ITA Nos. 2848 and 6305/Del/2012, (Assessment Year: 2007-2008;2008-2009). Case: Asstt. Commissioner of Income Tax, Circle 3(1) Vs Citi Financial Consumer Finance India Ltd.. ITAT (Income Tax Appellate Tribunal)
| Case Number | ITA Nos. 2848 and 6305/Del/2012, (Assessment Year: 2007-2008;2008-2009) |
| Counsel | For Appellant: C.S. Aggarwal, Sr. Adv. and Ravi Pratap Mall, Adv. and For Respondents: Vivek R. Wadekar, CIT DR and Rahul Garg, Sr. DR |
| Judges | N.K. Saini, Member (A) and I.C. Sudhir, Member (J) |
| Issue | Income Tax Act, 1961 - Sections 133(6), 143(1), 143(3), 144C, 36(1)(vii), 36(2), 37, 37(1), 56, 92CA |
| Judgement Date | August 17, 2015 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
N.K. Saini, Member (A), (ITAT Delhi 'I(2)' Bench)
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These two appeals by the department are directed against the separate orders dated 27.03.2012 and 26.10.2012 for the assessment years 2007-08 and 2008-09 respectively, passed by the ld. CIT(A)-XX, New Delhi. These appeals were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity.
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First we will deal with the appeal for the assessment year 2007-08. Following grounds have been raised in this appeal:
1. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 24,40,36,690/- on account of Advertisement and publicity expenses.
2. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 21,16,50,310/- on account of lease hold improvements expenses.
3. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 1,00,55,42,364/- on account of direct selling agent commission expenses.
4. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 5,28,33,372/- on account of loss on sale of repossessed assets.
5. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 3,61,02,215/- on account of depreciation on computer peripherals.
6. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 5,74,05,698/- on account of NCD and Commercial paper issue expense.
7. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 51,34,55,174/- on account of loan acquisition costs.
8. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 1,13,56,639/- on account of adjustment Arm's length price of the international transaction.
9. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal.
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Vide Ground No. 1 the grievance of the Department relates to the deletion of addition of Rs. 24,40,36,690/- made by the AO on account of advertisement & publicity expenses. Facts of the case in brief are that the assessee company is engaged in the business of providing finance for auto loans, sales finance, mortgage (comprising of home loans and home equity) and personal loans. The assessee filed the return of income on 31.10.2007, declaring an income of Rs. 2,84,93,10,390/-. The said return of income was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act). Later on, the case was selected for scrutiny. The AO proceeded to pass the draft assessment order dated 23.12.2010 u/s. 144C of the Act. The assessee thereafter chose to file an appeal before the ld. CIT(A) instead of filing objections against the proposed additions before the DRP and communicated the same to the AO vide letter dated 24.01.2011. Thereafter the AO completed the assessment u/s. 143(3) r.w.s. 144C of the Act and assessed the income at Rs. 4,98,17,52,701/- vide order dated 22.02.2011 by making following additions/disallowances:
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Being aggrieved the assessee carried the matter to the ld. CIT(A) who deleted the addition of Rs. 24,40,36,690/- made by the AO on account of advertisement and publicity by following the decision of his predecessor in disposing of the appeal for the assessment years 2003-04 to 2005-06 wherein the order dated 18.12.2009 by the ITAT followed the earlier decision in assessee's own case for the assessment years 2001-02 and 2002-03 which had been upheld by the Hon'ble Jurisdictional High Court vide order dated 30.03.2011.
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We have considered the submissions of both the parties on this issue and are of the view that since the ld. CIT(A) deleted the addition made by the AO by following the judgment of the Hon'ble Delhi High Court and moreover, this issue is also squarely covered vide order dated 20.02.2015 in assessee's own case in ITA No. 4776/Del/2010 for the assessment year 2006-07 passed by this Bench of the Tribunal wherein relevant findings has been given as under:
"13. Applying the aforesaid principle to the facts of this case, it clearly emerges that the expenditure on publicity and advertisement is to be treated as revenue in nature allowable fully in the year in which it was incurred. Concededly, there is no advantage which has accrued to the assessee in the capital field. The expenditure was incurred to facilitate the assessee's trading operations. No fixed capital was created by this expenditure. We may also add here that in the Income Tax laws, there is no concept of deferred revenue expenditure. Once the assessee claims the deduction for whole amount of such expenditure, even in the year in which it is incurred, and the expenditure fulfills the test laid down u/s. 37 of the Act, it has to be allowed. Only in exceptional cases, the nature mentioned in Madras Industrial Corporation (supra), the expenditure can be allowed to be spread over, that too, when the assessee chooses to do so."
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Respectfully following the decision of Hon'ble Delhi High Court, this ground is allowed."
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In view of the above we do not see any merit in the departmental appeal on this issue.
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The next issue vide Ground No. 2 relates to the deletion of addition of Rs. 21,16,50,310/- made by the AO on account of lease hold improvements expenses. As regards to this issue the ld. Counsel for the assessee submitted that this issue has been decided by the ITAT in its aforesaid order dated 20.02.2015 wherein the relevant findings had been given in para 9 to 14 of the said order. The ld. DR could not controvert the aforesaid contention of the ld. Counsel for the assessee.
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After considering the submissions of both the parties, it is noticed that an identical issue was a subject matter of adjudication in the preceding year in assessee's own case wherein vide order dated 20.02.2015, the issue has been decided in favour of the assessee and relevant discussion is made in paras 9 to 14 which read as under:
"9. The second ground relates to disallowance of leasehold improvement expenditure as capital expenditure and allowing only depreciation @ 10%.
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Brief facts apropos this issue are that during the year the assessee company had incurred leasehold improvement expenses amounting to Rs. 6,46,12,909/- and the same was claimed as revenue expenditure. The assessee explained that the expenditure was incurred on account of safety films, shutters, laying of cables, electrical connections, installation PVC conduits, CATS, sanitary fittings, partitions and pin boards, civil works, brick work, water proofing, flooring, false ceiling, wall finishes, toilet furnishings, paints on walls and ceilings, earthling, switches and receptacles, glazing on ventilators etc. It was further explained that the capital expenditure was duly bifurcated from the bills and the balance amount of Rs. 6.46 crores was claimed as leasehold improvements. The Assessing Officer treated the entire expenditure being in capital field and allowed depreciation @ 10%. Learned Counsel submitted that this issue is covered by the decision of ITAT dated 18th December, 2009 for assessment years 2001-02 and 2002-03 contained at page No. 861 of paper book-II(A) and also by the decision of ITAT for assessment years 2003-04 to 2005-06 contained at page No. 1061 of paper book - II(A). Learned Counsel pointed out that the Tribunal's decision for assessment years 2001-02 and 2002-03 was assailed by revenue before Hon'ble High Court. Vide its judgment dated 30.03.2011 Hon'ble High Court dismissed the revenue's appeal observing as under:
"20. The argument of Mrs. Bansal was that the nomenclature of times of expenditure namely sanitary, fittings, civil works, brickworks, flowing etc. would clearly show that this expenditure could be capital in nature. Her grievance was that the Commissioner of Income Tax (Appeals) or the Tribunal did not go into this question at all and simply accepted the bifurcation given by the assessee in capitalizing the portion of the expenditure and treating the part of the expenditure as revenue. Her plea, therefore, was that the matter be remitted back to the Assessing Officer. She conceded, at the same time, that even the Assessing Officer had not done this exercise. It is clear that the Assessing Officer had not gone into the question as to whether the expenditure incurred on leasehold improvements was capital or revenue in nature. A large number of premises are taken on lease by the assessee throughout the country and expenditure on improvements of these lease premises was incurred by the assessee. The assessee has treated part of the said expenditure as capital in nature and deprecation thereon. In so far as expenditure to the extent of Rs. 1.52 crores is concerned, the same is treated as revenue in nature.
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Mrs. Bansal may not be correct in her submission that the Commissioner of Income Tax (Appeals) simply accepted the assertion of the assessee. The order of the CIT reveals that the plethora of documents in respect of expenditure incurred on leasehold improvements to the extent of Rs. 1.52 crores was filed at pages 282 to 336 of the paper book. The order of the Commissioner of Income Tax (Appeals) clearly reveals that he had "perused the bills filed by the appellant and also verified its various assertions". Thus the Commissioner of Income Tax (Appeals) accepted the sand of the assessee only after verification of the records and arriving at a finding of fact that the expenditure on the aforesaid account was revenue in nature. In this backdrop, the IT AT has observed that the Commissioner of Income Tax (Appeals) had verified the details produced by the assessee and gave his categorical finding based thereupon. This would, thus, be a mere question of fact and no question of law arises thereupon."
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Learned Counsel further pointed out that SLP filed against the judgment of Hon'ble Delhi High Court has been dismissed.
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We have considered the submissions of both the parties and have perused the record of...
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