Commissioner Of Income Tax-I,Chandigarh v. M/S. Punjab State Industrial Developmentcorporation Ltd., Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 347 of 2008Date of decision: 18.7.2011 Commissioner of Income Tax-I,Chandigarh Versus --- Appellant M/s. Punjab State Industrial DevelopmentCorporation Ltd., Chandigarh --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELACTING CHIEF JUSTICE HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Ms. Urvashi Dhugga, Senior Standing Counselfor the appellant-Revenue. --- AJAY KUMAR MITTAL, J. This order will dispose of Income Tax Appeal Nos. 347and 453 of 2008 as identical questions have been claimed by theRevenue in both the appeals. The facts are being referred fromIncome Tax Appeal No. 347 of 2008. 2. Income Tax Appeal No. 347 of 2008 filed under Section260A of the Income-Tax Act, 1961 (for short “the Act”) has beenpreferred by the revenue against the order dated 27.9.2007, passedby the Income Tax Appellate Tribunal Chandigarh Bench ‘A’,Chandigarh (in short “the Tribunal”) in ITA No. 33/CHANDI/2007,relating to the assessment year 2003-04. 3.The following substantial questions of law have been claimed for determination of this Court: “(i)Whether on the facts and circumstances of the case, theHon’ble ITAT is justified in law in holding that the sale ofinvestments by the assessee was a capital gain and notprofit and gain from business, whereas the main businessof the assessee is to make investments and earn profitfrom realisation of the same?Hon’ble ITAT is justified in law in holding that the sale ofinvestments by the assessee was a capital gain and notprofit and gain from business, whereas the main businessof the assessee is to make investments and earn profitfrom realisation of the same? (ii)Whether on the facts and circumstances of the case, theHon’ble ITAT is justified in law in holding that the projectsurvey expenses should be treated as revenueexpenditure whereas the project survey expenses are inthe nature of capital expenditure?Hon’ble ITAT is justified in law in holding that the projectsurvey expenses should be treated as revenueexpenditure whereas the project survey expenses are inthe nature of capital expenditure? (iii)Whether on the facts and circumstances of the case, theHon’ble ITAT is justified in law in holding that thecommitment charges/upfront fees was allowable in viewof the Board’s Circular No. 2-P(XI-6), (F. No. 10-67/65-IT(A-1) dated 23.8.1965 whereas the same is capitalexpenditure and not expenditure?Hon’ble ITAT is justified in law in holding that thecommitment charges/upfront fees was allowable in viewof the Board’s Circular No. 2-P(XI-6), (F. No. 10-67/65-IT(A-1) dated 23.8.1965 whereas the same is capitalexpenditure and not expenditure? 4. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee is a financialinstitution of the Punjab Government which provides term lendingand financing industry/business. The assessee filed its return for theassessment year 2003-04 on 27.11.2003 declaring total loss of Rs.85,13,72,560/- along with brought forward losses ofRs.1,69,75,27,485/-. The assessee adjusted long term capital gainof Rs. 46,68,725/- and dividend income of Rs. 1,00,37,108/- againstthe losses. The return was processed under Section 143(1) and refund was issued to the assessee. The assessee thereafter filedrevised return on 3.1.2005 showing total loss including the broughtforward loss, amounting to Rs.3,12,31,66,140/-. While makingassessment under Section 143(3) on 20.12.2005, the assessingofficer vide order dated 20.12.2005 made various additions anddisallowances. 5.The appeal carried by the assessee was allowed by theCommissioner of Income Tax (Appeals) [for short “the CIT(A)”], videorder dated 20.10.2006. 6.Aggrieved by the appellate order, the revenue preferredappeal before the Tribunal. The appeal was partly allowed vide orderdated 27.9.2007. Hence, this appeal at the instance of the revenue. refund was issued to the assessee. The assessee thereafter filedrevised return on 3.1.2005 showing total loss including the broughtforward loss, amounting to Rs.3,12,31,66,140/-. While makingassessment under Section 143(3) on 20.12.2005, the assessingofficer vide order dated 20.12.2005 made various additions anddisallowances. 5.The appeal carried by the assessee was allowed by theCommissioner of Income Tax (Appeals) [for short “the CIT(A)”], videorder dated 20.10.2006. 6.Aggrieved by the appellate order, the revenue preferredappeal before the Tribunal. The appeal was partly allowed vide orderdated 27.9.2007. Hence, this appeal at the instance of the revenue. 7.We have heard learned counsel for the appellant andperused the record. 8.Learned counsel for the revenue very fairly accepted thatquestion Nos. (i) and (ii) mentioned above are covered against therevenue in view of the decision in the case of the assessee itself inIncome Tax Reference No.20 of 2000 (The Punjab State Industrial Development Corporation Ltd., Chandigarh vs. TheCommissioner of Income Tax) decided on 30.9.2010. Accordingly,the said questions are answered against the revenue. 9.Adverting to question No. (iii), it was submitted by thelearned counsel that the commitment charges/upfront fees wascapital expenditure and the Tribunal had erred in law in allowing thesame as revenue expense. 10.We find no substance in the submission. The CIT(A)while adjudicating the issue in favour of the assessee noticed that the assessee had incurred commitment charges/upfront fees for securingshort term loan from the IDBI. The expenses incurred fell within theexpression ‘any service fee or other charges in respect of themoneys borrowed’ and was, therefore, admissible as revenueexpense. The said finding was affirmed by the Tribunal. 11.Learned counsel for the revenue was unable todemonstrate that the said finding was erroneous or perverse in anymanner. Accordingly, the third question is also answered against therevenue. 12.In view of the above, finding no merit in the appeals, thesame are dismissed. (AJAY KUMAR MITTAL) JUDGE July 18, 2011*rkmalik* (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE