TMI Blog2022 (8) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee is revenue expenditure and not capital expenditure. Hence we allow the expenditure incurred as revenue expenditure. Interest on refund as per section 244A - HELD THAT:- Refund was granted to the assessee on 11.06.2020. The ld. A/R submitted that as per section 244A where refund of any amount becomes due to the assessee, he is entitled to receive simple interest thereon from 1st day of April, of the assessment year to the date on which refund is granted. Simply calculating the interest till the month on which intimation under section 143(1) is issued do not amount to grant of refund. Refund is granted when the amount is actually paid to the assessee. In the case of the assessee, the refund was actually paid to the assessee on 11.06.2020. Therefore, the assessee is eligible for interest under section 244A from April, 2018 to June, 2020 i.e. for 27 months and not from April, 2018 to November, 2019 i.e. 20 months - we direct the AO to allow interest to the assessee upto the actual date of refund i.e. upto 11.06.2020. The matter is restored to the file of the AO. - ITA No. 207/JP/2022 - - - Dated:- 10-8-2022 - Shri Sandeep Gosain, JM And Shri Rathod Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case in Supreme Court in relation to assessee s property where its export house is situated. The AO considered the same to be a capital expenditure being incurred for acquiring, improving, extending, possession or removing defect in the title of fixed assets by referring to the decision of Hon ble Supreme Court in case of V. Jaganmohan Rao vs. CIT, 75 ITR 373 (SC). The AO further held that assessee is in possession of the said property and utilizing the same from the beginning and, therefore, the litigation expenses incurred for continued possession of the immovable property where assesee s office and factory are located is expenditure in relation to immovable property and hence, a capital expenditure which would provide benefit for several years. The AO thus disallowed the litigation expenses of Rs. 2,37,00,000/- being a capital expenditure and added back to assessee s returned total income. Being aggrieved, assessee preferred an appeal before the ld. CIT (A). The ld. CIT (A) observed that the expenditure has substantially increased as compared to the last year. The details of expenses have not been furnished during the appellate proceedings. The outcome of the litigation and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal was filed before the Hon ble Supreme Court. (v) The Hon ble Supreme Court vide its order dt. 29.07.2019 (PB 63-71) after considering the facts at Para 4-18 of its order, at Para 49 dismissed the appeal filed by the buyers. (vi) For pursuing the litigation before High Court and Supreme Court, the assessee incurred expenditure on payment of legal fees to advocates/ consultants since it was using the said property for its business purpose. Accordingly, in the year under consideration the assessee incurred expenditure of Rs.2,36,96,671/- (i.e. approx. Rs.2.37 cr.) as per the details furnished to the AO vide letter dt. 12.01.2021 (PB 15-21). The year wise details of the legal expenditure incurred with reference to the said property is at PB 41-52. 3.1. On the above facts, the legal expenses of approx. Rs.2.37 cr. has been claimed by the assessee as business expenditure u/s 37(1) of the Act in as much as the same was incurred by the assessee to have continued possession of office/ factory premises which it was using from last 25 years. From this premises assessee has secured export business worth Rs.2,500 cr. in foreign currency and createed employment of more than 1,000 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him are neither correct nor for these reasons, the expenditure can be treated as capital expenditure. In support of his contention, the ld. A/R placed reliance on the following case laws :- (1) Bikaner Gypsums Ltd. Vs. CIT(1991) 187 ITR 39 (SC) (2) Dalmia Jain Co. Ltd. Vs. CIT (1971) 81 ITR 754 (SC) (3) Sree Meenakshi Mills Ltd. Vs. CIT (1967) 63 ITR 207 (SC) (4) CIT Vs. O.P.N. Arunachala Nadar (1983) 141 ITR 620 (Madras) (HC) While concluding, the ld. A/R submitted that from the above decisions it is evident that when the litigation expenditure is incurred to protect the business, the same is revenue expenditure. In the present case, the assessee is not the owner of asset but it is possessing the asset from where it is conducting its business. Thus, the litigation expenditure incurred is to protect its business and therefore, the expenditure so incurred be directed to be allowed as revenue expenditure. 4. On the other hand, the ld. D/R supported the orders of the authorities below and submitted that the order of the ld. CIT (A) be sustained. 5. We have heard the rival submissions and perused the material available on record. We note that the AO has disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng defect in the title of fixed assets in as much as assessee was not the owner of such asset. Hence the decision reported in 75 ITR 373 (supra) relied by the A.O. is not applicable. As against this, the Hon ble Supreme Court in case of Dalmia Jain Co. Ltd. vs. CIT, 81 ITR 754 (SC) at para 4 of its order held as under :- 4. The question for decision is whether the litigation expenses incurred by the assessee were for the purpose of creating, curing or completing the assessee's title to capital or whether it was for the purpose of protecting its business. If it is the former then the expenses incurred must be considered as capital expenditure. But, on the other hand, if it is held that the expenses were incurred to protect the business of the assessee, then it must be considered as a business loss. The principle which has to be deduced from decided cases is that, where the expenditure laid out for the acquisition or improvement of a fixed capital asset is attributable to capital, it is a capital expenditure but if it is incurred to protect the trade or business of the assessee then it is a revenue expenditure. In deciding whether a particular expenditure is capital or rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/- was determined. This refund was granted to the assessee on 11.06.2020. The ld. A/R submitted that as per section 244A where refund of any amount becomes due to the assessee, he is entitled to receive simple interest thereon from 1st day of April, of the assessment year to the date on which refund is granted. Simply calculating the interest till the month on which intimation under section 143(1) is issued do not amount to grant of refund. Refund is granted when the amount is actually paid to the assessee. In the case of the assessee, the refund was actually paid to the assessee on 11.06.2020. Therefore, the assessee is eligible for interest under section 244A from April, 2018 to June, 2020 i.e. for 27 months and not from April, 2018 to November, 2019 i.e. 20 months. Rule 244A of the IT Rules, 1962 reads as under :- 244A(1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :- (a) Where the refund is out of any tax collected at source under section 206C or paid by way of advance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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