ITAT Remits Rs. 93.34 Lakh Processing Fee Disallowance for Fresh Adjudication:

M/s. Harsha Engineers International Limited is merged from M/s. Harsha Abacus Solar Pvt. Ltd. and has challenged the order of the CIT(A) passed under Section 250 of the Income Tax Act, 1961 for AY 2018-19. The assessee raised three grounds, including violation of Section 144B, disallowance of Rs. 93,34,795/- towards upfront and processing fees under Section 37, and non-grant of TDS credit of Rs. 2,08,15,442.60/- under Section 199 of the Act.

The AO had treated the upfront and processing fees as capital expenditure and disallowed the amount of Rs. 93,34,795/-. The CIT(A) confirmed the disallowance. The Tribunal observed that the issue required examination of the period to which the expenditure related and the actual purpose of the corresponding borrowings. It held that the mere fact that the payment was made to a bank, or that the expenditure was treated as prepaid, would not by itself establish that the expenditure was capital in nature.

The Tribunal accordingly set aside the CIT(A)’s finding and restored the matter to the AO for fresh adjudication. With regard to the assessee’s claim for TDS credit of Rs. 2,08,15,442.60/-, the Tribunal noted that although the CIT(A) recorded that no submission had been made by the assessee on the issue, the CIT(A) had already directed the AO to grant credit of the TDS deducted while computing the demand payable in accordance with law.

Since the appropriate direction had already been issued, the Tribunal declined to interfere with the CIT(A)’s order on this issue.