Bonds, grant of discounts, ascertained liability - Income Tax - 496 / CBDT

INSTRUCTION NO. 496 / CBDT Dated : January 12, 1973 Section(s) Referred: 37 Statute: Income - Tax Act, 1961 Reference is invited to Board's Office Memorandum No.10/49/67-ITA.II dated the 31st August, 1968. A question has been raised whether the loss representing the amount of discount granted when bonds are issued should be allowed in the year of issue or the year of resumption. As soon as debentures are issued on discount by any financial institution it stands to honour the determined liability. As such, the discount becomes an ascertained liability in the year of issue itself. The loss representing the amount of discount should, therefore, be allowed as a deduction in the year of issue. Necessary instructions may please be issued to the Income-tax Officers working in your charge on the lines indicated above.