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2014 (12) TMI 1232 - HC - Income TaxAllowability of premium paid on premature redemption of debentures - Held that:- The premium was paid on premature redemption of debentures. The expenditure was incurred in the previous year and was termed to be a allowable deduction. The Tribunal held that in the case of Madras Industrial Investment Corporation Ltd. vs. Commissioner of Income Tax (1997 (4) TMI 5 - SUPREME Court ), which was the other Judgment relied upon by the Revenue, the facts were that the Assessee issued debentures at a discount and was bound to repay them at face value value, after a period of 12 years. The question that arose for consideration was as to whether the entire discount had to be paid in the year of redemption or whether the same had to be spread over, namely, the period for which the debentures were issued. The findings and conclusions of the Hon'ble Supreme Court were distinguished by the Tribunal and in our opinion, rightly. That was done to deal with the two contentions of the Revenue, namely that the expenditure was capital in nature and alternatively even if it is considered to be revenue expenditure, it should have been spread over the duration or the entire period of the debentures. Meaning thereby, the date on which the debentures could become redeemable as per its terms. The Tribunal held that if the debentures were redeemed by the Assessee prior to the period for which they were issued and there was a mutual arrangement for premature redemption thereof, then, the amount of premature redemption or premature redemption premium cannot be said to be a capital expenditure and need not be spread over. - Decide against revenue
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