TMI Blog2019 (4) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... (28A) of the said Act. Now this interest payment was spread over the duration of the loan. Therefore, the front ends fee constituted interest liability of the assessee spread over a period of time. Obtaining the loan and paying interest to service it ensured long term benefit to the assessee. Hence, this expenditure was revenue and not capital. Furthermore, according to the above decision, the assessee was entitled to amortize it. Tribunal is required to re-determine this issue by considering Madras Industrial Investment and determine the allowable revenue, expenses of the assessee for the relevant assessment year. The impugned order of the tribunal is set aside with regard to the issue concerning front end fee. - Decided in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) Whether on the facts and in the circumstances of the case, the Learned Tribunal erred in deleting the addition made by Assessing Officer of unrealized foreign exchange gain of ₹ 7,20,12,479/-. These questions of law arose from a judgment and order of the Income Tax appellate tribunal A Bench dated 29th February, 2008 in respect of the assessment year 2004-05, to be heard in this appeal under Section 260A of the Income Tax Act, 1961. While obtaining a new loan, the assessee had to pay a fee to the bank or financial institution described as front end fees. An expenditure of ₹ 61,69,000/- shown by the assessee on this account was deleted by the department. The assessee had claimed amortiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment in the case of Madras Industrial Investment Corporation Ltd. Vs. Commissioner of Income Tax reported in 225 ITR 802 . The learned tribunal in its impugned judgment and order felt itself bound by its earlier orders. Following the decision of the Tribunal for the Assessment Year 2003-04 dated 23rd November, 2007 the department s appeal was dismissed. Now, I express my views on this subject. The facts of the above Supreme Court case need to be analysed. In December, 1966 the company issued debentures at a discount. Debentures worth ₹ 1.5 crores were issued at an aggregate discount of ₹ 3 lakhs. The debenture was redeemable over a period of 12 years. So the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in its entirety in the year in which it occurred. It could not be spread over a number of years. By issuing debentures the assessee incurred liability to pay the discount in the year of its issue. There was a continuing benefit spread over a number of years. The liability should therefore be spread over the period of the debentures. In my opinion, the facts of this case are very similar to those before the Supreme Court. Here the assessee was required to pay front end fee to obtain loan from a bank or financial institution. It also had to pay interest. As I have observed above, the front end fee is part of interest under Section 2(28A) of the said Act. Now this interest payment was spread over the duration of the loan. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since the assessee was following the mercantile system of accounting they could not avoid the said amount being assessed as its income during the relevant financial year. It was contended on behalf of the assessee that this profit was only notional calculated on the basis of the foreign exchange rate on the last day of the previous year. There was no actual gain. The Commissioner of Income Tax, Appeals in his order dated 29th November, 2006 directed deletion of the same. The tribunal by its impugned order dated 23rd November, 2007 upheld the order of the Commissioner of Income Tax. Mr. Khaitan, learned Senior Advocate appearing for the respondent assessee conceded that the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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