TaxTMI 
TaxTMI 
2016 (2) TMI 404
X X X X Extracts X X X X
X X X X Extracts X X X X
....as claimed by the assessee. 2. Brief facts of the case are that the assessee company, which is in the business of Cargo Transport and Trading, filed its return of income for the A.Y. 2007- 08 on 31.10.2007 declaring a total income of Rs. 15,54,67,315 and book profit of Rs. 2,62,85,309 under section 115JB of the Act. During the assessment proceedings under section 143(3) of the I.T. Act, the income of the assessee was determined at Rs. 16,36,43,200. Subsequently, the CIT assumed jurisdiction under section 263 of the I.T. Act and directed the A.O. (i) to bring to tax the gain on account of foreign exchange fluctuation of Rs. 15,46,428 as income from other sources; (ii) to disallow gratuity of Rs. 1,32,95,577; and (iii) to disallow expenditur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... capital investment projects and the advantage that would accrue to the assessee from such capital investment would be of an enduring nature. He further observed that the bonds were not meant to be part of profit earning process or a part of the working capital but was meant for investment in the capital field such as off-shore acquisition, acquisition/ purchase of scrips, / investment in wholly owned subsidiaries etc., He therefore, treated the expenditure of Rs. 2,64,26,757 incurred on issue of the bonds as capital expenditure and accordingly, brought it to tax. Aggrieved, assessee filed an appeal before the Ld. CIT(A) who confirmed the order of the A.O. and the assessee is in second appeal before us. 3. The Ld. Counsel for the assessee,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng outstanding amount in respect of the balance FCCBs has been fully repaid on 31.12.2011 with premium to the bond holders which fact has also been taken note of by the Commissioner in his order under section 263 of the I.T. Act. He has submitted that as the bonds were issued only for the purpose of securing loan finance, the assessee has not obtained any asset or advantage of any enduring nature and the expenditure made is for securing the use of money in business for certain period. He has submitted that it is irrelevant to consider the object for which the loan is obtained so long as it is for the business purposes of the assessee, to consider the same as revenue expenditure. According to him, the utilisation of FCCB proceeds has nothing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. D.R., on the other hand, supported the orders of the A.O. and has placed reliance upon the findings of the A.O. and the CIT(A). 5. Having regard to the rival contentions and the material on record, we find that the only dispute is to the nature of expenditure incurred by the assessee on issue of FCCBs. The Hon'ble Supreme Court in the case of "India Cements" (cited supra) was considering the allowability of claim of expenditure of the assessee therein, incurred by it, on stamps, registration fees etc., for securing a loan, as business expenditure under section 37(1) of the Act, and held that loan obtained cannot be treated as an asset or advantage of an enduring nature for the benefit of the business of the assessee, as, a loan is a lia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ility of the expenditure on account of issue of debentures and the applicability of Section 35D to such expenses and it was held that Section 35D has been introduced w.e.f. 01.04.1971 to give benefit to the assessees in case of capital expenses but a deduction, which is otherwise allowable as revenue expenditure, cannot be denied after insertion of Section 35D. The Hon'ble High Court also took note of the CBDT Circular No.56 dated 19.03.1971 which clarified the provision of section 35D and the amortization allowable and the said provision has further been clarified that it is not intended to supersede any other provision of the I.T. Act, under which such expenditure is admissible as a deduction. In the case before the Hon'ble Calcutta High ....