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TMI Blog2014 (11) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case by ignoring the judgment of Hon'ble "E" Bench ITAT, New Delhi on the ground No.2, in the case of appellant for the assessment year 2002-03 and 2003-04. The Hon'ble Bench held that the Take Out Assistance Fees is revenue expenditure. 4) The Ld. CIT(A) has earned in law and on the facts and circumstances of the case by treating a sum of Rs. 3,51,07,840/-s being amortization of Zero Coupon Bond (Series B), issued to Lenders as a part of the package of Relief and Restructuring Cell (CDR) of the Banks and Financial Institutions, as capital expenditure. The appellant submit that it is entitled to deduction of Rs. 3,51,07,840/- as revenue expenditure." 2. As regards grounds No.2 & 3, the same are related to a single issue with regard to confirmation of addition of Rs. 1,34,44,986/- being the "Take Out Assistance Fee" as capital expenditure paid by the assessee in connection with the loan raised by it against the claim of the assessee for deduction of the said amount as revenue expenditure. 3. The facts indicate that the assessee in its P & L account, as a part of finance charges, has claimed an amount of Rs. 1,34,44,986/- towards 'take out assistance f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or revenue expenditure. The source or the manner of the payment would then be of no consequence. It is only in those cases where this test is of no avail that one may go to the test of fixed or circulating capital and consider whether the expenditure incurred was par of the fixed capital of the business or part of its circulating capital. If it was part of the fixed capital of the business it would be of the nature of capital expenditure and if it was part of its circulating capital it would be of the nature of revenue expenditure.' The perusal of Article II of takeout agreement contains the condition that the company shall pay to the takeout lenders, takeout fee on the respective amounts of takeout obligation. Such takeout fee shall be paid six months from the date of signing of the agreement or from the date of allotment of DDBs whichever is earlier, up to the end of ninth year from the date of allotment of DDBs or until the date of conversion whichever event is later. I find that the similar issue was decided against the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not controvert this factual aspect that this issue is squarely covered in favour of the assessee in assessee's own case for the assessment year 2005-06. It was submitted that the issue may be decided in accordance with Hon'ble jurisdictional High Court decision. 8. We have heard both the sides, perused the material on record and find that it is undisputed fact that the issue raised in the appeal of the assessee in grounds No.2 & 3 is squarely covered in favour of the assessee by Hon'ble Allahabad High Court decision as relied upon by the Ld. Counsel for the assessee. Since, there is no change of facts as emerging in this year and as was there before the Hon'ble Allahabad High Court on the issue, which is squarely covered in favour of the assessee, therefore, respectfully following the same, we direct to delete the addition as made by the A.O. and confirmed by Ld. CIT(A). 9. Regarding 2nd issue as contained in ground No.4, the challenge of the assessee is with regard to treating a sum of Rs.,3,51,07,840/- being amortization of zero coupon bonds (series B) issued to lenders as a part of the package of relief and concessions granted by CDR empowered group of the Corporate Debt Restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the I. T. Act, 1961 being revenue in nature. The assessee had created a provision on a year to year basis on the principle of Sinking Fund by applying the weighted average interest rate on outstanding borrowing prior to restructuring as the discount rate and thereby arriving at the amount of the yearly charge. The assessee has obtained confirmation from professional experts with respect to appropriateness to the Sinking Fund Method as well as the adequacy of the charge on a year to year basis to account for the liability towards the ZCBs in the books. Accordingly, the P & L account has been debited with Rs. 5,16,01,434/- being the required amount of provision and the corresponding liability has been created under the head secured loans and claiming it as a revenue expenditure. The assessee has also redeemed ZCBs (Series B) aggregating to Rs. 2,77,71,100/- during the year and the same has been adjusted against the face value of the zero coupon bonds (Series B) issued by the assessee. Though, the P & L account was debited with Rs. 5,16,01,434/- being the amortized amount of the cost of zero coupon bonds, the assessee had treated the same as interest or the purposes of claiming d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and rejoinder of the assessee in para 5.2 and 5.3 has concluded to confirm the action of the A.O. as per para 5.4, which is reproduced as under: "I have carefully considered the submissions made by the Ld. A.R. and perused the assessment order passed by the A.O. I find that the assessee has liability of Rs. 5,16,01,434/- on account of amortization of zero coupon bonds. Out of this the assessee itself has disallowed an amount of Rs. 1,64,93,594/- u/s 43B. The A.O. has therefore disallowed the remaining amount of Rs. 3,51,07,840/- as capital in nature. I find that this amount was on account of zero coupon bonds issued to compensate the lenders for loss of the interest. Section 37(1) requires that in order to claim an expenditure as deductible, the assessee must have incurred an expenditure and it should not be of the capital nature. The assessee does not fulfill these conditions. Since the amount was incurred for raising the capital, the same was in the nature of the capital expenditure. Therefore, the addition made by the A.O. is confirmed. This ground of appeal is rejected." 12. Still aggrieved, the assessee has come up in further appeal and while reiterating the submissions as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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