TaxTMI 
TaxTMI 
2014 (7) TMI 308
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.... law, the ld. CIT(A) has erred in holding that loss on account of extinguishment of debt is Revenue in nature; without appreciating the fact that debentures were borrowed capital as such, any loss derived therefrom is capital in nature/ 3. On the facts and in the circumstances of the case and in law, learned CIT(A) has erred in allowing the entire expenditure of Rs. 1,31,46,245/- on account of cancellation of debentures on the ground that a payment which frees an assessee from the liability of making recurring revenue payments is revenue in nature; without appreciating the fact that it is 'recurring' in nature, therefore, should have been allowed over a period of time. 4. On the facts and in the circumstances of the case and in law, learn....
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....31,46,245/- referable to the amount paid by the Assessee during previous year to the debenture holders on cancellation of debentures prior to the date of maturity. The Assessing Officer has also not allowed a sum of Rs. 15,42,136/-, paid to ICICI Bank for their agreeing to accept pre-payment/foreclosure of loan. 3. The case of the AO is that the company had issued privately placed debentures to raise funds for general corporate purpose with a coupon rate of 11.6%. With a view to save recurring interest expenditure on interest the company cancelled 25 debentures by paying in aggregate Rs. 1,31,46,245/- over the face value. This was debited under "Loss on Extinguishment of Debts" in the accounts. Similarly, the company had taken a term loan ....
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....essee. 5. Aggrieved, revenue is in appeal before us. Ld. DR submitted that the amount borrowed from ICICI Bank was utilised for making investment which is capital in nature. Similarly debentures were issued for utilization of funds for making investment in the company by foreclosing the debentures and loan account. The assessee gets an enduring/recurring benefit in the form of nonpayment of interest in future and therefore, it has to be treated as capital in nature. He further submitted that the case law relied upon by the assessee and referred to by CIT(A) are distinguishable on facts. In respect of an assessee carrying on finance business, by virtue of foreclosure of loans the assessee is getting advantage of non-payment of interest and ....
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....en advantage of non-payment of municipal taxes for a period of 15 years the expenditure incurred on laying pipelines in the year of incurring such expenditure, should be considered on revenue account and allowed accordingly. Similarly he referred to the decision of the Apex Court in the case of Assam Bengal Cement Co. Ltd. vs. CIT(SC) (27 ITR 34 @ 35) wherein the Court observed that even if the payment is paid in lump sum what has to be looked to is character of payment. In the instant case in the subsequent years, the expenditure would have been allowed as revenue in nature and, hence, merely because lump sum payment has been made it cannot be considered as capital in nature. He also referred to page-40 @ 42 of the paper book (CIT vs. Guja....