2000 (3) TMI 50

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....85 : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to deduction of entire premium of Rs. 10,00,000 payable on debenture in the computation of its total income in the year when the debentures are redeemed and not in the year of issue ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not allowing the assessee-company even proportionate deduction on account of premium payable by the company ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that cash subsidy of Rs. 5,72,000 received during the year on generator is deductible from its cost for the purpose ....

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....ved by the assessee should be deducted from the cost of the assets for the purpose of depreciation and investment allowance and the other issue relates to the deduction of Rs. 10,00,000, being premium at the rate of five per cent. payable on redemption of loan convertible secured debentures issued during the year and whether that deduction should be allowed in the first year or last year or that should be spread over seven years. At the outset, learned counsel for the assessee brought to our notice the decision of the apex court in the case of Madras Industrial Investment Corporation Ltd. v. CIT [1997] 225 ITR 802 wherein their Lordships have taken the view that the discount written off should be allowed as deduction proportionately each....

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....the company over the entire period. The liability should, therefore, be spread over the period of the debentures." Following the view taken by the apex court, the liability should, therefore, be spread over the period of the debentures. In case of P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC) at page 841, their Lordships observed as under : "The Government subsidy, it is not unreasonable to say, is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the 'actual cost'. We should prefer the reasoning of the majority of the High....