The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that up-front fee debited on account of term loan for acquiring the fixed asset as “Plant” is an allowable business expenditure.
The assessee, M/s. Brace Iron & Steel Pvt. Ltd. is a Company engaged in the business of Service Sector. The AO disallowed the up-front fees of Rs.1,10,82,175/- debited in the P & L A/c on the ground that prima facie this expenditure incurred is in the nature of capital expenditure.
Mr. S.K. Tulsiyan, the counsel for the assessee contended that he A.O. has erred in disallowing the ‘upfront fee‘ of Rs.1,10,82,175/- claimed as a business/revenue expenditure on account of the payment of the one time non- refundable fee for the processing of the loan, prior to the execution of the Term Loan taken by the Assessee from the Lenders via the Common Loan Agreement Dated 26.02.2015. The A.O. has disallowed the same on the erroneous basis that the upfront fee is an expenditure that is capital in nature and thus cannot be allowable as a revenue expenditure. He submitted that the A.O. has not disputed the veracity/genuineness of the Term Loan undertaken between the Assessee and the Lender Banks.
The two-member bench of Judicial Member Suchitra Kamble and Accountant Member, R.K.Panda while setting aside the disallowance held that the up-front fee of Rs.1,10,82,175/- debited in the P & L A/c on account of term loan taken by the assessee during the relevant year for acquiring the fixed asset as“Plant” is an allowable business expenditure.
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