2003 (12) TMI 579

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....xpenses on issue of shares of Rs. 68,096 claimed under section 35D which was disallowed on the ground that the assessee is not an industrial undertaking. 2. The facts of the case are that some convertible debentures were issued during the year and convertible part of debentures of the face value of Rs. 50 was to be converted into five shares of Rs. 10 each and as a matter of fact, these debentures got converted into equity shares, during the year itself. And under the circumstances, the Assessing Officer treated the expenditure on account of issue of convertible part of the debentures also as expenses incurred on issue of shares (sic). The learned CIT(A) upheld the order of the Assessing Officer by appreciating the fact that the conversi....

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....nnection with debentures. In both the judgments of the Tribunal relied upon by the learned Authorised Representative, the conversion was to take place after a period of time but not to be converted in the same year. It was held in all these judgments that expenses incurred on issue of convertible portion of PCD also are of revenue expenditure. 4. Now, limited question before us to adjudicate upon, is whether the conversion of PCD into shares in the same year or after the end of the relevant year has got any bearing on the allowability of the expenses incurred on the issue of convertible portion of the debentures. The addition by the Assessing Officer is based on this consideration alone and on this consideration only the learned CIT(A) c....

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....essed by the learned Authorised Representative and we sustain the order of the learned CIT(A) on this count. Hence, the assessee gets part relief of Rs. 11,01,379 on this ground out of Rs. 11,69,475. 5. The second ground relates to not allowing the interest income of Rs. 5,43,257 to be deducted from the share issue expenses. The learned Authorised Representative relied on the judgment in the case of CIT v. Karnal Co-operative Sugar Mills Ltd. [2000] 243 ITR 2 (SC). In this case, the interest was earned against the deposit to open letter of credit for purchase of machinery required for setting up its plant and it was held that the deposit of money was directly linked with the purchase of plant and machinery and hence, any income earned on....