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2023 (11) TMI 88 - HC - Income TaxDeduction of the depreciation as well as the interest - Construction of towers - Passive use - respondent/assessee commenced business through lease of towers under IRU Agreement - Upfront payment of processing fee on the loan - revenue expenditure u/s 37 or capital expenditure - HELD THAT:- AO had proceeded in the absence of the requisite material pertaining to the tower-wise details and the said material was provided subsequently at the first appellate stage and on the basis thereof the learned Tribunal passed the impugned order. Depreciation and the interest on loan is similar to the issue of payment of upfront fee towards loan processing charges in the sense that the AO opted to truncate the said charges proportionally for the reason that not all the towers might have been put to use as the tower-wise details had not been furnished and that the respondent/assessee had amortized loan processing fee over a period of time in its profit & loss account. On these aspects, the above cited judicial precedents clearly fortify the view taken by the learned Tribunal. The towers which were constructed subsequent to commencement of business of the respondent/assessee were so constructed admittedly during the year relevant to the subject Assessment Year. As laid down in the above cited judicial precedents, the expression “used for the purposes of the business” in Section 32(1) of the Act has to be construed liberally so as to include even passive user of the subject machinery (towers in the present case). It is nobody’s case that the profits earned by the respondent/assessee had no nexus with the towers in question. Therefore, we find no infirmity in the view taken by the learned Tribunal on the basis of factual matrix, thereby allowing the amount of depreciation concerning the said towers to be deducted. Upfront payment of processing fee on the loan - revenue expenditure u/s 37 or capital expenditure - HELD THAT:- We have no hesitation to reiterate that it being undisputed that the loan in question was raised by the respondent/assessee only for the purposes of its business, merely because the loan processing charges though paid upfront but amortized over a period of five years, solely to be in consonance with the mercantile system of accounting, deduction of the entire charges in lump sum in the year in which the same were paid could not be denied to the respondent/assessee. On this aspect also we find no infirmity in the view taken by the learned Tribunal in the impugned order. No substantial question of law.
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