Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (11) TMI 287 - AT - Income TaxAllowability of bond issue expenses - nature of expenses - assessee has raised an alternative plea of allowing the bond issue expenses under section 35D(1)(ii) - Held that:- The bonds have been raised for restructuring or rehabilitation of the sick mills through voluntarily retirement scheme of employees etc., the advantage is definitely of enduring nature to the assessee. The expenditure in the nature of interest on the bond is payable every year, which is an expense of recurring nature whereas the arranger fee paid by the assessee is one-time fee in connection with raising of bonds and thus the expenditure is covered over the maturity life of the bond. The expenditures on bond issue expenses has been incurred in connection with the restructuring of the various units of the company, which are profit-making centers. The expenses are having definite role in reorganizing the company and thus played a role in enhancing the value of the company. In view of the discussion, we hold that the bond issue expenses in the case of the assessee are not allowable u/s 37(1) of the Act as revenue expenditure. We find that under section 35D(1)(ii) of the Act expenditure incurred by the assessee after commencement of business in connection with expansion of his undertaking or in connection with setting up of a new unit are allowed subject to the fulfillment of the conditions laid down in the said section. The expenditure specified under the section include legal charges for drafting of agreement, expenses incurred by company in connection with issue for public subscription, or shares or debentures of the company etc. As this issue has not been examined by the lower authorities, we feel it appropriate to restore the issue to the Assessing Officer for examining the allowability of the bond issue expenses under section 35D of the Act and decide the issue in accordance to the law. The assessee is directed to produce all the details of the expenses alongwith other evidences. Accordingly, the ground of the appeal is allowed for statistical purposes
|