TaxTMI 
TaxTMI 
2017 (5) TMI 1407
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....;s ground to disallow the expenses. Ground 2: Stamp duty on Convertible debentures 2.1 The learned CIT(A) has erred in facts and in law in confirming the disallowance of expenditure incurred in relation to issue of debentures amounting to Rs. 19,38,800 (only 2 items), as capital expenditure. 2.2 The learned CIT(A) has erred in facts and in law to appreciate that where the stamp duty is incurred by the Appellant towards issue of debentures, the same is an allowable expenditure under section 37 of the Act. 2.3 The learned CIT(A) has erred in facts and in law to appreciate that the stamp duty for issue of debenture, is an allowable expenditure under the provisions of the Act, as the said stamp duty is compulsory levy under the Companie....
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....able expenditure as per the provisions of the Act. 3.5 The learned CIT(A) has erred in not considering the written submissions made by the Appellant, in this regard 3.6 The learned CIT(A) has erred in not considering the judicial precedents relied on by the assessee." The Appellant submits that each of the above grounds is independent and without prejudice to one another." 2. During the course of hearing, the ld. counsel for the assessee has invited my attention that expenditure incurred in relation to debentures is revenue expenditure in the light of judgment of Hon'ble jurisdictional High Court in the case of CIT & Anr. v. ITC Hotels Ltd., 338 ITR 109; whereas the CIT(Appeals) has decided the appeal of assessee following the j....
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....horities below and the judgments referred to in the light of rival submissions, we find that the issue of expenditure incurred in relation to issue of debentures was examined by the CIT(Appeals) in the light of judgment of Hon'ble Gujarat High Court and the order of Mumbai Bench of the Tribunal and held that this expenditure cannot be allowed as revenue expenditure. Whereas, the Hon'ble Rajasthan High Court had examined this issue in the light of the Hon'ble Apex Court judgment and various judgments of different High Courts and finally concluded that debenture when issued is a loan, and, therefore, whether it is convertible or non-convertible, does not militate against the nature of the debenture, being loan, and therefore the expenditure i....
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....llowing deduction for the entire sum and thus this addition was deleted. 7. We have gone through the judgment in Brooke Bond India Ltd.' s case [1997] 225 ITR 798 (SC) and find that that was a case where the registration fee to the tune of Rs. 1,50,000 was paid to the Registrar of Companies for increasing the share capital of the company, while in the case of India Cements Ltd. [1966] 60 ITR 52, the matter related to the borrowing of Rs. 40 lakhs from a financial institution, which loan was secured by a charge on the fixed assets of the company. The Hon'ble Supreme Court in this judgment considered various aspects of the matter including the previous English judgments and couple of judgments of the English courts based on the Engli....
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....o the question as to whether the expenditure for obtaining loan was revenue or capital expenditure. We are told that relying on this judgment many of the High Courts of the country have consistently taken the view that the expenditure incurred in issuing any debentures and raising loan on debentures is admissible obviously because the debenture is also a loan. 8. At this stage it was contended by the learned counsel for the Revenue that a distinction should be drawn between the convertible and non-convertible debentures inasmuch as if the debenture is converted into shares then it partakes of the character of capital and in that event the expenditure would not be revenue expenditure and would be capital expenditure. Learned counsel for the....
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....the learned counsel for the parties, we have come across a judgment of the Rajasthan High Court in CIT v. Secure Meters Ltd. [2010] 321 ITR 611 (Raj) (Income-tax Appeal No. 8 of 2007-Jodhpur Bench of the Rajasthan High Court) considering the various aspects has come to the conclusion that even if the debenture were to be converted into share at a later date, the expenditure incurred on such convertible debenture has to be treated as a revenue expenditure. The order of the Jodhpur Bench was taken up before the Hon'ble Supreme Court in Special Leave Appeal CC 10548 of 2009. The Hon'ble apex court has dismissed the special leave petition. 6. Therefore, we are of the view that the point raised in this appeal has been decided in view of the dis....