Question of law
When an assesse himself capitalised the interest on loan and other expenditure incurred toward creation of an asset. Whether the CIT(A) and the Tribunal were right in justified in allowing the assesse to claim the said expenditure as revenue expenditure without any just cause?
Fact of the case
For the AY 2000-01, Shri Rama Multi Tech Ltd. a public company had incurred an expenditure of Rs 3,37,84,348/- toward payment of interest on loan and other items for setting up the establishment. Even though they have capitalised the expense and claim the depreciation on same. In appeal, they raised an additional ground and claimed interest payment and other expenditure as a revenue expenditure.
Commissioner of Income Tax(Appeals) by its order allowed the claim of assesse to the extent of Rs 2,92,45,670/- being payment made toward interest on loan taken for setting up the industry and rejected the other expenditure, namely, financial charges, professional expenses, upfront fee etc.
Revenue went into appeal against the order to Income Tax Appellate Tribunal(ITAT), which upheld the order of CIT(A) insofar as it related to the allowance of the expenditure claimed towards payment of interest and, also allowed expenditure on other items connected therewith.
High Court not interfered as judgment of ITAT was based on the decision of CIG Vs. Core Health Care (2001) 251 ITR 61 of the Gujarat High Court. And the matter went to the Supreme Court.
Decision of Supreme Court
Upheld the decision of ITAT of allowing the expenditure of Rs 3,37,84,348/-
Provided, if assesse has claim any depreciation on the said amount, such depreciation should be reversed by the assessing authority and dismissed the appeal as filed by the Revenue.
Date of Judgement/Order: 06th April,2017