2006 (2) TMI 151

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....No. 351/Mds/98 for the assessment years 1993-94 and 1994-95. 2. The brief facts are as follows: The Revenue is the appellant. The relevant assessment years are 1993-94 and 1994-95. For the said assessment years, the assessee claimed deduction of amount paid towards provision for premium payable on redemption of debentures in future years. The Assessing Officer disallowed the same and also disallowed the amount claimed on the debenture issue expenses. Aggrieved by the order of the Assessing Officer, the assessee preferred appeals before the Commissioner of Income-tax (Appeals), who confirmed the order of the Assessing Officer relying on the earlier orders in the assessee's own case for the assessment year 1988-89. On further appeals b....

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....fer section 37 of the Income-tax Act, which reads as follows: "37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession'." 5. The questions whether the discount on debenture is revenue expenditure or capital expenditure and the same could be spread over and whether the expenditure incurred for the issue of debentures in earlier years has to be spread over and allowed as a deduction in future years came for c....

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....evenue expenditure. 6. Then the question arises whether the deduction of such revenue expenditure could be spread over. The revenue expenditure, which is incurred wholly and exclusively for the purpose of business, must be allowed in its entirety in the year in which it is incurred and it cannot be spread over a number of years, even if the assessee has written it off in his books over a period of years, but it was held by the apex court in the decision cited supra that issuing debentures is an instance where, although the assessee has incurred the liability to pay the discount in the year of issue of debentures, the payment is to secure a benefit over a number of years, there is a continuing benefit to the business of the company over the....