TMI Blog2006 (5) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in allowing the deduction claimed by the assessee. - - - - - Dated:- 19-5-2006 - Judge(s) : T. S. THAKUR., J. M. MALIK. JUDGMENT The judgment of the court was delivered by T. S. THAKUR J.- The common question of law which the Revenue has raised in all these appeals for our adjudication is whether the Income-tax Appellate Tribunal was correct in law in allowing the assessee's claim for proportionate allowance of premium payable on redemption of debentures issued by it. The question is no longer res integra in the light of the decision of the Supreme Court in Madras Industrial Investment Corporation Ltd. v. CIT [1997] 225 ITR 802, but before we refer to the said decision in some detail, we need to state a few facts relevant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the parties, we are of the view that the question sought to be agitated before us is no longer examinable in the face of the authoritative pronouncement of the Supreme Court in Madras Industrial Investment Corporation Ltd. v. CIT [1997] 225 ITR 802. In that case also, the assessee-company had issued debentures at a discount amounting in all to Rs. 3 lakhs. The company spread the said amount over a period of 12 years for which the debentures were issued and claimed deduction on a proportionate basis towards expenditure incurred for the purpose of business. This was disallowed by the High Court on the ground that the proportionate amount could not be considered to be an expenditure within the meaning of section 37 of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in the present appeals disputed the nature of the expenditure. It is not in dispute that the amount raised through the issue of debentures was used for business activities of the assessee. That being so, the moment the debentures were issued, the liability had arisen against the assessee which would constitute an expenditure allowable under section 37 of the Act. What is argued by the Revenue all the same is that the liability could not be spread over on a proportionate basis as has been done by the assessee in the instant case. A similar argument was advanced even before the apex court in Madras Industrial Investment Corporation Ltd. v. CIT [1997] 225 ITR 802. Repelling the contention that the liability cannot be spread over the number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry distorted picture of the profits of a particular year. Thus, in the case of Hindustan Aluminium Corporation Ltd. v. CIT [1983] 144 ITR 474, the Calcutta High Court upheld the claim of the assessee to spread out a lump sum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question." The court further held that issuing debentures at a discount is also an instance where although the assessee has incurred the liability to pay the discount in the year of the issue of debentures the payment is to secure the benefit over a number of years. There is thus a continuing benefit to the business of the company over the entire period. The liability should, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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