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TMI Blog2024 (11) TMI 1386X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT] wherein the Supreme Court affirmed the view taken by this Court in CitiBank NA [ 2008 (8) TMI 766 - SUPREME COURT] , American Express International Banking Corporation [ 2002 (9) TMI 96 - BOMBAY HIGH COURT] as also in HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] question answered in affirmative in favour of the assessee and against the Revenue. Deduction in respect of the expenditure incurred by the assessee on the issue of Fully Convertible Debentures - assessee had made a rights issue of Fully Convertible Debentures (FCDs) and in such connection, had incurred expenditure on account of printing expenses, advertisement, professional fees, stamp duty and filing fees, bank charges, packages, etc. - deduction was rejected by AO on the ground that the real intention of the assessee was to increase its capital and not to raise borrowed capital - HELD THAT:- In answering such issue in favour of the assessee and against the Revenue, observed that the said question would stand covered by the decision of Havells India Ltd. [ 2012 (5) TMI 449 - DELHI HIGH COURT] which followed the decision of the Supreme Court in India Cements Ltd. [ 1965 (12) TMI 22 - SUPREME COURT] and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold or when interest is received. As observed by the Tribunal, for the assessment year 1991-92 (subject matter of one of the appeals), the broken period interest amounted to Rs. 1,32,88,488/- which included the sum of Rs. 95,05,870/- pertaining to earlier years. The Assessing Officer rejected the claim of the assessee and disallowed the sum of Rs. 37,82,618/- (Rs. 1,32,88,488 Rs. 95,05,870). Similarly, disallowances were made for the assessment year in question. The reason for disallowance was that broken period interest formed part of the price of the asset purchased, which has already been debited to Profit Loss Account and, therefore, question of allowing deduction did not arise in view of the Supreme Court judgment in the case of Vijaya Bank Ltd. vs. Additional Commissioner of Income-tax (1991) 187 ITR 541 (SC). 5. The assessee was aggrieved by such view taken by the Assessing Officer and carried the matter in appeal before the Commissioner of Income-tax (Appeals) (for short CIT(A) ), who also agreed with the Assessing Officer and accordingly confirmed the order passed by the Assessing Officer. Against such orders passed by the CIT(A), the appellant carried the matter to the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated into interest accrued up to the date of purchase and balance of the price. The Court considered the Revenue s contention that the payment for the broken period interest (net) cannot be claimed as a revenue expenditure and it was the assessee s contention that the banks were valuing the securities/interest held by it at the end of each year and offered to tax, the appreciation in their value by way of profits/interest earned. In answering such question, the Court considered the decision of the Supreme Court in Vijaya Bank Ltd. (supra), the question was answered in favour of the assessee in the following terms: Therefore, under either method, the same amount is offered for tax, The Department has not been able to show in this case as to why the method adopted by the assessee-bank ought to be rejected. On the other hand, the Department has not been able to explain as to why broken period interest received should be taxed whereas broken period interest payment should be disallowed. In the circumstances, we uphold the order of the Tribunal. .. In the light of what we have discussed hereinabove, we find that the assessee's method of accounting does not result in loss of tax/reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and against the revenue. The Appeal is dismissed accordingly. Parties to bear their own costs. 9. Similar view was taken by the Supreme Court in dismissing another appeal filed by the Revenue in the case of Commissioner of Income Tax vs. Citi Bank N.A., Civil Appeal No. 2641 of 2004 decided on 12 August, 2008., for AY 1982-83. 10. Mr. Mistry has also drawn our attention to an order passed by this Court in assessee s own case (Housing Development Finance Corporation Ltd. - the assessee as formerly known), which was on three Income-tax Appeals filed for the A.Ys. 1991-92, 1992-93 and 1994-95, wherein following the decision of this Court in American Express International Banking Corporation (supra) and CitiBank N.A. (supra), the appeals filed by the appellant were allowed in favour of the assessee. Such orders passed by this Court need to be noted, which read thus: 1. These three Appeals under Section 260A of the Income Tax Act, 1961 (the Act), challenge the order dated 4th August, 2005 passed by the Income Tax Appellate Tribunal (the Tribunal). The common impugned order dated 4th August, 2005 disposes of the Appeals for Assessment Years 1991-92, 1992-93, 1993-94 and 1994-95. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for deduction was rejected by the Assessing Officer on the ground that the real intention of the assessee was to increase its capital and not to raise borrowed capital. On appeal, CIT(A) confirmed the disallowance made by the Assessing Officer inter alia following the decision of the Supreme Court in Brooke Bond India Ltd. vs. CIT (1997) 225 ITR 798 . It is against such decision of the CIT(A), the assessee approached the Tribunal. The Tribunal in confirming the order passed by the CIT(A) observed that there was no dispute on the entire issue on share capital in parts. It was observed that the true intention was not to raise loan but to raise share capital to increase its capital base. The Tribunal opined that it was therefore necessary to apply the ratio of the decision of Supreme Court in Brooke Bond India Ltd. (supra) and accordingly the expenditure incurred on such public issue was not allowed as a deduction confirming the order passed by the CIT(A), against which the present appeal has been filed. 15. In assailing such orders of the Tribunal, Mr. Mistry would firstly rely on the decision of the Delhi High Court in Commissioner of Income Tax vs. Ranbaxy Laboratories Ltd. ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hotels Ltd., (2011) 334 ITR 109 (Karn.); (iii) CIT vs. South India Corporation (Agencies) Ltd., (2007) 290 ITR 217 (Mad.) and(iv) CIT vs. First Leasing Co. of India Ltd., (2008) 304 ITR 67 (Mad.). The Court also observed that the Revenue has not been able to show any reason which would require the Court to take a different view from the one taken by the various High Courts in the country on an identical issue. 16. Before a Division Bench of this Court in Principal Commissioner of Income-tax vs. Reliance Natural Resource Ltd. (2019) 111 taxmann.com 413 (Bom.), again a similar issue had fell for consideration, namely whether the Tribunal was justified in deleting the disallowance of expenses on the issue of Foreign Currency Convertible Bond without appreciating the fact that expenses were incurred for the issue of FCBs, which is capital in nature. In answering such question of law in favour of the assessee and against the revenue, the Division Bench referring to the decision of Delhi High Court in Havells India Ltd. (supra) as also the decision of Rajasthan High Court in Secure Meters Ltd. (supra), held it to be an accepted position that such question of law would stand concluded in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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