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TMI Blog2015 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ilendra P. Yadav ORDER PER R.C.SHARMA (A.M.) : This appeal is filed by the assessee against the order of CIT(A), dated 22-3-2013, for the assessment year 2009-10, in the matter of order passed under Section 143(3) of the I.T. Act. 2. Rival contentions have been heard and record perused. Facts in brief that assessee is a private Trust carrying on its activities under the name of M/ s. Jamnagar Infrastructure Enterprises and is formed by Settler Reliance Capital Ltd. (RCL) with the object of holding the trust amount and carrying on the activities and business as undertaken by Reliance Capital Ltd. by virtue of debt defeacensing agreements. M/ s. Appollo Exim Private Ltd. has been appointed as a Trustee to carry on the activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,80,324/- being discount on assigned liabilities claimed as deductible u/s.37(1) of the Income tax Act. 3. It is prayed that the order of Commissioner of Income tax (Appeals) be cancelled and direction be issued to allow the appeal on the grounds raised before him. 4. Shri J.D.Mistry, learned Senior Counsel appearing on behalf of the assessee has contended that there was a finance transaction between the person assigning the liability and the person accepting the liability i.e. the assessee, whereby the person accepting the liability in view of having received present value of the liability agrees to pay on the due dates the amount of liability to the respective State Governments. Learned AR placed reliance on the decision of Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned for the year ended 31.03.2009 interest income and dividend income. Against these incomes, the assessee Trust has claimed discount on the assigned liability taken over which represents the finance cost of the liability taken over. This is worked out by apportioning the difference between the amount received for taking over payment obligations and the amounts payable on account of the payment obligations over the period of the assigned liability at the predetermined rate. Thus, the assessee had claimed proportional discount on assigned liability of ₹ 4,07,80,324/- as a deduction while computing the income. Thus, it was in the nature of finance transaction between the person assigning the liability and the person accepting the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income of the company and is therefore allowable as a revenue deduction. 7. We also found from the record that discount claimed by assessee was an actual liability arising in terms of the contract under which the assigned liability has been accepted by the assessee and it is not a contingent liability. As per the terms of the contract, the Trust has undertaken to discharge liabilities of the assignor on due dates as mentioned in the contract and in lieu thereof, has received certain amounts. The difference between the amount received and the amount payable over a period of time has been claimed as deduction over the period of time during which such amounts are going to be utilised for the purpose of business of the Trust. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has incurred in praesenti although it is payable in futuro. A contingent liability that may arise in future is, however, not expenditure . It would also cover not just a one time payment but a liability spread out over a number of years. Therefore, when a company issues debentures at a discount, it incurs a liability to pay a larger amount than what it has borrowed, at a future date. One need not go into the question whether this additional liability equivalent to the discount, which is incurred in praesenti but is payable in future, represents deferred interest or not. That may depend upon the totality of circumstances relating to the issue of debentures, including its terms. The liability, however, to pay the discounted amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Madras Industrial Corpn. Ltd. (supra) has held that the liability to pay the discounted amount over and above the amount received for the debentures was a liability incurred by the company for the purposes of its business in order to generate funds for its business activities. It was therefore taken as expenditure. The Hon ble Supreme Court directed as to allow such expenditure. The facts of the case are identical to the facts of the case decided by the Hon ble Supreme Court (supra) and also the finding that in earlier three scrutiny assessment in the case of the assessee, the AO has allowed such discount. In our considerate view, facts being the same, and the law has not changed therefore similar view should be follow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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