TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 345
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....-convertible debentures of face value of Rs.10 lacs each aggregating to Rs.75 croresredeemable after five years at a premium of Rs.7,23,870/- per debenture giving implicit return of 11.5%. In such manner, the redemption price of the debentures comes to Rs.17,23,870/-. It was further observed by the Assessing Officer that during the F.Y. 2013-14, the assessee has issued 860 non-convertible debentures of face value of Rs.10 lacs each, aggregating to Rs.86 crores which were redeemable after seven years at a premium of Rs.10,77,342/- per debenture giving an implicit return of 11%. Accordingly, the assessee has claimed a total amount of Rs.20,73,77,111/- on account of provision for payment of premium on redemption of these debentures for the F.Y. 2014-15 which is debited in the profit & loss account of the assessee. 2.1 On being asked to justify why the premium payable on redemption of debentures may not be disallowed, the assessee submitted that being a corporate assessee, the assessee is required to maintain its accounts on mercantile/accrual basis and accordingly, a sum of Rs.20,73,77,111/- being the proportionate amount of premium accrued for the year, has been booked under the hea....
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.... the term of the debentures. In the case of the premium, which the assessee pays, the premium paid on the date fixed for redemption consideration of the use of the funds by the assessee until such date as the debentures fall due for redemption. 2.3 Ultimately, the Assessing Officer held that the facts of the case of the assessee are exactly similar to a case law decided by Hon'ble Bombay High Court in the case of CIT vs. Raymond Ltd. (IT Appeal No. 188 of 2011), wherein the assessee had issued non-convertible debentures redeemable at premium. The assessee paid the entire amount due on redemption of such debentures along with premium in the relevant Financial Year and claimed a deduction for the premium payable made in the year of actual redemption of debentures. The Assessing Officer also quoted the conclusion of the decision of Hon'ble High Court wherein, it was held : "The principle which has been laid down by the Supreme Court in Madras Industrial Investment Corpn. Ltd (supra) to hold that the additional liability equivalent to a discount represents revenue expenditure must, by analogy of reasoning, apply to the premium which is paid by the assessee at the time of redemption ....
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....as relied on the same case laws and has submitted that reliance of AO on Raymonds Ltd. case is misplaced as in this case, the issue of payment of premium on redemption of debenture was decided and allowed as revenue expenditure. The issue of pro- rata basis or on payment basis was never before the Court. 6.5 This argument is not correct as is clear from the reading of the quoted para of the order of the Court in Raymonds Ltd. case. It is clear that the issue of actual payment basis was the subject of discussion while deciding allowance of premium on redemption of debenture as revenue expenditure. 6.6 However, in the case of CIT VsJagjeet Industries 204 CTR 428 (Del.), the same issue has been decided in favour of the assessee allowing provisions for premium on debentures on pro- rata basis as accrued during the year. The decision of the jurisdictional Court on identical facts as that of the instant case is squarely applicable. 6.7 Considering the facts of the case, in the light of judgments of various Courts including jurisdictional High Court as mentioned above, the addition is not held to be justified and is deleted. This ground is allowed." 4. The Revenue Department, b....
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....noted by the Ld. CIT(A) is squarely covered by the decision of Hon'ble High Court in the case of CIT vs. Jagatjit Industries Ltd. (supra) wherein the Hon'ble High Court relied upon the ratio and principle laid down by the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. wherein it was observed as under:- "Having heard learned Counsel for the parties, we are of the view that the question sought to be agitated before us is no longer examinable in the face of authoritative pronouncement of the Supreme Court in Madras Industrial Investment Corporation Ltd. v. Commissioner of Income Tax (supra). That being so, the moment the debentures were issued, the liability had arisen against the assesseewhich would constitute on expenditure allowable under section 37 of the Act. What is argued by the revenue all the time is that the liability could not be spread over on a proportionate basis as has been done by the assessed in the instant case. A similar argument was advanced even before the Apex Court in Madras Industrial Investment Corporation Ltd. v. Commissioner of Income tax (supra). Repelling the contention that the liability cannot be spre....