TMI Blog1985 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... n 263 an order passed by the Inspecting Assistant Commissioner (Assessment) ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that a sum of Rs. 94,875 allowed as discount to the subscribers of the bond issued by the assessee-Corporation was not an allowable expenditure ? " The material facts giving rise to this reference, briefly, are as follows : The assessee is a corporation established under the State Financial Corporations Act, 1951. The assessment year in question is 1978-79. During the relevant previous year, the assessee, with the object of increasing its working capital, issued bonds for public subscription described as 6 1/4% 1981 Bonds (II Series of the face value of Rs. 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed an order under section 263 of the Act directing the Inspecting Assistant Commissioner (Assessment) to modify the assessment for the assessment year 1978-79 by rejecting the claim of the assessee for deduction of Rs. 94,875. Aggrieved by the order passed by the Commissioner of Income-tax under section 263 of the Act, the assessee filed an appeal before the Tribunal. It was contended before the Tribunal that the Commissioner of Income-tax had erroneously assumed jurisdiction under section 263 of the Act in respect of an order of assessment passed by the Inspecting Assistant Commissioner (Assessment) and that the Commissioner of Income-tax had erred in holding that the assessee was not entitled to the deduction of Rs. 94,875 as claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed by an Income-tax Officer is liable to be revised by the Commissioner under section 263 of the Act, in accordance with the provisions of that section. Therefore, in our opinion, the Tribunal was justified in holding that the Commissioner of Income-tax was competent to revise under section 263 of the Act, the order passed by the Inspecting Assistant Commissioner (Assessment). Our answer to the first question referred to us is in the affirmative and against the assessee. Before we proceed to consider question No. 2, it is necessary to refer to certain facts having a bearing on that question. It is not disputed that during the relevant accounting year, the assessee had issued bonds for public subscription at a discount of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted. The amount of discount, in effect, represents deferred interest. Looked at as a loss, a proportionate amount of discount can be written off out of revenue every year during the period the bonds would remain outstanding. Therefore, though the assessee would not be justified in claiming deduction of the entire amount of discount amounting to Rs. 94,875 in the accounting year in question, it would nevertheless be entitled to proportionate deduction spread over the period for which the bonds would remain outstanding. The Tribunal held, following the decision of the Madras High Court in CIT v. Madras Industrial Investment Corporation Limited [1980] 124 ITR 454, that the expression " expenditure " occurring in section 37 of the Act has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression ' expenses ' meant actual disbursements not allowances for loss of time. Therefore, a charge by a town clerk for preparing lists of parliamentary voters was not 'expense incurred' by him within the Parliamentary Voters Registration Act, 1843. But, again, in the case of R. v. Marsham [1892] 1 QB 371, 379 (CA), the Master of the Rolls, Esher, observed that the 'money expended' by a local board and recoverable from the owners or occupiers were not confined to moneys actually paid but include the moneys expended in the sense, the owner or occupier was bound to pay it. It, therefore, appears that the expression must be understood in the context in which it is used. " The learned judge further observed as follows (at pp. 76 and 77): " ..... X X X X Extracts X X X X X X X X Extracts X X X X
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