TaxTMI 
TaxTMI 
2015 (2) TMI 55
X X X X Extracts X X X X
X X X X Extracts X X X X
..../ s. Jamnagar Infrastructure Enterprises and is formed by Settler Reliance Capital Ltd. (RCL) with the object of holding the trust amount and carrying on the activities and business as undertaken by Reliance Capital Ltd. by virtue of debt defeacensing agreements. M/ s. Appollo Exim Private Ltd. has been appointed as a Trustee to carry on the activities of the assessee. During the course of scrutiny assessment, the AO found that the assessee claimed discount on assigned liability of Rs. 4,07,80,324/-. On enquiry by the AO, it was explained by the assessee that the claim of discount on the assigned liability taken over represent the finance cost of the liability taken over, which has been worked out by apportioning the difference between the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ween the person assigning the liability and the person accepting the liability i.e. the assessee, whereby the person accepting the liability in view of having received present value of the liability agrees to pay on the due dates the amount of liability to the respective State Governments. Learned AR placed reliance on the decision of Hon'ble Supreme Court in the case of Madras Industrial Corporation Ltd. Vs. CIT, reported in 225 ITR 802, wherein on the same principle discounted liability were spread over the period of maturity and allowed. Further, the learned AR brought to our notice the order of the Tribunal in assessee's own case of the assessment years 2007-08 & 2008-09, wherein exactly similar claim of the assessee was allowed by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ations over the period of the assigned liability at the predetermined rate. Thus, the assessee had claimed proportional discount on assigned liability of Rs. 4,07,80,324/- as a deduction while computing the income. Thus, it was in the nature of finance transaction between the person assigning the liability and the person accepting the liability i.e. the assessee, whereby the person accepting the liability in view of having received present value of the liability agreed to pay on the due dates the amount of liability to the respective State Governments. Since this is a finance transaction, the amount received from the assignor is a liability which has to be repaid alongwith interest in future and hence it has been reflected alongwith accrued....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ignor on due dates as mentioned in the contract and in lieu thereof, has received certain amounts. The difference between the amount received and the amount payable over a period of time has been claimed as deduction over the period of time during which such amounts are going to be utilised for the purpose of business of the Trust. Thus, the difference between the amount received by JIE and total amount payable at a future date, being a loan liability of assignors, represents the cost of borrowing which has been incurred but payable on future date, as per agreed terms, such accrued liability in praesenti even though payable in future is a deductible expenditure over a period for which the amount received initially has been used by the JIE, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t go into the question whether this additional liability equivalent to the discount, which is incurred in praesenti but is payable in future, represents deferred interest or not. That may depend upon the totality of circumstances relating to the issue of debentures, including its terms. The liability, however, to pay the discounted amount over and above the amount received for the debentures, is a liability which has been incurred by the company for the purposes of its business in order to generate funds for its business activities. The amounts so obtained by issue of debentures are used by the company for the purposes of its business. This would, therefore, be expenditure. The character of payment in relation to the payer can be different ....