DCIT RG 10(1), MUMBAI vs. MAHARASHTRA STATE ELECTRICITY TRANSMISSION CO. LTD, MUMBAI

This appeal of Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)]-21, Mumbai, [in short CIT(A)], in CIT(A)-21/IT/325/2009-10 dated

At the outset, the learned Counsel for the assessee drew our attention to the order of Tribunal in Miscellaneous Application No. 840/Mum/2017 dated 08.10.2018, whereby only issue recalled is as regards to the claim of stamp duty and service charges raised by Revenue vide Ground No. 8, which read as under: -

From the above, it is clear that the only ground No. 8 is to be adjudicated.

Briefly stated facts are that the AO noted in the assessment order that the assessee company has incurred expenditure on account of stamp duty and legal charges on loan taken from construction of capital assets, which are to be capitalized in the books of account and accordingly, expenditure amounting to ₹ 41,95,000/- on account of stamp duty and legal charges are capital in nature and cannot be allowed as deduction under section 37(1) of the Act. The AO also directed the 3 | P a g e ITAs No.419 /Mum/2010 assessee to capitalize the sum as and when the same is put to use. Aggrieved, assessee preferred the appeal before CIT(A).

The CIT(A) allowed the expenditure incurred on stamp duty paid for availing various loans and legal expenses/ services fee as business expenditure. For this he noted that AO’s main contention for disallowance is that first this is a capital expenditure, reason being the loan is taken for the purpose of acquiring capital asset and hence, stamp duty paid, registration fee paid and lawyer’s fee paid is capital expenditure. The CIT(A) noted that the AO in his remand report also during the appellate proceedings, stated that the evidences filed were not admissible and secondly, the assessee has suo moto capitalized these expenses in its books of account reflected in Schedule 13 of the balance sheet. The CIT(A) stated that the findings of the AO is totally perverse for the reason that from the facts it is not clear where he is noticed that these expenses were relating to loans which were taken for the construction of assets which were yet to be capitalized. Further, these amounts were reflected in the Revenue account as interest and finance charges in Schedule 12 of the balance sheet and also out of the total interest and finance charges debited to the Revenue Account. The assessee had suo moto not capitalized the expenses which were reflected in schedule 13 of the balance sheet. Hence, the CIT(A) allowed the claim of expenses. Aggrieved, now revenue is in appeal before us.

We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee has incurred the following expenses and the narrations are as under: -

We noted from the above that the assessee is able to prove that these expenses were routine expenses incurred by the assessee during the course of business for the reason that on account of these loans no capital asset has been created by incurring such expenditure. We noted that even Hon’ble Supreme Court in the case of India Cement Ltd. vs. CIT (1966) 60 ITR 52 SC held that the stamp duty, registration fee, lawyers fee etc., paid for obtaining loan was eligible for business expenditure. We noted that the aforesaid amounts were reflected in the schedule 12 of the balance sheet in the Revenue’s account as interest and finance charges. Also the assessee has suo moto capitalize the expenses which were to be capitalized as is evident from Schedule 13 of the balance sheet, which is in Revenue’s account. We noted from the copies of the agreement that these expenses were incurred on stamp