Commissioner Of Income-Tax-I,Chennai v. First Leasing Co. Of India Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 02.07.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) Nos.846 and 847 of 2007 Commissioner of Income-tax-I,Chennai. ..Appellant in both the T.C.(A)s. Vs. First Leasing Co. Of India Ltd.,749, Mount Road,Chennai-600 002. ..Respondent in both the T.C.(A)s. Appeals under Section 260A of the Income-tax Act, 1961against the order of the Income Tax Appellate Tribunal, Bench 'B',Chennai in I.T.A. Nos.172 & 175(Mds)/98 dated 23.08.2004 for theassessment years 1992-93 and 1989-90. Against IT/WT/GT/Appeal Nos.ITA NO. 90/95-96 dated 05.12.1997 and 214/92-93 dated 27.11.1997on the file of the Commissioner of Income Tax Appeals V Chennaiagainst GI NOS. 4-F/92-93 P.A. NO. 47-055-CV-3961 dated 29.3.1995and GI NO. 4-F/1989-90 PA NO. 47-05J-CV-3961 DATED 30.03.1992 onthe file of the Deputy Commissioner of Income Tax Special Range VIMadras – 34 respectively For Appellant :Mr.J.Narayanaswamy, Standing Counsel forIncome-tax Department JUDGMENT (Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.) These appeals are filed under Section 260A of the Income TaxAct, 1961 by the Revenue, against the order of the Income TaxAppellate Tribunal, Bench 'B', Chennai in I.T.A. Nos.172 & 175(Mds)/98 dated 23.08.2004 raising the following common substantial https://hcservices.ecourts.gov.in/hcservices/ question of law:- "Whether in the facts and circumstances of thecase, the Tribunal was right in holding thatthe expenses for the issue of debenture isallowable as a deduction in full in the lightof section 35D of the Act."The learned Standing Counsel appearing for the Revenue now statedthat the real issue involved in the appeals is, whether theexpenses incurred for the issue of debenture is revenueexpenditure or not and hence, redrafted the question which readsas under:- "Whether in the facts and circumstances of thecase, the Tribunal was right in holding thatthe expenses for the issue of debenture is anallowable deduction as revenue expenditure?" 2.It is fairly stated that the issue stands covered infavour of the assessee, by this Court judgment in the case ofCommissioner of Income-tax Vs. South India Corporation (Agencies)Limited [2007] 290 ITR 217 (Mad), wherein it was held as follows:-"This question pertains to the assessment years 1989-90and 1992-93. For the relevant assessment years, theassessee claimed certain expenditure as debenture issueexpenses. The Assessing Officer treated 60 per cent ofthe claim of expenditure as capital expenditure and thebalance 40 per cent as revenue expenditure. Aggrievedby the same, the assessee filed an appeal to theCommissioner of Income-tax (Appeals). The Commissionerof Income-tax (Appeals) confirmed the order of theAssessing Officer and dismissed the appeal filed by theassessee. Aggrieved by the order, the assessee filed anappeal to the Income-tax Appellate Tribunal (hereinafterreferred to as the "Tribunal"). The Tribunal held asfollows:"The last of the issues is with regard toexpenses incurred on debenture issue beingtreated as capital expenditure. Theauthorities have treated part of theexpenditure as capital expenditure on thereasoning that at the time of redemption ofthe debenture, the holders of the debentureswere entitled to certain shares. The issue ofshares is a future event which may or may nothappen. At present, the expenditure incurredwas on the issue of debentures only and hencethe expenses incurred on obtaining a loan is arevenue expenditure. We accordingly upholdthe claim of the assessee." The Assessing Officer had bifurcated theexpenditure and allowed only 40 per cent as revenueexpenditure, without any basis. The Tribunal correctlyheld that the disallowance of 60 per cent is without any https://hcservices.ecourts.gov.in/hcservices/ The Assessing Officer had bifurcated theexpenditure and allowed only 40 per cent as revenueexpenditure, without any basis. The Tribunal correctlyheld that the disallowance of 60 per cent is without any https://hcservices.ecourts.gov.in/hcservices/ basis and the Assessing Officer was wrong in treatingpart of the expenditure as capital expenditure on thereasoning that at the time of redemption of debentures,the holders of the debentures would be entitled tocertain shares. The issue of shares is a future eventwhich may or may not happen. The Tribunal considered and followed the principlesenunciated in the Apex Court judgment reported in IndiaCements Ltd. v. CIT [1966] 60 ITR 52, which, in fact,followed by the Delhi High Court in CIT v. ThiraniChemicals Ltd. [2007] 290 ITR 196 holding thatexpenditure incurred on the issue of debentures is apermissible deduction under Section 37 of the Act. Learned counsel appearing for the Revenue has notproduced any material or evidence to take a differentview. The reasoning of the Tribunal was based onrelevant materials and evidence and there is no error orinfirmity in the order of the Tribunal to warrantinterference. In view of the same, no substantialquestion of law arises for consideration by this Courtand hence, the appeal in respect of question No.1 isdismissed." 3.Following the above principle, we are of the view thatno substantial question of law arises for consideration of thisCourt and accordingly the tax cases are dismissed. Consequently,M.P.No.1 of 2007 in T.C.(A) No.847 of 2007 is closed. No costs. km Sd/Asst.Registrar/true copy/Sub Asst.Registrar To 1. The Assistant Registrar, Income-tax Appellate Tribunal, Chennai Bench 'B', Chennai. Income-tax Appellate Tribunal, Chennai Bench 'B', Chennai. 2. The Commissioner of Income-tax (Appeals) V, Chennai. Chennai. 3. The Deputy Commissioner of Income-tax, Spl.Range VI, Madras-34. 4. The Commissioner of Income Tax Chennai + one cc to Mrs. Pushya Sitaraman Senior Standing counsel for ITCases sr no. 39871 smv(co)nm(17.07.07) T.C.(A) Nos.846 and 847of 2007