(PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0 As common question of law and facts arise in this group of appeals and as such with respect to very assessee but different assessment years and as such arise out of the impugned common judgment and order passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as the “Tribunal”), all these appeals are decided and disposed of by this common judgment and order. In the facts and circumstances of the case and with the consent of the learned advocate for the respective parties, all these appeals are taken up for final hearing today.
2.0 All these appeals are Admitted to consider the following substantial questions of law. Shri K.M. Parikh, learned advocate waives service of notice of admission on behalf of the respondent in each of the appeals.
Tax Appeal No.778 of 2013
(i).Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that the entire revenue expenditure of Rs.82,14,000/ cannot be allowed in assessment year 200506 when it was incurred but must be spread over a number of years of benefit thereof to the company?
(ii). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that Rs.3,36,224/ being amortisation of lease rent for the land is capital expenditure?
Tax Appeal No.779 of 2013
(i).Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that the entire revenue expenditure of Rs.39,19,000/ cannot be allowed in assessment year 200607 when it was incurred but must be spread over a number of years of benefit thereof to the company?
(ii). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that Rs.3,36,224/ being amortisation of lease rent for the land is capital expenditure?
Tax Appeal No.780 of 2013 (i).Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that Rs.3,36,224/ being amortisation of lease rent for the land is capital expenditure?
3.0 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal dated 0.03.2013 passed in ITA No. 179/AHD/2010 for AY 200506, the appellant – assessee has preferred present Tax Appeal No. 778 of 2013 to consider the following substantial questions of law.
(i).Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that the entire revenue expenditure of Rs.82,14,000/ cannot be allowed in assessment year 200506 when it was incurred but must be spread over a number of years of benefit thereof to the company?
(ii). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that Rs.3,36,224/ being amortisation of lease rent for the land is capital expenditure?
3.1. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal dated 0.03.2013 passed in ITA No. 180/AHD/2010 for AY 200607, the appellant – assessee has preferred present Tax Appeal No. 779 of 2013 to consider the following substantial questions of law.
(i).Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that the entire revenue expenditure of Rs.39,19,000/ cannot be allowed in assessment year 200607 when it was incurred but must be spread over a number of years of benefit thereof to the company?
(ii). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that Rs.3,36,224/ being amortisation of lease rent for the land is capital expenditure?
3.2. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal dated 0.03.2013 passed in ITA No. 181/AHD/2010 for AY 200708, the appellant – assessee has preferred present Tax Appeal No. 780 of 2013 to consider the following substantial questions of law.
(i).Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that Rs.3,36,224/ being amortisation of lease rent for the land is capital expenditure?
4.0. It appears that while filing the return of income for AY 200506, the assessee claimed the deduction in the year under consideration of Corporate Debt Restructuring expenses of Rs.82,14,000/ as a revenue expenditure. Similarly, for AY 200607, the assessee claimed the deduction of Corporate Debt Restructuring expenses of Rs.39,19,000/ as a revenue expenditure in the very year i.e. AY 200607.
4.1. That in the respective years i.e. AY 200506 to AY 200708, the assessee claimed the deduction of Rs.3,36,224/ being amortisation of lease rent for the land is capital expenditure. However, the AO disallowed the aforesaid expenditure, more particularly, the aforesaid Corporate Debt Restructuring expenses in the relevant assessment years by observing that entire expenditure should not be allowed in the respective assessment years but it must be spread over a number of years of benefit of such reconstructing proportionately. The AO also held that Rs. 3,36,224/ after amortisation of lease rent for the land is capital expenditure and also disallowed the same. Against the respective assessment orders, the assessee preferred appeal before the learned CIT(A) and the learned CIT(A) has confirmed the respective assessment orders. Feeling aggrieved and dissatisfied with the orders passed by the learned CIT(A) in confirming the orders passed by the AO and disallowing the entire expenses of Corporate Debt Restructuring in the respective years under consideration and even with respect to amortisation of lease rent for the land is capital expenditure, the assessee preferred appeals before the learned ITAT and by impugned judgment and order and considering its earlier judgment and order on the similar issue with respect to assessment year 200405, the learned Tribunal has dismissed the aforesaid appeals and has held that the respective Corporate Debt Restructuring expenses should not be allowed in the respective assessment years but it must be spread over a number of years of benefit of such reconstructing proportionately. The learned Tribunal has also held that amount of Rs.3,36,224/ after amortization of lease rent paid for the land is a capital expenditure.
4.2. Feeling aggrieved and dissatisfied with the common impugned judgment and order passed by the learned Tribunal, the assessee has preferred present Tax Appeals to consider aforesaid substantial questions of law.
5.0. Shri Manish Shah, learned advocate for the appellant assessee has vehemently submitted that so far as substantial question of law with respect to Corporate Debt Restructuring Expenses to be treated as a revenue expenditure and it must be allowed in the assessment years when it was incurred is squarely covered by the decision of this Court in Tax Appeal No.126 of 2013 reported in 217 Taxman 229. It is submitted that in the aforesaid decision, it is observed and held by the Division Bench of this Court relying upon the decision of the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Limited vs. CIT reported in 225 ITR 802 held that once the expenditure is held to be in revenue in nature incurred wholly and exclusively for the purpose of business, it can be allowed in its entirety in the year in which it is incurred.
5.1. Shri Shah, learned advocate for the respective appellant – assessee has submitted that even the question no.2 in Tax Appeal No. 778 of 2013 and Tax Appeal No.779 of 2013 and sole question in Tax Appeal No. 780 of 2013 i.e. whether the Tribunal is erred in holding that Rs.3,36,224/ after amortisation of lease rent paid for the land is a capital expenditure is concerned, the learned Tribunal has materially erred in distinguishing the decision of this Court in the case of DCIT vs. Sun Pharmaceutical Industries Limited reported (2010) 329 ITR 479 as well as decision of the Hon'ble Supreme Court in the case of CIT vs. Madras Auto Services Pvt. Limited reported in (1998) 233 ITR 468. Making above submissions, it is requested to allow present appeals.
6.0. All these appeals are opposed by Shri Parikh, learned counsel for the revenue. It is submitted that in the facts and circumstances of the case the learned Tribunal has not committed any error and / or illegality in confirming the order passed by the AO as well as learned CIT(A) holding that the entire expenditure of Corporate Debt Reconstructing expenses should not be allowed in the single year but it must be spread over for number of years for benefit of such reconstructing proportionately.
6.1. It is further submitted by Shri Parikh, learned counsel for the revenue that in the facts and circumstances of the case, the learned Tribunal has rightly distinguished the decision of this Court in the case of Sun Pharmaceutical Industries Limited (supra) as well as decision of the Hon'ble Supreme Court in the case of Madras Auto Services Pvt. Limited (supra). Making above submissions and relying upon the decision of the Calcutta High Court reported in 259 CTR 275(Cal), reported in 339 ITR 319.
6.2. Making above submissions and relying upon above decisions, it is requested to dismiss the present Tax Appeals.
7.0 Heard the learned advocates for the respective parties at length.
The question no.1 in Tax Appeal Nos. 778 of 2013 and 779 of 2013
8.0 At the outset, it is required to be noted that and it is not in dispute that the assessee incurred the expenses of Rs. 82,14,000/ in AY 200506 and Rs. 39,19,000/ in AY 200607 and claimed the deduction treating as revenue expenditure. It is required to be noted that the learned Tribunal as well as learned CIT(A) has considered the same as revenue expenditure however disallowed the same in one year and held that it must be spread over a number of years of benefit of such restructuring proportionately. Therefore, the short question which is posed for the consideration of this Court is whether the Corporate Debt Restructuring expenses of Rs.82,14,000/ was required to be allowed in AY 200506 and Rs.39,19,000/ in AY 200607 as contended on behalf of the assessee or it must be spread over a number of years of benefit of such structuring proportionately as held by the learned Tribunal ? The aforesaid issue as such is now not res integra in view of the decision of this Court in the case of Commissioner of Income Tax I vs. Gujarat State Fertilizer & Chemicals Limited rendered in TAX Appeal No. 126 of 2013. In the aforesaid decision, the Division Bench of this Court has held that once the expenditure is held to be in revenue in nature incurred wholly and exclusively for the purpose of business, it can be allowed in its entirety in the year in which it is incurred. In view of the above direct decision of this Court, question no.1 in respective appeals is required to be held in favour of assessee and against the revenue by holding that the respective Corporate Debt Restructuring expenses of Rs.82,14,000/in AY 200506 and Rs.39,19,000/ in AY 200607 was revenue expenditure and the same was required to be allowed in the respective assessment years.
The question no.2 in Tax Appeal Nos. 778 of 2013 and 779 of 2013 and sole question in Tax Appeal No.780 of 2013
9.0 Now, so far as question no.2 in Tax Appeal Nos. 778 of 2013 and 779 of 2013 and sole question in Tax Appeal No.780 of 2013 i.e. Whether the learned Tribunal was right in law in holding that Rs. 3,36,224/ being amortisation of lease rent for the land is capital expenditure is concerned, on considering the decision of this Court in the case of Sun Pharmaceutical Industries Limited (supra) as well as decision of the Hon'ble Supreme Court in the case of Madras Auto Services Pvt. Limited (supra), we are of the opinion that the learned Tribunal has committed an error in distinguishing the aforesaid decisions and not applying the same to the facts of the case on hand. Considering the aforesaid two decisions, it is to be held that the aforesaid lease rent was deductible as revenue expenditure and the learned Tribunal has erred in holding that Rs.3,36,224/ after amortisation of lease rent paid for the land is capital expenditure. Under the circumstances, considering the aforesaid two decisions of the Hon'ble Supreme Court in the case of Madras Auto Services Pvt. Limited (supra) and the decision of this Hon'ble Court in the case of Sun Pharmaceutical Industries Limited (supra) the question no. 2 in Tax Appeal Nos. 778 and 779 of 2013 and sole question no.1 in Tax Appeal No. 780 of 2013 is required to be answered in favour of the assessee and against the revenue.
10. In view of the above and for the reasons stated above, all the appeals succeed. The question no.1 in Tax Appeal Nos. 778 of 2013 and 779 of 2013 and question no.2 in Tax Appeal Nos. 778 of 2013 and 779 of 2013 and sole question in Tax Appeal No. 780 of 2013 are held in favour of the assessee and against the revenue. Consequently, all these appeals are allowed. Necessary consequences shall follow.
sd/ (M.R.SHAH, J.) Kaushik sd/ (MS SONIA GOKANI, J.)