The Commissioner Of Income Tax – 2, Mumbai v. Tata Ssl Limited

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.491 OF 2011 The Commissioner of Income Tax – 2, Mumbai..Appellant. Versus Tata SSL Limited ..Respondent. Mr.Vimal Gupta, Senior Advocate with Ms.Padma Divakar for the appellant.Mr.Ajit Shah i/by Mr.Srihari M Iyer for the respondent. P.C. : CORAM : J.P. Devadhar &M.S. Sanklecha, JJ. DATE : 5[th] November 2012 1.Two questions of law raised by the Revenue in this appeal reads thus : a)Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the disallowance of Rs.2,71,65,498/- made by the Assessing Officer being interest paid on loans raised specifically to set up a new unit at Sisodra and for modernization of the wire rod mill plant even though the provisions of Explanation 8 to Section 43 (1) state that such expenditure will constitute part of the actual cost of the assets and also the fact that the Assessee Company had itself capitalized the said expenditure in its Books of Account ?the Tribunal was justified in deleting the disallowance of Rs.2,71,65,498/- made by the Assessing Officer being interest paid on loans raised specifically to set up a new unit at Sisodra and for modernization of the wire rod mill plant even though the provisions of Explanation 8 to Section 43 (1) state that such expenditure will constitute part of the actual cost of the assets and also the fact that the Assessee Company had itself capitalized the said expenditure in its Books of Account ? b)Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that full amount of expenditure incurred on issue of partly convertible debentures is deductible as the Tribunal was justified in holding that full amount of expenditure incurred on issue of partly convertible debentures is deductible as revenue expenditure which is contrary to the decision of the Hon'ble Supreme Court in the case of Brook Borne India Limited reported in 228 ITR 798 (SC) ? 2.The assessment year involved herein is AY 1996-1997. 3.As regards first question is concerned, the Income Tax Appellate Tribunal has allowed interest on the borrowed capital under Section 36(1)(iii) by recording a finding that the borrowed capital was used in connection with the existing business of the assessee. In such a case, where there is no issue relating to depreciation is involved, the Apex Court in the case of Dy. Commissioner of Income-tax V/s. Core Health Care Limited reported in (2008) 298 ITR 194 (S.C.) has held that explanation 8 to Section 43 of the Act would not apply and interest under Section 36(1)(iii) of the Act cannot be denied to the assessee. In these circumstances, no fault can be found with the decision of the Income Tax Appellate Tribunal in allowing the claim of the assessee. Hence, the first question cannot be entertained. 4.The second question raised by the Revenue relates to allowing the expenditure incurred by the assessee in connection with the partly convertible debentures. According to the Revenue, the expenses relating to convertible debentures are capital in nature and, hence, disallowable. 5.The Rajasthan High Court in the case of Commissioner of Income-tax V/s. Secure Meters Limited reported in (2010) 321 ITR 611 (Raj.) after considering various decisions including the decision of the Apex Court in the case of Brook Bond India Limited V/s. Commissioner of Income-tax reported in 225 ITR 798 (S.C.) has held that the debentures when issued as convertible or non-convertible is a loan allowable as revenue expenditure. Admittedly, the SLP filed by the Revenue against the said decision has been dismissed by the Apex Court on 11[th] August 2009. In this view of the matter, the second question raised by the Revenue cannot be entertained. 6.The appeal is accordingly dismissed with no order as to costs. (M.S. Sanklecha, J.) (J.P. Devadhar, J.)