Processing Fees for Purchase of Business Assets Allowable as Expenditure: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the processing fees for purchase of business assets shall be allowable as expenditure under the provisions of the Income Tax Act, 1961.

The assesse, M/s Crayons Advertising (P) Ltd. was aggrieved by the order of the Assessing Officer wherein the claim of the assesse towards processing fees of Rs.25,74,864/- under the head ‘Interest & Finance Costs’ was disallowed. The assesse claimed that Rs.7,74,864/- was paid as processing fees for purchase of business assets and the same is allowable as the loan has been taken for assets used for the business of the assessee. The Assessing Officer disallowed the claim and held that the same cannot be allowed.

Allowing the claim of the assesse, a bench of Shri Shamim Yahya (Accountant Member) and Shri Yogesh Kumar US (Judicial Member) observed that “The Ld. counsel for the assessee submitted that the revenue authorities have erred in disallowing the expenditure by holding that processing fee for purchase of capital asset is capital expenditure. In this regard, he relied upon the decision of Hon’ble Supreme Court in the case of India Cements Ltd. vs CIT (1966) 60 ITR 52(SC). We find that in the case of India Cements Ltd. (Supra), Hon’ble Apex Court has expounded that loan is neither an asset nor any business advantage and that nature of expenditure incurred in raising a loan is not dependent upon nature and purpose of loan. Accordingly, we set-aside the order of authorities below and decide the issue in favour of the assessee.”

To Read the full text of the Order CLICK HERE

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