Income Tax Appeal No. 347of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 347 of 2008 Date of decision: 18.7.2011 Commissioner of Income Tax-I, Chandigarh --- Appellant Versus M/s. Punjab State Industrial Development Corporation Ltd., Chandigarh --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL ACTING CHIEF JUSTICE HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Ms. Urvashi Dhugga, Senior Standing Counsel for the appellant-Revenue. --- AJAY KUMAR MITTAL, J. This order will dispose of Income Tax Appeal Nos. 347 and 453 of 2008 as identical questions have been claimed by the Revenue in both the appeals. The facts are being referred from Income Tax Appeal No. 347 of 2008. 2. Income Tax Appeal No. 347 of 2008 filed under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been preferred by the revenue against the order dated 27.9.2007, passed by the Income Tax Appellate Tribunal Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No. 33/CHANDI/2007, relating to the assessment year 2003-04. Income Tax Appeal No. 347of 2008 2 3. The following substantial questions of law have been claimed for determination of this Court: “(i) Whether on the facts and circumstances of the case, the Hon’ble ITAT is justified in law in holding that the sale of investments by the assessee was a capital gain and not profit and gain from business, whereas the main business of the assessee is to make investments and earn profit from realisation of the same? (ii) Whether on the facts and circumstances of the case, the Hon’ble ITAT is justified in law in holding that the project survey expenses should be treated as revenue expenditure whereas the project survey expenses are in the nature of capital expenditure? (iii) Whether on the facts and circumstances of the case, the Hon’ble ITAT is justified in law in holding that the commitment charges/upfront fees was allowable in view of the Board’s Circular No. 2-P(XI-6), (F. No. 10-67/65-IT (A-1) dated 23.8.1965 whereas the same is capital expenditure and not expenditure? 4. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee is a financial institution of the Punjab Government which provides term lending and financing industry/business. The assessee filed its return for the assessment year 2003-04 on 27.11.2003 declaring total loss of Rs. 85,13,72,560/- along with brought forward losses of Rs.1,69,75,27,485/-. The assessee adjusted long term capital gain of Rs. 46,68,725/- and dividend income of Rs. 1,00,37,108/- against the losses. The return was processed under Section 143(1) and Income Tax Appeal No. 347of 2008 3 refund was issued to the assessee. The assessee thereafter filed revised return on 3.1.2005 showing total loss including the brought forward loss, amounting to Rs.3,12,31,66,140/-. While making assessment under Section 143(3) on 20.12.2005, the assessing officer vide order dated 20.12.2005 made various additions and disallowances. 5. The appeal carried by the assessee was allowed by the Commissioner of Income Tax (Appeals) [for short “the CIT(A)”], vide order dated 20.10.2006. 6. Aggrieved by the appellate order, the revenue preferred appeal before the Tribunal. The appeal was partly allowed vide order dated 27.9.2007. Hence, this appeal at the instance of the revenue. 7. We have heard learned counsel for the appellant and perused the record. 8. Learned counsel for the revenue very fairly accepted that question Nos. (i) and (ii) mentioned above are covered against the revenue in view of the decision in the case of the assessee itself in Income Tax Reference No.20 of 2000 (The Punjab State Industrial Development Corporation Ltd., Chandigarh vs. The Commissioner of Income Tax) decided on 30.9.2010. Accordingly, the said questions are answered against the revenue. 9. Adverting to question No. (iii), it was submitted by the learned counsel that the commitment charges/upfront fees was capital expenditure and the Tribunal had erred in law in allowing the same as revenue expense. 10. We find no substance in the submission. The CIT(A) while adjudicating the issue in favour of the assessee noticed that the Income Tax Appeal No. 347of 2008 4 assessee had incurred commitment charges/upfront fees for securing short term loan from the IDBI. The expenses incurred fell within the expression ‘any service fee or other charges in respect of the moneys borrowed’ and was, therefore, admissible as revenue expense. The said finding was affirmed by the Tribunal. 11. Learned counsel for the revenue was unable to demonstrate that the said finding was erroneous or perverse in any manner. Accordingly, the third question is also answered against the revenue. 12. In view of the above, finding no merit in the appeals, the same are dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) July 18, 2011 ACTING CHIEF JUSTICE *rkmalik*