I.P.MUKERJI, J. - (1.) On 18th August, 2008 this appeal was admitted by a Division Bench of this Court, to be heard on the following questions of law: "i) Whether on the facts and in the circumstances of the case the Learned Tribunal erred in law in deleting the addition made on account of front end fees of Rs.61,69,000/- without considering that the same is capital in nature and the benefit of this claim should be spread over to different years and followed mechanically its orders for earlier years although appeals against those orders have already been filed and the same are pending before the Hon'ble Court. iii) Whether on the facts and in the circumstances of the case, the Learned Tribunal erred in deleting the addition made by Assessing Officer of unrealized foreign exchange gain of Rs.7,20,12,479/-. These questions of law arose from a judgment and order of the Income Tax appellate tribunal 'A' Bench dated 29th February, 2008 in respect of the assessment year 2004-05, to be heard in this appeal under Section 260A of the Income Tax Act, 1961.
(2.) While obtaining a new loan, the assessee had to pay a fee to the bank or financial institution described as "front end fees." An expenditure of Rs.61,69,000/- shown by the assessee on this account was deleted by the department. The assessee had claimed amortization of the expense under Section 35D of the Income Tax Act, 1961. According to the department, this expenditure could be claimed once and could not be spread over a period of ten years under Section 35D. This expense, according to them was not one which would fall within the conditions stipulated in Section 35D(1) and (2) of the said Act.
(3.) Mr. Khaitan appearing for the assessee showed us Section 2(28A) of the said Act. In this sub-section interest is defined in the following manner: "28A :- 'interest' means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised." He argued that the front end fees paid by the assessee could be equated with "any service fee or other charge" provided in that sub-section and constitute a part of interest payment made by the assessee. Therefore, if this loan was of a particular duration and interest was paid at intervals, this front end fee should be added to the interest amount and would be a part of interest. Therefore, the interest amount including the "front end fees" is to be treated as an expenditure and could be amortized under Section 35D. He argued that kind of an expense could be so amortized was supported by a Supreme Court judgment in the case of Madras Industrial Investment Corporation Ltd. Vs. Commissioner of Income Tax reported in 225 ITR 802. The learned tribunal in its impugned judgment and order felt itself bound by its earlier orders. Following the decision of the Tribunal for the Assessment Year 2003-04 dated 23rd November, 2007 the department's appeal was dismissed. Now, I express my views on this subject. ;