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2013 (11) TMI 63 - AT - Income TaxAllowance of discount on issue of debenture as expenditure – Held that:- Reliance has been placed on the decision of Hon’ble Rajasthan High Court in case of CIT Vs Secure Meters Ltd.[ 2008 (11) TMI 66 - HIGH COURT RAJASTHAN ], which has been upheld by Hon’ble Supreme Court - Discount on issue of debenture is expenditure for raising loan and therefore the same is allowable as business expenditure. As per the decisions of the Hon’ble Rajasthan High Court and Supreme Court (supra) it is irrelevant to consider the object with which the loan was obtained however in the case of the assessee the loan was obtained to invest in the Zero Coupon Convertible Loan advance to the sister concerns which are in the same line of business therefore, in view of the decision of Hon’ble Supreme Court in case of S. A. Builders Ltd. [2006 (12) TMI 82 - SUPREME COURT] the same is for the business/commercial expediency and hence is allowable expenditure. Disallowance u/s 14A read with rule 8D of the Income Tax Act – Held that:- Rule 8D is not applicable for the assessment year under consideration in view of Hon’ble Jurisdiction High Court in case of Godrej and Boyce Mfg. Co. Ltd. v. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT]. The authorities below have invoked section 14A on the ground that the assessee invested this money in the Zero Coupon Convertible Loans therefore the intention of the assessee was to earn dividend income. It has been brought on record by the assessee that the loans were received back by the assessee and there was no conversion of loan into shares. Even otherwise section 14A cannot be invoked on the presumption that the particular investment would be convertible into shares and in future after such conversion the assessee is going to earn dividend income – No justification in invoking section 14A for disallowance of the expenditure when the assessee has invested in the form of giving Zero Coupon Optionally Convertible Loan – Decided in favor of Assessee.
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