The Delhi High Court has granted relief to Indus Towers by allowing the loan processing charges.
The revenue has filed an appeal against deletions of additions made on account of disallowance of interest on loan, disallowance of depreciation and disallowance of upfront loan processing fee against Indus Towers Ltd.
The respondent/assessee, was a Public Limited Company was incorporated in the year 2007 as a joint venture Company of Bharti Infratel Limited, Vodafone Essar Limited and Aditya Birla Telecom Limited with its main object being to share the telecom infrastructure amongst various telecom service providers in 16 telecom circles through telecom sites, out of which some telecom sites were under indefeasible rights to use on 01.01.2009 and the remaining 14,484 sites were built and personalised by the respondent/assessee on its own during the financial year concerning the subject Assessment Year.
On 30.09.2009 the assessee filed its return of income, thereby declaring total loss which was revised and the declared loss was pegged including unabsorbed depreciation. Case of the respondent/assessee having been selected for scrutiny assessment, notice under Section 143(2) of the Income Tax Act was issued to it. The Assessing Officer passed an Assessment Order dated 19.08.2011, thereby declaring the total loss of the respondent/assessee as against the claimed loss.
Zoheb Hossain , for appellant/revenue contended that the impugned order of the Tribunal was not sustainable in the eyes of law since despite repeated directions, the respondent/assessee did not submit details of the newly constructed towers; that proviso to Section 36(1)(iii) of the Act clearly stipulated that the interest component on borrowed capital for the purposes of business could not be claimed as deduction; that the respondent/assessee itself having amortised the expenses on loan processing fee, findings of the learned Tribunal in that regard were not sustainable; and that the Tribunal failed to appreciate that the loan taken by the respondent/assessee was to procure assets and not for routine business, so the same could not be claimed as revenue expenditure under Section 37 of the Income Tax Act.
Rohit Jainfor appeared for the respondent/assessee supported the impugned order and contended that the appeal was completely devoid of merit in view of the judicial pronouncements in the cases reported as CIT vs Gujarat Guardian Ltd.,CIT vs Bharti Telenet Ltd.,; Taparia Tools Ltd. vs JCIT, etc
The Division Bench of Justice Rajiv Shakdher and Justice Girish Kathpalia held that , “In view of the legal position discussed above, we have no hesitation to reiterate that it being undisputed that the loan in question was raised by the respondent/assessee only for the purposes of its business, merely because the loan processing charges though paid upfront but amortised over a period of five years, solely to be in consonance with the mercantile system of accounting, deduction of the entire charges in lump sum in the year in which the same were paid could not be denied to the respondent/assessee.”
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