TaxTMI 
TaxTMI 
2006 (8) TMI 174
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..... T. Appeal No. 49 of 2002) was admitted for final hearing on the following substantial questions of law : "1. Whether the Tribunal erred in law in not allowing the deduction of expenditure incurred in the assessment year 1990-91, in the issue of debentures for raising loan for the purpose of business under section 37, instead of treating as covered under section 35D of the Act ? 2. Whether the Tribunal erred in law in not allowing the deduction of interest payment Rs. 10,99,007 against business income thereby whether further entitled to deduction under section 80M on the gross dividend income as against the net dividend income from the UTI ? 3. Whether the Tribunal erred in law in disallowing interest payment of Rs. 5,83,700 which is against the loan raised to purchase tax-free securities whose income is exempt and is arising in the course of one indivisible business ? 4. Whether the Tribunal erred in law in not including the cost of interest in purchase price of units/tax-free securities thereby increasing the short-term capital loss under section 45 of the Income-tax Act, 1961, as against deduction allowed from dividend income under the head 'Income from other sources' under....
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....as revenue expenditure as contended by the assessee. 8. By order (annexure C), the Assessing Officer while negativing the claim made by the assessee along with other issues held that a sum of Rs. 22.18 lakhs claimed by the assessee as revenue expenditure should be allowed as preliminary expenses defined in section 35D(2)(c)(iv) ibid and accordingly, benefit in the manner provided therein be given to the assessee. 9. The assessee felt aggrieved against this finding of the Assessing Officer, filed an appeal to the Commissioner of Income-tax (Appeals) along with the other issues decided by the Assessing Officer against the assessee and confirmed the finding by his order dated April 4, 1993, (annexure B). The assessee felt aggrieved filed further appeal to the Tribunal. By the impugned order, the Tribunal too upheld the aforesaid finding of the Assessing Officer and that of the Commissioner of Income-tax (Appeals). As a consequence, the issue in so far as it related to the deduction of Rs. 22.18 lakhs was concerned, the same was decided against the assessee by all the three authorities. It is against this finding, the assessee filed this appeal under section 260A ibid and questioned ....
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...., The assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount equal to onetenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the industrial undertaking is completed or the new industrial unit commences production or operation : Provided that where an assessee incurs after the 31st day of March, 1998, any expenditure specified in sub-section (2), the provisions of this sub-section shall have effect as if for the words 'an amount equal to one-tenth of such expenditure for each of the ten successive previous years', the words 'an amount equal to one-fifth of such expenditure for each of the five successive previous years' had been substituted. (2) The expenditure referred to in sub-section (1) shall be the expenditure specified in any one or more of the following clauses, namely :— . . . (c) where the assessee is a company, also expenditure— . . . (iv) in connection with the issue, for public subscription of shares in or debentures of the company, being underwriti....
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....applies to general category of expenditure thereby excluding its applicability. 18. We are not impressed with the submission of learned counsel for the appellant/assessee when he contended in alternative that expenditure incurred in relation to issuance of non-convertible debenture could be treated as revenue expenditure. In our view, the use of the expression "debenture" in sub-clause (iv) would include all kinds of debentures, i.e., convertible and/or non-convertible. Had the Legislature used only one specific type of debenture in sub-clause (iv) then in such eventuality it would have excluded all other kinds of debentures which are not mentioned in the clause. But such is not the case here. In the scheme of the Companies Act and all other related corporate laws relating to company affairs, there are several kinds of debentures which are usually issued by the limited companies in the share market for public. The intention of the Legislature is, therefore, to include all kinds of debentures within the four corners of section 35D irrespective of name by which they are known in market and not one kind of debenture as contended by learned counsel for the assessee. 19. In vi....
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....ay of deduction and claimed exemption under section 10(15)(iv) so far as interest income was concerned. The assessee also claimed deduction of 60 per cent. under section 80M from gross amount of dividend income. 24. The Assessing Officer held that such investment being not part of assessee's business and hence, disallowed the claim of interest while computing the business income. The Assessing Officer then allocated the same against dividend and interest received and deducted under section 80M in accordance with procedure specified by the Supreme Court in the case of Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120. 25. The assessee felt aggrieved filed appeal to the Commissioner of Income-tax (Appeals) who after appreciating the whole issue by his order dated April 4, 1993 (annexure B), held that interest payable by the assessee in their overdraft account to the extent of Rs. 18,64,553 alone is an allowable business expenditure and hence, disallowance made by the Assessing Officer to this extent was held unjustified. It was, accordingly, set aside by granting partial benefit to the assessee. However, so far as interest of Rs. 10,99,007 was concerned, the same w....
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....tions for section 80M on the basis of the law laid down by the Supreme Court in the case of Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120 by taking into consideration the interest paid on direct borrowings, i.e., Rs. 10,99,007 and Rs. 5,83,700. No fault thus can be found in this approach. 31. Learned counsel for the appellant (assessee) cited several decisions at the Bar but having gone through the same, we find that these very authorities were cited before the Commissioner of Income-tax (Appeals) and the Tribunal and then impugned finding was recorded by both the authorities. Since, we have upheld the findings impugned in this appeal and hence, we do not consider it necessary to again deal with several case law cited at the Bar separately. It will only burden our order with no utility as such. 32. In view of the foregoing discussion, we also answer question No. 2 against the appellant/assessee and in favour of the Revenue. 33. So far as questions Nos. 3 and 4 are concerned, learned counsel for the appellant made a statement that he does not press question No. 3 and hence, it is answered against the assessee. As far as question No. 4 is concerned, the same, ....