irrespective of whether the borrowing is a long term or short term one. This issue is accordingly decided in favour of the assessee.

Disallowance of expenditure in the shape of upfront fees and brokerage etc. paid for issuing the non-convertible debentures - Held that:- This issue is also covered with the decision of the Hon’ble Supreme Court’ in the case of India Cements Ltd. v. CIT [1965 (12) TMI 22 - SUPREME Court] wherein the Supreme Court held that the expenditure in raising loans or issuing debentures would be revenue in nature, irrespective of whether the borrowal is a long term or short term one. It was held that the act of borrowing money was incidental to the carrying on of business, the loan obtained was not an asset or an advantage of enduring nature, the expenditure was made for securing the use of money for a certain period and it was irrelevant to consider the object with which the loan was obtained. This issue is accordingly decided in favour of the assessee.

Alowability of deduction under section 10A - Held that:- This issue is squarely covered with the decision of Hon’ble Bombay High Court in the case of “CIT vs. Black & Veatch Consulting Pvt. Ltd.” (2012 (4) TMI 450 - BOMBAY HIGH COURT ) wherein held that the deduction under section 10A has to be given at the stage when the profits and gains of business are computed in the first instance and thus the brought forward unabsorbed losses cannot be set off against current profit of the section 10A eligible unit for computing the income of the assessee. That the unabsorbed losses have to be deducted only from the profit available after allowing deduction u/s 10A. The Ld. D.R. has not brought any decision contrary to the above decision of the Hon’ble Bombay High Court. - Decided in favour of assessee