Case: Commissioner of Income Tax Vs. Shri Rama Multi Tech Ltd

Civil Appeal Nos. 4072-4073 of 2007 1. The only question on which the leave has been granted by this Courts order dated August 31, 2007 is as follows: "When the Assessee had itself capitalized the interest and other expenditure incurred towards creation assets. Whether the Commissioner of Income-tax (Appeals) and the Tribunal were right and justified in allowing the Assessee to claim the said expenditure as revenue expenditure without any just cause?" Briefly stated, the facts of the present appeals are as follows: The Respondent is a public limited company. For the assessment year 2000-01 it had incurred an expenditure of Rs. 3,37,84,348 towards payment of interest on loans taken and other items for setting up the industry. Even though it had capitalised the said amount and claimed depreciation before the assessing authority, however, in appeal, the Respondent raised additional ground claiming deduction of the aforesaid amount on interest paid with some other expenditure on other items connected therewith as revenue expenditure. 2. The Commissioner of Income-tax (Appeals) vide order dated March 5, 2004 allowed the claim of the Respondent-Assessee only to the extent of interest amount of Rs. 2,92,45,670 paid on loans taken by it for establishing the industry. He, however, disallowed the other expenditures, namely, financial charges, professional expenses, upfront fee, etc. 3. The Revenue, feeling aggrieved by the said allowance, preferred an appeal before the Income-tax Appellate Tribunal which vide order dated December 2, 2004 upheld the order of the Commissioner of Income-tax (Appeals) in so far as it related to the allowance of the expenditure claimed towards payment of interest and also allowed expenditure on other items connected therewith. The High Court did not interfere in the appeal preferred by the Revenue on the ground that the Tribunal has followed the decision of the Gujarat High Court in the case of Deputy CIT v. Core Healthcare Ltd. [2001] 251 ITR 61 (Guj). 4. Feeling aggrieved, the Commissioner of Income-tax has preferred the present appeal. 5. We have heard learned Counsel for the parties. 6. We find that this Court in the case of Deputy CIT v. Core Health Care Ltd. [2008] 2 SCC 465 : [2008] 298 ITR 194 (SC) has affirmed the view taken by the Gujarat High Court. 7. In this view of the matter, we are of the considered opinion that the Income-tax Appellate Tribunal was justified in allowing the expenditure of Rs. 3,37,84,348 towards the interest paid on the loans taken and expenditure on other items connected therewith for establishment of the unit, while affirming the order of the Commissioner of Income-tax (Appeals). 8. Learned Counsel for the Revenue-Appellant submitted that the Respondent cannot claim depreciation on the amount of interest which has been allowed as revenue expenditure and therefore, the depreciation referable to such interest expenditure be reversed. 9. Learned Counsel for the Respondent however submitted that there is nothing on record that depreciation on this amount has been taken by the Respondent.

Decision reasoning: 1[ds]6. We find that this Court in the case of Deputy CIT v. Core Health Care Ltd. [2008] 2 SCC 465 : [2008] 298 ITR 194 (SC) has affirmed the view taken by the Gujarat High Court7. In this view of the matter, we are of the considered opinion that the Income-tax Appellate Tribunal was justified in allowing the expenditure of Rs. 3,37,84,348 towards the interest paid on the loans taken and expenditure on other items connected therewith for establishment of the unit, while affirming the order of the Commissioner of Income-tax (Appeals).