2014 (12) TMI 807

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....of manufacturing and selling of Cements. The assessee filed the return of income on 30.11.1994 declaring loss at Rs. 14,25,77,366/-. Thereafter, the return was revised twice and in the first revised return filed on 31.12.1994, the loss shown was at Rs. 14,58,02,276/-. The assessee filed the second revised return on 29.03.1996 reducing the loss to Rs. 5,22,99,863/-. This return was revised on account of sales and payment made in last Assessment Year before due date of filing of return of income and the sole payment made was subsequently claimed for deduction on paid basis in A.Y. 1993-94. Assessment scrutiny was undertaken and ultimately, the Assessing Officer passed the order of assessment u/s.143(3) on 31.03.1997. 3. Being aggrieved by th....

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....nses incurred are in respect of issuance of convertible debentures. Facts would further clearly indicate that major portion of the convertible debentures was converted into equity shares, and thereby assessing company had got enduring benefit. Debenture under the Company law means a document which either creates or acknowledges a debt. Debentures, wholly secured or unsecured are also used as convertible debentures with the option of being subsequently converted into shares. Share is a right to a special amount of the Share Capital of a company. Capital can be raised by converting debentures into equity shares. Expenditure incurred by the assessee on conversion of convertible debentures into equity shares would have to be treated as capital ....

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....rt in India Cements Ltd. Vs. CIT, Madras (supra), held that the loan obtained is not an asset or advantage of an enduring nature, but obtaining capital by issuance of shares is different from obtaining loan by debentures. Above referred judgment was followed by the Apex Court in Brooke Bond India Ltd. Vs. CIT (supra) and took the view that expenditure incurred by the company in connection with issue of shares with a view to increase its share capital, is directly related to the expansion of the capital base of the company, and is capital expenditure, even though it may incidentally help in the business of the company and in the profitmaking.             9. In view of the above position....