INCOME TAX ACT, 1961

Section 35D

Business expenditure - Allowability - Interest component of lease rental allegedly allowed twice -

During the relevant year for STBs and head ends, there were two components of the lease payments made by the assessee to M/s. CISCO, namely, principal component and interest components. The assessee capitalized the total amount in the books of account and claimed depreciation on it. The assessee did not debit the interest component of Rs. 6,00,38,178 in the profit and loss account, though inadvertently mentioned so in 'Note 2J' of the Audited Accounts that interest component had been debited. However, actually it was not done so. The sum and substance of the whole arguments of the assessee was that the interest component of the total lease rental paid by the assessee was required to be debited into the profit and loss account even as per AS-19, however, the assessee inadvertently capitalized the entire amount of lease rental of Rs. 64.87 crores. However, in the income tax return, the entire lease rental of Rs. 64.87 cores has been claimed as deduction of expenditure under section 37. That there was no deduction of the interest component of Rs. 6,00,38,178 which was otherwise allowable to the assessee under both the conditions, i.e., whether the transaction is taken as that of lease or as that of loan. The assessee was entitled to claim deduction under section 37 of interest expenditure incurred/paid for the procurements of the assets which were used solely for the business of the assessee. Held: This issue was restored to the file of the AO for limited purpose of verification as to whether the assessee had claimed double deduction of the amount of Rs. 6,00,38,178 claimed as interest component of the total lease rental claim of Rs. 64,87,55153.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2012-13 to 2015-16

Income Tax Act, 1961

Section 36(1)(iii)

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