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2010 (1) TMI 26 - HC - Income TaxDeduction - The assessee issued 21800 Optionally Convertible Premium Notes (OCPN) at Rs.100/- each on 15.4.1995 and raised loan of Rs.21.80 lakhs. These OCPNs were redeemable at the expiry of four years at Rs.200/- per OCPN. However, OCPN holders had an option at the end of the 4th year from the date of allotment to get redemption amount of Rs.200/- per OCPN or to convert into 20 equity shares of Rs.10/- each at par. The assessee has claimed a sum of Rs.4,47,958/- as OCPN, premium amount written off in the P/L Account on the grounds that the amount is nothing but the cost or compensation of using the borrowed money for four years and is accordingly in the nature of interest and allowable – held that - there was a continuing benefit to the business of the company over the entire period and therefore premium payable on redemption of loan convertible secured debentures issued during the year should be spread over the period of the debentures and such premium payable liable to be deducted – order of ITAT allowing the deduction sustained.
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