TMI Blog2014 (7) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... on more effectively and profitably, while leaving the fixed capital untouched, the expenditure would be on revenue account, even though advantage may endure for an indefinite future - even though a benefit may endure for an indefinite period, so long as the expenditure, if incurred in the subsequent year, is allowable as Revenue in nature, the pre-payment would also need to be considered on the same plane - the Assessee incurred expenditure for laying water pipelines which would have otherwise been considered as capital expenditure but the fact remains that the expenditure was in lieu of saving municipal tax and fees payable in future for a period of 15 years - the Assessee foreclosed the loan account by paying some additional amount which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law, learned CIT(A) has erred in allowing the entire expenditure of ₹ 15,12,136/- on account of prepayment of future interest on the ground that a payment which frees an assessee from the liability to make recurring revenue payments is Revenue in nature; without appreciating the fact that it is recurring in nature, therefore, should have been allowed over a period of time. 5. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the Assessing Officer restored. 2. Facts necessary for the disposal of the appeal are stated in brief. The Assessee company is engaged in production and sale of clinker and cement. For the assessment year under consideration it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Similarly, the company had taken a term loan for acquiring certain assets in the earlier years. With a view to save future recurring interest, the company pre-paid the loan. For making such pre-payment the company had to pay lender ₹ 15,42,136/- in lieu of future interest. This was also debited under Loss on Extinguishment of Debts . According to the AO this gives enduring benefit to the assessee and hence capital in nature. 4. On the other hand the case of the assessee is that interest payment is otherwise allowable as revenue expenditure and hence lump sum payment made for saving periodic payment of interest on loan should also be treated as revenue expenditure and allowable in the year of payment. Reliance was placed upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is getting advantage of non-payment of interest and assessee s main income is interest i.e. finance, there is implied benefit in the normal course of business of earning higher income whereas in the instant case the assessee carried on business of production of clinker and cement and loan taken by assessee as well as debenture amount was utilized for making investment. Thus the case law referred to by assessee are distinguishable. 6. On the other hand the ld. Counsel for the assessee adverted our attention to the case law paper book. He referred to page-9 @12 of the paper book ( CIT vs. Associated Cement Companies Ltd. (172 ITR 257)(SC) to highlight that if the advantage consists merely in facilitating the assessee s trading o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He also referred to page-40 @ 42 of the paper book (CIT vs. Gujarat Guardian Ltd. 177 Taxman 434) wherein the Court observed as under :- Pre-payment of premium paid in lump sum by assessee in lieu of reduced rate of interest as a result of restructuring of rupee term loan by IDBI-Same represented interest paid to a public financial institution i.e. IDBI-Claim for deduction thereof has to be allowed in lump sum in the relevant year in view of the provisions of section 43B(d)-There is no scope for spreading over the liability over a period of 10 years as done by the Assessing Officer. The same view was echoed by various Benches of the Tribunal, copies of which are placed in the paper book submitted and are as below: i) Overseas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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