DCIT, Bangalore V. M/s IG Petrochemicals Ltd., Bangalore

ITA 1005/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89940 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 28-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALA KRISHNA
• Assessee Lawyers: PRATHIBHA
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T . A. NO. 1005 /BANG/20 1 4 (ASSESSMENT YEAR : 200 6 - 07 ) DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(4), BAN GALORE - 560 0 01 . APPELLANT. VS. M/S. I.G. PETROCHEMICALS LTD., D - 4, JYOTHI COMPLEX, NO.134/1, INFANTRY ROAD, BANGALORE. .. RESPONDENT. PAN AAACI 4115R APPELLANT BY : SHRI BALAKRISHNA, JCIT (D.R) R E SPONDENT BY : S MT. PRATHIBHA, ADVOCATE. DATE OF H EARING : 21.05.2015. DATE OF P RONOUNCEMENT : 5.6. 201 5 . O R D E R PER SHRI JASON P. BOAZ , A.M . : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) - I, BANGALORE DT. 1 3. 3 .201 4 FOR ASSESSMENT YEAR 200 6 - 0 7 . 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE PRODUCTION OF P HYTHALLI C A NHYDRIDE - PA AND PHYTHALLIC P LASTIZIER - D BP , FILED ITS RETURN FO R ASSESSMENT YEAR 2006 - 07 ON 25.10.2006 DECLARING LOSS OF RS.188,29,73,900. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE 2 IT A NO. 1005 /BANG/201 4 INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') AND THE CASE WAS SUBSEQUENTLY SELECTED FOR SCRUTINY. THE ASSESS MENT WAS CONCLUDED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DT.20.12.2008 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.194,01,48,336 AFTER MAKING CERTAIN ADDITIONS/ DISALLOWANCES TO THE RETURNED INCOME . AFTER SETTING OFF BROUGHT FORWARD UNABSO RBED BUSINESS LOSSES OF EARLIER YEARS, THE TAXABLE INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 07 WAS DETERMINED AT NIL. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07 DT.20.12.2008 , THE ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT (APPEALS) I, BANGALORE RAISING VARIOUS GROUNDS. THE LEARNED CIT(A) DISPOSED OFF THE ASSESSEE'S APPEAL VIDE ORDER DT.13.3.2014 ALLOWING THE ASSESSEE PARTIAL RELIEF. 3. REVENUE, BEING AGGRIEVED BY THE ORDER OF CIT (APPEALS) I, BANGALORE DT.1 3 .3.2014 FOR ASSESSMENT YEAR 2006 - 07, HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS : - 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN DELETING THE ADDITION OF RS.29, 59,740 BY HOLDING THAT THE FACTS OF THE CASE OF CIT & ANOTHER VS. HAVELLE INDIA IN THE ORDER OF THE DELHI HIGH COURT IN ITA NO.55, 57/2012 DT.21.5.2012 IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE WITHOUT APPRECIATING THAT THE ASSESSEE HAD NO T PAID THE INTEREST ON THE CONVERTIBLE DEBENTURES ISSUED. 3. THE CIT (APPEALS) ERRED IN DELETING THE ADDITION OF RS.29,59,740 WITHOUT APPRECIATING THE VIEWS TAKEN BY THE APEX COURT IN THE CASE OF BROOK BOND INDIA LTD. VS. CIT (1997) 225 ITR 798 AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION VS. CIT (1997) 225 ITR 792 WHEREIN IT WAS HELD THAT EXPENDITURE INCURRED FOR RAISING CAPITAL THROUGH PUBLIC ISSUE OF SHARES OR OTHERWISE IS A CAPITAL EXPENDITURE NOT ELIGIBLE FOR A DEBIT TO THE PROFIT/LOSS ACCOUNT AND THAT WHEN THE DEBENTURES ARE CONVERTED INTO SHARES THEY PARTAKE THE CHARACTER OF CAPITAL. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT (APPEALS) BE REVERSED AND THAT OF T HE ASSESSING OFFICER BE RESTORED. 3 IT A NO. 1005 /BANG/201 4 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 4. THE GROUNDS RAISED AT S.NOS.1, 5 AND 6 ARE GENERAL IN NATURE AND THEREFO RE NO ADJUDICATION IS CALLED FOR THEREON. 5. GROUND NOS.2 & 4 : DISALLOWANCE OF LEGAL EXPENSES : RS.29,59,740 . 5.1 IN THE GROUNDS AT S.NOS.2 AND 4 , REVENUE ASSAILS THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.29,59,74 0 BY HOLDING THAT THE FACTS OF THE CASE OF CIT & ANOTHER V HAVELLS INDIA LTD. OF THE HON'BLE HIGH COURT OF DELHI REPORTED IN 325 ITR 376 (DEL) IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE ON HAND WITHOUT APPRECIATING THAT THE ASSESSEE HAD NOT PAID INTE REST ON THE CONVERTIBLE DEBENTURES ISSUED. REVENUE FURTHER CONTENDS THAT, WHILE DELETING THE DISALLOWANCE OF LEGAL EXPENDITURE OF RS.29,59,740, THE LEARNED CIT(A) HAD NOT APPRECIATED THAT THE ASSESSING OFFICER HAD FOLLOWED THE VIEWS TAKEN BY THE HON'BLE APEX COURT IN THE CASE OF BROOK BOND INDIA LTD. V CIT (1997) 225 ITR 798 AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION V CIT (1997) (225 ITR 792). THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS HEARD IN RESPECT OF THE GROUNDS RAISED AND HE SUPPORTED THE FINDING IN THE ORDER OF THE ASSESSING OFFICER ON THIS POINT. 5.2 PER CONTRA, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE REITERATED THE SUBMISSION PUTFORTH BEFORE THE LEARNED CIT(A) AND SUPPORTED THE FINDING OF THE LEARNED CIT(A) IN THI S ISSUE IN THE IMPUGNED ORDER AS BEING CORRECT. IT WAS PRAYED, BY THE LEARNED AUTHORISED REPRESENTATIVE THAT IN THE FACTUAL AND LEGAL MATRIX OF THE CASE, THE IMPUGNED ORDER OF THE LEARNED CIT(A) BE UPHELD. 4 IT A NO. 1005 /BANG/201 4 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS O N THIS ISSUE AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL PRONOUNCEMENTS REFERRED TO. THE FACTS OF THE MATTER, AS EMANATE FROM THE RECORD , ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT IN THE PERIOD RELEVANT TO ASSESSMENT YEAR 2006 - 07, THE ASSESSEE HAD ISSUED DEBENTURES FOR RS.125 CRORES IN FAVOUR OF M/S. SPINNAKER C OMPRISING BOTH CONVERTIBLE AND NON - CONVERTIBLE DEBENTURES; AMOUNTING TO PART A CONVERTIBLE DEBENTURES OF RS.13.5 CRORES AND PART B NON - CONVERTIBLE DEBENTURES OF RS.111.50 CRORES WHICH HAD BEEN REPAID. IN THIS REGARD, THE ASSESSEE HAD CLAIMED LEGAL EXPENSES AMOUNTING TO RS.2.74 CRORES. ON EXAMINATION THEREOF, THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE PART - A CONVERTIBLE DEBENTURES OF RS.13.5 CRORES CONVERTED AS SHARES PARTOOK THE CHARACTER OF CAPITAL, THE LEGAL EXPENSES ATTRIBUTABLE TO AND CLAIMED IN RESPECT OF THE CONVERTIBLE DEBENTURES WERE ALSO TO BE DISALLOWED BEING CAPITAL IN NATURE AS THERE WAS AN IN CREASE IN THE AUTHORISED SHARES CAPITAL. AS 10.8% OF THE DEBENTURES WERE CONVERTED INTO EQUITY SHARES, THE ASSESSING OFFICER DISALLOWED PROPORTIONATE AMOUNT OF 10.8% OF THE EXPENDITURE CLAIMED ON LEGAL EXPENSES OF RS.2.74 CRORES, WHICH RESULTED IN A DISAL LOWANCE OF RS.29,59,740. 5.3.2 THE LEARNED AUTHORISED REPRESENTATIVE REITERATED THE CONTENTIONS AND SUBMISSIONS PUT FORTH BEFORE THE LEARNED CIT(A) CONTENDING THAT THE EXPENDITURE WAS FOR THE PURPOSE OF RAISING THE WORKING CAPITAL OF THE ASSESSEE COMPA NY AND THEREFORE THE LEGAL EXPENDITURE CLAIMED WAS ALLOWABLE AS REVENUE EXPENDITURE. IN SUPPORT OF THIS PROPOSITION THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF 5 IT A NO. 1005 /BANG/201 4 HAVELLS INDIA LTD. (SUPRA). THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : - (I) CIT V ITC HOTELS LTD. (2011) 334 ITR 109 (KAR) (II) CIT V SECURE METERS LTD. IN ITA NO.8 OF 2007 DT.20.11.2008 (RAJ). (III) CIT V EAST INDIA HOTELS LTD. (2 001) 252 ITR 860 (CAL) 5.3.3 WE HAVE CAREFULLY PERUSED THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF HAVELLS INDIA LTD. (SUPRA) AND FIND THAT THE FACTS OF THE CITED CASE ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE ON HAND. THE R ELATION PORTION OF THIS DECISION OF THE DELHI HIGH COURT AT PARA 26 THEREOF IS EXTRACTED HEREUNDER : - 26. IT IS WELL SETTLED THAT EXPENDITURE INCURRED IN CONNECTION WITH THE ISSUE OF DEBENTURES OR OBTAINING LOAN IS REVENUE EXPENDITURE. REFERENCE IN THI S CONNECTION MAY BE MADE TO THE LEADING JUDGMENT OF THE SUPREME COURT IN INDIA CEMENTS LTD. V CIT (1966) 60 ITR 52. THE QUESTION BEFORE US, HOWEVER, IS WHETHER IT IS A DEBENTURE ISSUE OR AN ISSUE OF SHARE CAPITAL INVOLVING THE STRENGTHENING OF THE CAPITAL BASE OF THE COMPANY. THOUGH IT PRIMA FACIE APPEARS THAT THERE ARE SUFFICIENT FACTS TO INDICATE THAT WHAT WAS CONTEMPLATED WAS AN ISSUE OF SHARES TO THE MAURITIUS COMPANY UNDER THE INVESTOR AGREEMENT WHICH WOULD RESULT IN STRENGTHENING OF THE ASSESSEE'S C APITAL BASE, HAVING REGARD TO THE JUDGMENTS CITED ON BEHALF OF THE ASSESSEE, IN WHICH IT HAS BEEN HELD THAT DESPITE INDICATIONS TO THE EFFECT THAT THE DEBENTURES ARE TO BE CONVERTED IN THE NEAR FUTURE INTO EQUITY SHARES, THE EXPENDITURE INCURRED SHOULD BE ALLOWED AS REVENUE EXPENDITURE ON THE BASIS OF THE FACTUAL POSITION OBTAINING AT THE TIME OF THE DEBENTURE ISSUE, WE ARE NOT INCLINED TO TAKE A DIFFERENT VIEW. THE FOLLOWING CASES HAVE BEEN CITED ON BEHALF OF THE ASSESSEE IN SUPPORT OF THE VIEW THAT EVEN IN SUCH A SITUATION THE EXPENDITURE IS ALLOWABLE AS REVENUE EXPENDITURE : - (I) CIT V EAST INDIA HOTELS LTD. (2001) 252 ITR 860 (CAL) (II) CIT V ITC HOTELS LTD. (2011) 334 ITR 109 (KAR) (III) CIT V SOUTH INDIA CORPORATION (AGENCIES) LTD. (2007) 290 ITR 217 (MAD) (IV) CIT V FIRST LEASING CO. OF INDIA LTD. (2008) 304 ITR 67 (MAD). 5.3.4 IN THE CASE OF CIT V SECURE METERS LTD. (ITA NO.8 OF 2007) DT.2011.2008, ONE OF THE QUESTIONS OF LAW FOR CONSIDERATION BEFORE THE HON'BLE HIGH COURT OF RAJASTHAN WAS 6 IT A NO. 1005 /BANG/201 4 (2) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TRIBUNAL WAS JUSTIFIED IN HOLDING THE EXPENSES INCURRED IN RELATION TO ISSUE OF DEBENTURES TO BE ALLOWABLE AS DEDUCTION UNDER SECTION 37 OF THE ACT OF 1961 AS REVENUE EXPENDITURE ? THE HON'BLE RAJASTHAN HIGH COURT WHILE ANSWERING THE ABOVE QUESTION IN THEIR JUDGEMENT HAS CONSIDERED THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF BROOKE BOND INDIA LTD. (SUPRA) AND THEIR LORDSHIPS HAVE THEN HELD AS UNDER : - COMI NG TO THE SECOND QUESTION, THE LEARNED TRIBUNAL IN THIS REGARD HAS HELD, THAT THE DECISION OF THE HON'BLE SUPREME COURT, IN BROOKE BOND INDIA LTD. VS. CIT REPORTED IN 225 ITR 798 IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE, BECAUSE THAT WAS A SITUAT ION IN WHICH EXPENDITURE ON ISSUE OF SHARES WAS HELD TO BE INELIGIBLE FOR DEDUCTION, WHILE THE ASSESSEE HAS ISSUED DEBENTURES FOR WHICH RS.44.00 LACS WAS CLAIMED AS DEDUCTION, AND IT WAS CONSIDERED, THAT THIS ASPECT IS SETTLED BY SEVERAL DECISIONS OF VARIO US HIGH COURTS, AND IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT, IN INDIA CEMENT VS. CIT REPORTED IN (1996) 60 ITR 52, THAT A LOAN IS NOT AN ASSET, OR ADVANCE OF ENDURING NATURE, AND THE PURPOSE OF TAKING LOAN IS TOTALLY AN IRRELEVANT CONSIDERATION, AND HENCE THE DEDUCTION ON ACCOUNT OF INTEREST ON LOANS CANNOT BE DENIED. THEN, THE LEARNED TRIBUNAL ALSO PROCEEDED TO RELY UPON ANOTHER JUDGMENT OF JAIPUR BENCH OF THE TRIBUNAL, IN THE CASE OF RAJASTHAN FINANCIAL CORPORATION VS. DCIT REPORTED IN (1997) TW - 501 , HOLDING THAT THE EXPENDITURE INCURRED FOR RAISING CAPITAL THROUGH BONDS IN BUSINESS WAS REVENUE IN NATURE, AND IT WAS HELD, THAT SINCE IN THE PRESENT CASE THE ASSESSEE HAD INCURRED EXPENSES OF RS.44.00 LAKHS ON ISSUANCE OF DEBENTURES, BEING A LOAN, IN OU R CONSIDERED OPINION, THERE IS NO BASIS FOR NOT ALLOWING DEDUCITON FOR THE ENTIRE SUM, AND THUS THIS ADDITION WAS DELETED. WE HAVE GONE THROUGH THE JUDGMENT IN BROOKE BOND INDIA LTD.'S CASE, AND FIND, THAT THAT WAS A CASE WHERE THE REGISTRATION FEE TO T HE TUNE OF RS. 1,50,000/ - WAS PAID TO THE REGISTRAR OF COMPANIES FOR INCREASING SHARE CAPITAL OF THE COMPANY, WHILE IN THE CASE OF INDIA CEMENT, THE MATTER RELATED TO THE BORROWING OF RS. 40 LAKHS FROM A FINANCIAL INSTITUTION, WHICH LOAN WAS SECURED BY A C HARGE ON THE FIXED ASSETS OF THE COMPANY. THE HON'BLE SUPREME COURT IN THIS JUDGMENT CONSIDERED VARIOUS ASPECTS OF THE MATTER, INCLUDING THE PREVIOUS ENGLISH JUDGMENTS, AND COUPLE OF JUDGMENTS OF ENGLISH COURTS, BASED ON ENGLISH INCOME TAX ACT, AND PROCEED ED TO DRAW DISTINCTION BETWEEN THE INCOME TAX LAW IN ENGLAND, AND INDIA. NOT ONLY THIS, THE HON'BLE SUPREME COURT FURTHER PROCEEDED TO EXAMINE NUMBER OF CASES DECIDED BY VARIOUS HIGH COURTS LIKE KERALA, ANDHRA PRADESH, CALCUTTA, BOMBAY ETC., AND HAD GONE TO THE EXTENT OF HOLDING, THAT SOME OF THE JUDGMENTS WERE WRONGLY DECIDED. THEN, THE HON'BLE SUPREME COURT PROCEEDED TO HOLD AS UNDER: - 10. TO SUMMARISE THIS PART OF THE CASE, WE ARE OF THE OPINION THAT : (A) THE LOAN OBTAINED IS NOT AN ASSET OR ADVANTAG E OF AN ENDURING NATURE; (B) THAT THE EXPENDITURE WAS MADE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD; AND (C) THAT IT IS IRRELEVANT TO CONSIDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINED.. THUS IT WAS HELD, THAT THE EXPENDITURE IN CURRED IN PROCURING THE LOAN WAS REVENUE EXPENDITURE WITHIN SECTION 10(2)(XV) OF THE OLD INCOME TAX ACT, WHICH CORRESPONDS TO SECTION 37 OF THE PRESENT ACT. BY GOING THROUGH THE SAID JUDGMENT IT FURTHER TRANSPIRES, THAT THE HON'BLE 7 IT A NO. 1005 /BANG/201 4 SUPREME COURT ALSO PROCE EDED TO EXAMINE THE ASPECT OF PURPOSE OF RAISING LOAN, AND ITS IMMEDIATE OR SUBSEQUENT UTILISATION FOR DIFFERENT PURPOSE, AND EXAMINED, THAT EVEN IF A LOAN IS RAISED FOR PURCHASING RAW MATERIAL, AND AFTER RAISING THE LOAN THE COMPANY FINDS IT UN - NECESSARY TO BYE RAW MATERIAL AND SPENDS THE AMOUNT ON CAPITAL ASSET, STILL IT CANNOT BE SAID TO BE CAPITAL EXPENDITURE, AS IT WAS HELD, THAT PURPOSE FOR WHICH THE NEW LOAN WAS REQUIRED WAS IRRELEVANT TO THE QUESTION AS TO WHETHER THE EXPENDITURE FOR OBTAINING LOAN WAS REVENUE OR CAPITAL EXPENDITURE. WE ARE TOLD, THAT RELYING ON THIS JUDGMENT, MANY OF THE HIGH COURTS OF THE COUNTRY HAVE CONSISTENTLY TAKEN THE VIEW, THAT THE EXPENDITURE INCURRED IN ISSUING ANY DEBENTURES, AND RAISING LOAN ON DEBENTURES, IS ADMISSIBLE , OBVIOUSLY BECAUSE THE DEBENTURE IS ALSO A LOAN. AT THIS STAGE IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE REVENUE, THAT A DISTINCTION SHOULD BE DRAWN BETWEEN THE CONVERTIBLE, AND NON CONVERTIBLE DEBENTURES, INASMUCH AS IF THE DEBENTURE IS CONV ERTED INTO SHARES, THEN IT PARTAKES THE CHARACTER OF CAPITAL, AND IN THAT EVENT, THE EXPENDITURE WOULD NOT BE REVENUE EXPENDITURE, AND WOULD BE CAPITAL EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE INFORMS, THAT THOUGH IT HAS NOT COME ON RECORD SO FAR, BUT AS A MATTER OF FACT THE DEBENTURES ISSUED WERE OF CONVERTIBLE NATURE. THEN, THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED, RELYING UPON THE JUDGMENT OF CALCUTTA HIGH COURT, IN C.I.T. VS. EAST INDIA HOTELS, REPORTED IN 252 ITR - 860, THAT THE EXPENDITURE INCUR RED, EVEN IN RAISING LOAN BY CONVERTIBLE DEBENTURE WOULD ALSO BE ADMISSIBLE AS REVENUE EXPENDITURE. THE CALCUTTA HIGH COURT HAD ADOPTED THE REASONING, THAT CONVERSION OF DEBENTURES RESULTS INTO REPAYMENT OF LOAN, AND ISSUANCE OF SHARES. THIS IS ONE ASPECT OF THE MATTER. IN OUR VIEW, THE OTHER MORE IMPORTANT ASPECT OF THE MATTER IS, THAT THE HON'BLE SUPREME COURT IN INDIA CEMENT'S CASE HAS CLEARLY EXCLUDED THIS ASPECT FROM CONSIDERATION, BY HOLDING, THAT IT IS IRRELEVANT TO CONSIDER THE OBJECT, WITH WHICH TH E LOAN WAS OBTAINED. ADMITTEDLY THE DEBENTURES WHEN ISSUED IS A LOAN, AND THEREFORE, WHETHER IT IS CONVERTIBLE, OR NON CONVERTIBLE, DOES NOT MILITATE AGAINST THE NATURE OF THE DEBENTURE, BEING LOAN, AND THEREFORE, THE EXPENDITURE INCURRED WOULD B E ADMISSIBLE AS REVENUE EXPENDITURE. THUS, WE DO NOT FIND ANY ERROR IN THE FINDING OF THE LEARNED TRIBUNAL ON THIS ASPECT ALSO. CONSEQUENTLY, QUESTION NO. 2 ALSO AS FRAMED, IS REQUIRED TO BE, AND IS, ANSWERED AGAINST THE REVENUE, AND IN FAVOUR O F THE ASSESSEE. IT IS ALSO SUBMITTED THAT REVENUE S SLP AGAINST THIS DECISION OF THE RAJASTHAN HIGH COURT HAS BEEN DIS MISSED BY THE HON'BLE APEX COURT IN CC 10548/2009 DT.11.8.2009. 5.3.4 RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF HAVELLS INDIA LTD. (352 ITR 376) AND OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SECURE METERS LTD. (SUPRA), WE UPHOLD THE ACTION OF THE LEARNED CIT(A) IN THE IMPUGNED ORDER IN DELETING THE DISALLOWANCE OF RS.29,59,740 ON ACCOUNT OF LEGAL EXPENSES. CONSEQUENTLY, GROUNDS 2 AND 4 RAISED BY REVENUE ARE DISMISSED. 8 IT A NO. 1005 /BANG/201 4 6. IN THE RESULT, REVENUE S APPEAL FOR ASSESSMENT YEAR 2006 - 07 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JUNE, 2015. SD/ - (P. MADHAVI DEVI) JUDICIAL MEMBER SD/ - (JASON P BOAZ) ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I .T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. R EGISTRAR, ITAT, BANGALORE