2002 (11) TMI 74

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.... appeal, are: The assessee, a public limited company, is engaged in the business of manufacturing cement refractories and allied products at Rajgangpur, Orissa. During the course of assessment proceedings for the assessment year 1987-88, the Assessing Officer noticed that the assessee had claimed a sum of Rs. 62,09,542 as commission paid to Ceramic Sales, its sole selling agents for sale of refractories. The said agents were also responsible for realisation of the sale proceeds. He also noticed that the assessee had also claimed as revenue expenditure Rs. 78,22,545, paid by it as interest to various financial institutions. On being asked to explain the nature of these expenses, it was explained by the assessee that similar expenses on co....

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....cond issue, the Tribunal was of the view that if a loan is taken for expansion or modernisation, of a continuing business then interest paid thereon is to be allowed as revenue expenditure. Thus, finding that in the present case the interest had been paid on the loan, raised from various financial institutions, for the expansion and modernisation of the existing plant, the Tribunal held that the said expenditure was revenue in nature. Hence, the present appeal. The following questions, which are stated to be substantial question of law, have been formulated: "A. Whether the Tribunal was correct in law in holding that the expenditure of Rs. 78.22 lakhs on account of interest paid to the financial institution is revenue in nature? B. Wh....