The Indore bench of Income Tax Appellate Tribunal (ITAT) recently held that bank charge paid for obtaining loan was revenue expenditure.
Assessee Supreme Auto (India) Pvt. Ltd. filed return of relevant Assessment year 2013-14 declaring a loss of Rs. 16,96,950/- which was subjected to scrutiny and statutory notices under section 143(2) / 142(1) Income Tax Act 1961 were issued to assessee. After completing the assessment assessing officer making various additions and determining a total income of Rs. 3,17,298/- among this assessing officer disallowed Rs. 63,000/- paid as upfront fee to State Bank of India for renewal of cash credit limit. Aggrieved, the assessee filed an appeal before ITAT.
Ashish Porwal counsel for the revenue contented that the charge paid to the bank for renewal of cash credit limit was capital nature therefore it was taxable and disallowed the amount.
No one is appeared for the assessee, on the written submission filed by the assessee submit that “amount was paid in respect of renewal of cash credit limit from State Bank of India on 28.02.2013 which was exclusively in the nature of bank charges which occurred in pursuance to grant of credit facility to assessee company”.
After considering the contentions of the both parties the division bench of ITAT comprising B.M. Biyani, (Accountant) and. Madhumita Roy, (Judicial Member) allowed the appeal filed by the assessee and the bench observed that renewal of cash-credit limit is a regular feature, normally every year, being done by banks and the banks charge fee for every renewal and expenditure incurred for obtaining loan is a revenue expenditure and not capital in nature thus assessee has rightly claimed deduction.
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