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TMI Blog2016 (8) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities erred in not allowing deduction under Section 24(b) in respect of prepayment charges paid to bank - Rs. 1,32,44,633/-. 5. Both the lower authorities erred in not considering the specific definition of "Interest" under Section 2(28A). 6.The Appellant submits that the pre-payment charges paid should be allowed as deduction under Section 24(b) while computing "Income from House Property". 7. Both the lower authorities erred in not allowing as a deduction common area maintenance charges, amounting to Rs. 3,70,62,516/-, recovered by the Appellant from tenants, while arriving at the annual value under Section 23 of Income Tax Act. 8. Both the lower authorities erred in relying on the decision of the Supreme Court in case of Goetze India Limited (284 ITR 323). 9. Both the lower authorities erred in holding that for raising a new claim, a revised return is to be mandatorily filed. 10. The learned Commissioner of Income Tax (Appeals) erred in holding that the amount recovered by the appellant in respect of Common Area Maintenance charges cannot be assessed separately under the head "Income from other Sources". 2. The assessee also filed following additional grounds w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. 4.2. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) wherein he made detailed submissions in support of his claim. The Ld. CIT(A) was not satisfied and he upheld the order of the AO with following observations: "5.2.7. Processing fees are administrative charges levied by certain banks to process the loan applications from various categories of loan applicants. Administrative charges and processing fees do not guarantee the sanction of loan and therefore, the said processing fees are not always directly related to the payment of interest. There may be cases where processing charges have been paid by the loan applicant but no loans were actually sanctioned by the banks and therefore, no interest was paid by the loan applicant. On the other hand pre-payment is perceived as a risk, because such prepayment of loan is often linked with restructuring of loan through cheaper re-f inancing and therefore, the loaner bank is deprived of the projected cash inflow in respect of a loan already sanctioned by the bank. The pre-payment penalty is not with reference to interest but with reference to parting fees/penalty levied by the old bank from the loan applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties Pvt. Ltd. vs. DCIT (ITA No. 3714/M/2010) dated 07.09.2011 which has been relied upon by the AO in his order to decide this issue against the assessee. Per contra, Ld. DR has relied upon the orders of the lower authorities and submitted that these payments were of capital in nature and therefore, these are not allowable. 4.6. We have gone through the submissions made by both the sides and orders of the lower authorities as well as judgments relied upon before us. It is noted that it is not in dispute that interest paid on impugned loans was allowable u/s 24(b) of the Act. Thus, the only issue to be decided by us is whether 'prepayment charges' and 'processing fee' shall form part of the word 'interest' as used in section 24(b) of the Act. For this purpose, we need not labour much as the term 'interest' has been defined in section 2(28A) as under: "Interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;" 4.7. Peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76, with effect from 1st June 1976 defines "interest" as interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. It is seen from the definition that even a service fee paid in respect of the moneys borrowed is included in the definition of "interest". The processing fee is charged by the lender since the processing of the loan application and connected documents involves a service rendered by him to the borrower. By virtue of the definition of the word "interest", the processing fee, which perhaps may not otherwise fall to be considered as interest, is to be treated as interest and allowed as a deduction under section 24(b) of the Act. If we may say, that with respect, the CIT(A) would appear to have lost sight of the fact that it is by definition of the word "interest" that the processing fee is to be treated as interest and the fact that the processing is done before the grant of the loan cannot be put against the assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest for moneys borrowed and secondly, the amount paid by whatever name called in respect of the money borrowed or debt incurred. The second category may also encompass any charge paid for not utilizing the credit facility. When we incorporate the definition of `interest' in section 24(b), the position which emerges is that not only the amount paid designated as interest but also any other amount paid by whatever name called in relation to such debt incurred also qualifies for deduction. 4. Adverting to the facts of the instant case, it is noticed that the assessee obtained loan from HDFC Limited for acquisition of property. Later on it arranged the money from other sources and repaid the loan which was taken for acquisition of property. The bank accepted the early repayment of loan on receipt of prepayment charges. By such repayment, the assessee managed to wipe out its interest liability in respect of the loan, which would have otherwise qualified for deduction u/s 24(b) during the continuation of loan. It is obvious that these prepayment charges have live and direct link with the obtaining of loan which was availed for acquisition of property. It is beyond our comprehension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived were utilized for repayment of the loan. Accordingly, we are of the view that the processing charges for issue of debenture cannot be treated as interest paid on debenture and consequently cannot be allowed as a deduction u/s 24(b)." 4.11. Thus, perusal of the above clearly shows that the bench has rather supported the case of the assessee by observing that in case processing charges would have been paid for obtaining loan, then, the same would have been indeed allowable. Thus, in our considered view, the legal position is clear that these payments are allowable u/s 24(b) and therefore, AO is directed to grant the benefit of the same the disallowance made by the AO is directed to be deleted. Thus, ground nos. 1 to 6 are treated as allowed. 5. Ground No.7 to 8: in these grounds the assessee has made claim of maintenance charges, amounting to Rs. 3,70,62,516/- recovered by the assessee from its tenants. 5.1. The brief facts as narrated before us by the parties are that in all the earlier years, the impugned year as well as subsequent years, though the assessee has been showing its total income under the head 'income from house property', but by way of note given in the com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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