2013 (6) TMI 777 - AT - Income Tax

Summary

Issues involved: Appeal against order u/s 263 of the Act related to assessment year 2006-2007.

Summary:
The appeal was filed against the order passed by the Commissioner of Income-tax u/s 263 of the Act, challenging the treatment of Foreign Currency Convertible Bond (FCCB) issue expenses. The Assessing Officer allowed the claim u/s 37(1), but the CIT held that the expenditure should have been considered u/s 35D for amortization. The Tribunal referred to a previous case where it was held that such expenses are deductible in full in the year of incurring. As there was no contrary decision brought forward, the assessment order was deemed not erroneous or prejudicial to the interest of revenue. The Tribunal concluded that the CIT was not correct in setting aside the assessment order, and thus, the appeal was allowed.

The Tribunal considered the dispute regarding the deductibility of FCCB issue expenses amounting to &8377; 2.35 crore. While the assessee claimed deduction u/s 37(1) in one go, the CIT opined that the expenditure should have been amortized over the period as per section 35D. The Tribunal referred to a previous case where it was held that such expenses are revenue in nature and deductible in full in the year of incurring. Since no contrary decision was presented, the assessment order was not considered erroneous or prejudicial to the interest of revenue. The Tribunal held that the CIT was not justified in setting aside the assessment order, and thus, the appeal was allowed.