Amount of discount could not be treated as expenditure. - Income Tax - 1532/CBDT

INSTRUCTION NO. 1532/CBDT Dated: October 22, 1983 Section(s) Referred: 37 Statute: Income - Tax Act, 1961 Attention is invited to Board's Instruction NO. 496 (F.No. 204/20/72-ITA.II) dated 12-1-1973 wherein it was stated that the loss representing amount of discount granted when bonds are issued should be allowed in the year of issue as it becomes as ascertained liability. 2. However, recently the Hon'ble Madras High Court in the case of Commissioner of Income-tax Vs. Madras Industrial Investment Corporation Limited (124 I.T.R. 454) has held that before there could be any expenditure, there had to be some payment out and as there is no such payment out in the case of issue of bonds at a discount, the amount of discount granted could not be treated as expenditure. 3. In view of above said judgement of the Madras High Court, the instruction No. 456 may be treated as withdrawn. 4. The Board further desire that appropriate remedial action may be taken by the Income-tax Officers to withdraw the amount already allowed in accordance with the earlier instructions of the Board. 5. The above instructions may please be brought to the notice of all the officers working under you.