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| The Tax Publishers2020 TaxPub(DT) 1971 (Chen-Trib) INCOME TAX ACT, 1961
Section 37(1)
Where FCCBs raised by assessee were used for the purpose of its business, the expenditure incurred by way of premium paid on redemption of such FCCBs would be revenue expenditure and not capital expenditure.
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Business expenditure - Capital or revenue expenditure - Expenditure incurred by way of premium paid on redemption of FCCBs - FCCBs being used for purpose of business
AO noticed that assessee-company claimed expenditure with regard to premium paid on redemption of foreign currency convertible bonds (FCCBs). He further, noticed that the assessee infused equity in the form of share capital by introducing of FCCBs. Therefore, the AO held that the expenditure incurred by way of premium on such bonds was capital in nature and hence, it could not be deducted while computing the total income of the assessee.Held: Since FCCBs raised by assessee were used for the purpose of its business; the expenditure incurred by way of premium paid on redemption of such FCCBs would be revenue expenditure and not capital expenditure. Further, as the AO did not examine the issue properly and merely disallowed the expenditure stating that it was of capital nature, the issue was remanded to the AO for fresh examination and allow the assessee's claim in accordance with law.
REFERRED : Mahindra & Mahindra Limited v. DCIT (2012) 24 Taxmann.com 267 (Mum) and CIT v. Secure Meters Limited (2010) 321 ITR 611 (Raj) : 2010 TaxPub(DT) 252 (Raj-HC).
FAVOUR : In assesses favour.
A.Y. :
IN THE ITAT, CHENNAI BENCH
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