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2006 (3) TMI 188 - AT - Income TaxConvertible debentures for subscription - Expenditure incurred on the issuance of convertible debentures is "capital or revenue" expenditure? - HELD THAT - Maganlal Mohanlal Panchal (HUF)'s [1993 (9) TMI 20 - GUJARAT HIGH COURT], states that a solitary decision is to be followed but only when it is applicable to the facts and circumstances of the case. It has a persuasive value and not a binding decision like that of Supreme Court. This is with regard to decision of Calcutta High Court in the case of East India Hotels Ltd. [2001 (8) TMI 102 - CALCUTTA HIGH COURT], In this case, the debenture was held to be loan and 20 per cent repaid by allotment of shares was found to be an incentive for debentures subscription. There is nothing in the present case of that nature. Intention was to issue shares, partly on allotment of debenture itself and partly after 15 months. Here, the intention is thus was otherwise. The conversion is not an incentive for debenture but a prelude to issue of shares. We, therefore, hold that the raising of funds by issue of convertible debentures was to raise capital by ultimately converting debentures into equity share without giving an option to debenture holder to get repayment or a say in conversion. Substance of the transaction is issue of equity capital partly on the date of allotment of debentures. The contention of the assessee that expenditure relating to conversion partly after 15 months can at least be held as revenue has no force as the nature of such retention is akin to share application money pending allotment of shares. In the result, the appeal of the assessee is dismissed.
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