ACIT, Trichy V. Jennys Hotel Pvt. Ltd., Trichy

ITA 1349/CHNY/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4939 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASISH TRIPATHI
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Depreciation; Principle of natural justice; Retrospective amendment; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 115JB; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! ' . #$ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS. 1543 &1544/MDS/2012, 1348, 1349 &1350/MDS/2014 & 1657/MDS/2015 ( / ASSESSMENT YEARS: 2007-08, 2008-09, 2003-04, 2009-10, 2010-11 & 2011-12) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), TRICHY VS M/S. JENNYS HOTEL PVT. LTD., 3/14, MCDONALDS ROAD, CANTONMENT, TRICHY PAN: AABCJ1281G ( /APPELLANT) ( /RESPONDENT) & CO NOS. 72 & 73/MDS/2014, 112,113 & 114/MDS/2014 & 132/MDS/2015 (IN I.T.A.NOS. 1543&1544/MDS/2012,1348,1349 &1350/M DS/2014 & 1657/MDS/2015 ) M/S. JENNYS HOTEL PVT. LTD., 3/14, MCDONALDS ROAD, CANTONMENT, TRICHY VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), TRICHY PAN: AABCJ1281G ( /APPELLANT) ( /RESPONDENT) /REVENUE BY : SHRI ASISH TRIPATHI, JCIT /ASSESSEE BY : SHRI B. RAMAKRISHNAN, FCA !' /DATE OF HEARING : 06.12.2017 #$!' /DATE OF PRONOUNCEMENT : 18.01.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE APPEALS BY THE REVENUE AND THE CROSS OBJECTIO NS BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE OR DERS OF THE LD.CIT(A)-1, TRICHY AS DETAILED HEREIN BELOW:- 2 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 ASSESSMENT YEAR REVENUES APPEAL ITA NO. ASSESSEES CROSS OBJECTION CO NO. CIT(A)-1, TRICHY ORDER DETAILS ORDER NO. DATE PASSED UNDER SECTION 2003-04 1348/MDS/2014 112/MDS/2014 180/10-11/ CIT(A)/TRY 20.01.2014 250 (6) R.W.S. 143(3) &147 OF THE ACT 2007-08 1543/MDS/2012 72/MDS/2014 410/11-12 04.05. 2012 250 (6) R.W.S. 143(3) OF THE ACT 2008-09 1544/MDS/2012 73/MDS/2014 310/10-11 04.05. 2012 250(6) R.WS. 143(3) OF THE ACT 2009-10 1349/MDS/2014 113/MDS/2014 08/13-14/ CIT(A)/TRY 20.01.2014 250 (6) R.W.S. 143(3) &147 OF THE ACT 2010-11 1350/MDS/2014 114/MDS/2014 007/13-14/ CIT(A)/TRY 20.01.2014 250 (6) R.W.S. 143(3) OF THE ACT 2011-12 1657/MDS/2015 132/MDS/2015 314/13-14/ CIT(A)/TRY 22.04.2015 250 (6) R.W.S. 143(3) OF THE ACT 2. THERE IS A DELAY OF 10 DAYS IN FILING THE APPEAL S BY THE REVENUE IN ITA NOS.1348 & 1349/MDS/2014 FOR THE ASS ESSMENT YEARS 2003-04 & 2009-10. THE LD.ACIT HAS FURNISHED AN AFFIDAVIT BEFORE US STATING THAT THE DELAY HAD OCCURRED BECAU SE THE LD.AO WAS ENGAGED IN CARRYING ELECTION DUTY AS OBSERVER A ND THEREFORE WAS NOT ABLE TO TRACE THE FILE IN TIME. IT WAS THER EFORE PLEADED THAT THE SHORT DELAY IN FILING THE APPEALS MAY BE CONDON ED. THE LD.AR OBJECTED TO THE SUBMISSION OF THE LD.DR. HOWEVER, AFTER HEARING BOTH SIDES, IN THE INTEREST OF JUSTICE WE ARE OF TH E CONSIDERED VIEW THAT THE SHORT DELAY IN FILING THE APPEALS BY THE R EVENUE REQUIRES TO BE CONDONED BECAUSE THE LD.AO HAS A REASONABLE C AUSE FOR THE DELAY IN FILING THE APPEALS. ACCORDINGLY WE HE REBY CONDONE 3 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 THE DELAY OF 10 DAYS IN FILING THE APPEALS BY THE R EVENUE AND PROCEED TO HEAR THE CASE ON MERITS. 3. THERE IS A DELAY OF 673 DAYS IN FILING THE CROSS OBJECTIONS BY THE ASSESSEE IN CO NOS.72 & 73/MDS/2014 FOR THE ASSESSMENT YEARS 2007-08 & 2008-09. THE LD. AR SUBMITTED THAT THE DELAY HAD OCCURRED DUE TO THE OVERSIGHT OF HIS STAFF. TH EREFORE THE LD. AR PLEADED THAT THE INADVERTENT DELAY MAY BE CONDON ED BECAUSE IT WOULD BE UNJUST TO PENALIZE THE ASSESSEE FOR THE SHORTCOMINGS OF HIS STAFF. THE LD. DR STRONGLY OBJECTED TO THE S UBMISSION OF THE LD. AR. AFTER HEARING BOTH SIDES, THOUGH WE DO NOT APPRECIATE THE LETHARGIC ATTITUDE OF THE ASSESSEES LD. REPRESENTA TIVE, IN THE INTEREST OF JUSTICE, WE ARE OF THE CONSIDERED VIEW THAT THE DELAY OF 673 DAYS IN FILING THE APPEALS REQUIRES TO BE CONDO NED. ACCORDINGLY WE HEREBY CONDONE THE DELAY OF 673 DAYS IN FILING THE CROSS OBJECTIONS BY THE ASSESSEE AND PROCEED TO HEA R THE APPEAL ON MERITS. 4. ASSESSMENT YEAR 2003-04 :- A) REVENUES APPEAL:- THE ONLY ISSUE WHICH ARISES IN THE APPEAL FOR OUR CONSIDERATION IS THAT THE LD.CIT(A) HAS ERRED IN EX CLUDING THE 4 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 INTEREST WAIVED IN THE RELEVANT ASSESSMENT YEAR PER TAINING TO THE EARLIER ASSESSMENT YEARS AMOUNTING TO RS.79,91,716/ - WHILE COMPUTING THE PROFIT OF THE ASSESSEE FOR THE PURPOS E OF SECTION 115JB OF THE ACT ON THE GROUND THAT THE INTEREST CL AIMED BY THE ASSESSEE AS DEDUCTION DURING THE EARLIER ASSESSMENT YEARS WERE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 43 B OF THE ACT DUE TO NON-PAYMENT OF INTEREST TO M/S.TOURISM FINAN CE CORPORATION OF INDIA A GOVERNMENT OF INDIA UNDERTAK ING. B) ASSESSEES CROSS OBJECTION:- THE ASSESSEE HAS RAISED THE FOLLOWING CROSS OBJEC TIONS: 1. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW FACTS AND CIRCUMSTANCE S OF THE CASE TO THE EXTENT PREJUDICIAL TO THE INTEREST OF T HE RESPONDENT AND AT ANY RATE IS OPPOSED TO THE PRINCIPLES OF EQU ITY, NATURAL JUSTICE AND FAIR PLAY. 2. FOR THAT THE REOPENING / REASSESSMENT IS BAD-IN- LAW. 5) ASSESSMENT YEAR 2007-08 :- A) REVENUES APPEAL:- THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APP EAL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN 5 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 ADOPTING COMPOUND INTEREST @ 12.92% WITHOUT TAKING NOTE OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE CIT VS. MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED REPORTED IN 225 ITR 802 WHEREIN IT WAS HELD THAT THE RATE OF INTEREST SHOUL D BE ADOPTED ON STRAIGHT LINE METHOD FOR GRANTING DEDUCTION ON AM ORTIZATION OF PREMIUM ON DEBENTURES. B) ASSESSEES CROSS OBJECTION:- THE ASSESSEE HAS RAISED FIVE GROUNDS IN ITS CO HO WEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERR ED IN UPHOLDING THE DISALLOWANCE OF AMORTIZATION OF PREMIUM ON DEBE NTURES TO THE EXTENT OF RS.14,54,741/-. 6) ASSESSMENT YEAR 2008-09:- A) REVENUES APPEAL:- THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEA L HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN ADOPTING COMPOUND INTEREST @ 12.92% WITHOUT TAKING NOTE OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE CIT VS. MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED REPORTED IN 225 ITR 802 WHEREIN IT WAS HELD THAT THE RATE OF INTEREST SHOUL D BE ADOPTED ON 6 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 STRAIGHT LINE METHOD FOR GRANTING DEDUCTION ON AM ORTIZATION OF PREMIUM ON DEBENTURES. B) ASSESSEES CROSS OBJECTION:- THE ASSESSEE HAS RAISED SEVEN GROUNDS IN ITS CO HOW EVER THE CRUXES OF THE ISSUES ARE THAT (I) THE LD.CIT(A) HAS ERRED IN UPHOLDING THE DISALL OWANCE OF AMORTIZATION OF PREMIUM ON DEBENTURES TO THE EXTENT OF RS.14,54,741/-. (II) THE LD.CIT(A) HAS ERRED BY OMITTING TO ADJUDIC ATE THE ISSUE WITH RESPECT TO DISALLOWANCE OF REVENUE EXPENDITURE OF RS.42,25,206/- WHICH THE LD.AO HELD TO BE CAPITAL I N NATURE. 7) ASSESSMENT YEAR 2009-10:- A) REVENUES APPEAL:- THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEA L HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN ADOPTING COMPOUND INTEREST @ 12.92% WITHOUT TAKING NOTE OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE CIT VS. MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED REPORTED IN 225 ITR 802 WHEREIN IT WAS HELD THAT THE RATE OF INTEREST SHOUL D BE ADOPTED ON 7 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 STRAIGHT LINE METHOD FOR GRANTING DEDUCTION ON AM ORTIZATION OF PREMIUM ON DEBENTURES. B) ASSESSEES CROSS OBJECTION:- THE ASSESSEE HAS RAISED SIX GROUNDS IN ITS CO HOWEV ER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN UPH OLDING THE DISALLOWANCE OF AMORTIZATION OF PREMIUM ON DEBENTUR ES TO THE EXTENT OF RS.14,54,741/-. 8) ASSESSMENT YEAR 2010-11:- A) REVENUES APPEAL:- THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEA L HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN ADOPTING COMPOUND INTEREST @ 12.92% WITHOUT TAKING NOTE OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE CIT VS. MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED REPORTED IN 225 ITR 802 WHEREIN IT WAS HELD THAT THE RATE OF INTEREST SHOUL D BE ADOPTED ON STRAIGHT LINE METHOD FOR GRANTING DEDUCTION ON AM ORTIZATION OF PREMIUM ON DEBENTURES. 8 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 B) ASSESSEES CROSS OBJECTION:- THE ASSESSEE HAS RAISED FIVE GROUNDS IN ITS CO HOWE VER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN UPH OLDING THE DISALLOWANCE OF AMORTIZATION OF PREMIUM ON DEBENTUR ES TO THE EXTENT OF RS.14,54,741/-. 9) ASSESSMENT YEAR 2011-12:- A) REVENUES APPEAL:- THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEA L HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN ADOPTING COMPOUND INTEREST @ 12.92% WITHOUT TAKING NOTE OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE CIT VS. MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED REPORTED IN 225 ITR 802 WHEREIN IT WAS HELD THAT THE RATE OF INTEREST SHOUL D BE ADOPTED ON STRAIGHT LINE METHOD FOR GRANTING DEDUCTION ON AM ORTIZATION OF PREMIUM ON DEBENTURES. B) ASSESSEES CROSS OBJECTION:- THE ASSESSEE HAS RAISED FIVE GROUNDS IN ITS CO HOWE VER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN UPH OLDING THE DISALLOWANCE OF AMORTIZATION OF PREMIUM ON DEBENTUR ES TO THE EXTENT OF RS.14,54,741/-. 9 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 10) THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF HOTEL BU SINESS FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YE AR. THEREAFTER ASSESSMENTS WERE COMPLETED U/S. 147 R.W.S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2003-04 AND U/S.143(3) OF THE A CT FOR THE ASSESSMENT YEARS 2007-08 TO 2011-12 WHEREIN CERTAIN ADDITIONS WERE MADE AND SUSTAINED/DELETED BY THE LD.CIT(A) AG GRIEVED BY WHICH BOTH THE REVENUE AND THE ASSESSEE ARE IN APPE AL BEFORE US. 11) ASSESSMENT YEAR 2003-04:- REVENUES APPEAL: EXCLUDING THE GAIN ARISING OUT OF WAIVER OF INTEREST OF RS.79,91,716/- WHILE COMPUTING PROFIT F OR THE PURPOSE OF SECTION 115JB OF THE ACT. DURING THE RELEVANT ASSESSMENT YEAR M/S. TOURISM FI NANCE CORPORATION OF INDIA HAD RESCHEDULED THE LOAN ADVAN CED OF THE ASSESSEE AND IN THE PROCESS REVISED THE INTEREST @ 14% WITH RETROSPECTIVE EFFECT. AS A RESULT THE INTEREST ELEM ENT OF RS.79,91,716/- STOOD AS WAIVED BY THE CORPORATION D URING THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE HAD COMPUTED ITS PROFIT DURING THE RELEVANT ASSESSMENT YEAR BY EXCLUDING TH E WAIVED 10 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 INTEREST OF RS.79,91,716/- FOR THE PURPOSE OF SECTI ON 115JB OF THE ACT. HOWEVER THE LD.AO OPINED THAT AS PER THE PROVI SIONS OF COMPANIES ACT, THE REMISSION OF INTEREST HAS TO BE CREDITED IN THE INCOME SIDE OF THE P&L ACCOUNT THEREBY CONSEQUENTLY INCREASING THE BOOK PROFIT TO THAT EXTENT FOR THE PURPOSE OF D ETERMINING TAX U/S.115JB OF THE ACT. BEFORE THE LD.CIT(A) THE LD.A R HAD ARGUED CITING THE DECISION IN THE CASE APOLLO TYRES LIMITE D VS. CIT REPORTED IN 255 ITR 273 BY STATING THAT THE LD.AO H AS NO RIGHT TO RECOMPUTED THE BOOK PROFIT. THE LD.AR HAD FURTHER S UBMITTED BEFORE THE LD.CIT(A) THAT THE ASSESSEE COMPANY ON I TS OWN HAD DISALLOWED THE INTEREST PAYABLE TO M/S. TOURISM FIN ANCE CORPORATION BY VIRTUE OF SECTION 43(B) OF THE ACT B ECAUSE THE ASSESSEE HAD NOT PAID THE INTEREST DURING THE EARLI ER RELEVANT ASSESSMENT YEARS. BASED ON THE ARGUMENT OF THE LD.A R THE LD.CIT(A) DIRECTED THE LD.AO TO EXCLUDE THE AMOUNT OF RS.79,91,716/- FOR DETERMINING THE PROFIT FOR THE P URPOSE OF SECTION 115JB OF THE ACT BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS AND I FIND FORCE IN THE SUBMISSIONS OF THE APPELLANT AND I AM OF THE CONSIDERED OPINION THAT IT IS A FUNDAMENTAL RULE OF TAXATION T HAT, UNLESS OTHERWISE EXPRESSLY PROVIDED, INCOME CANNOT BE TAXE D TWICE AS HELD IN LAXMIPAT SINGHANIA VS CIT IN 72 ITR 291 ( SUPREME COURT 1969). RESPECTFULLY FOLLOWING THE ABOVE DECIS IONS, I CONSIDER THE PRAYER OF THE APPELLANT THAT THE ADDIT ION OF RS.79,91,716/- MADE BY THE ASSESSING OFFICER TO THE BOOK 11 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 PROFIT OF THE APPELLANT COMPANY NEEDS TO BE DELETED IS JUSTIFIED AND HENCE I HERE BY DIRECT THE AO TO DELETE THE ADD ITION OF RS.79,91,716/- TO THE BOOK PROFIT OF THE COMPANY AN D THE APPELLANT GET RELIEF ON THIS GROUND. 11.1 BEFORE US THE LD.DR ARGUED IN SUPPORT OF THE O RDER OF THE LD.AO WHILE AS THE LD.AR RELIED ON THE ORDER OF THE LD.CIT(A). 11.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS PERTINENT TO MENTION THAT THE BOOK OF ACCOUNTS OF THE ASSESSEE COMPANY HAS TO BE MANDATORILY MAINTAINED BY ADHERING TO THE PROVISIONS OF COMPANI ES ACT. WHEN THE BOOKS OF ACCOUNTS OF THE COMPANY ARE MAINTAINED IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT, AS OBSERVED BY THE HONBLE APEX COURT IN THE CASE APOLLO TYRES LTD VS. CIT SUPRA, THE LD.AO HAS NO RIGHT TO RE-COMPUTE THE BOO K PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. HOWEVER IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAD FAILED TO COMPLY WITH TH E PROVISIONS OF THE COMPANIES ACT. SCHEDULE VI PART II, 2(B) OF THE COMPANIES ACT SPECIFIES AS TO HOW ITEMS OF GAIN INCLUDING NON -RECURRING TRANSACTIONS HAVE TO BE DISCLOSED IN THE P&L ACCOUN T. IT IS SPECIFICALLY PROVIDED THAT SUCH ITEMS SHALL BE CRED ITED TO THE P&L 12 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 ACCOUNT WITH PROPER DISCLOSURE WITH RESPECT TO THE NATURE OF GAIN. THEREFORE THE LD.AO HAS RIGHTLY OBSERVED THAT AS PE R THE PROVISIONS OF THE COMPANIES ACT THE GAIN ENJOYED BY THE ASSESSEE ON ACCOUNT OF WAIVER OF LOAN HAS TO BE NEC ESSARILY CREDITED TO THE P&L ACCOUNT WHICH THE ASSESSEE HAD FAILED TO COMPLY. FURTHER IT IS ALSO PERTINENT TO MENTION THA T THE INTEREST ACCRUED TO THE ASSESSEE HAS TO BE DEBITED TO THE P& L ACCOUNT OF THE ASSESSEE IN THE RELEVANT ASSESSMENT YEARS AS PE R THE PROVISIONS OF COMPANIES ACT FOLLOWING THE MERCANTIL E METHOD OF ACCOUNTING, EVEN THOUGH SUCH INTEREST ARE NOT ALLOW ABLE AS DEDUCTION AS PER THE PROVISIONS OF THE INCOME TAX A CT DUE TO THE APPLICABILITY OF SECTION 43B OF THE ACT. FROM THE A BOVE IT IS CLEAR THAT THE ADDITION MADE BY THE LD.AO FOR RS.79,91,71 6/- FOR COMPUTING THE BOOK PROFIT OF THE ASSESSEE FOR THE P URPOSE OF SECTION 115JB OF THE ACT IS IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANY ACT AS WELL AS THE INCOME TAX ACT WHICH CALLS FOR NO INTERFERENCE. THEREFORE WE HEREBY SET ASIDE THE ORD ER OF THE LD.CIT(A) AND REINSTATE THE ORDER OF THE LD.AO ON T HIS ISSUE. B) ASSESSEES CROSS OBJECTION: AT THE TIME OF HEARING THE CASE, THE LD.AR DID NOT ADVANCE ANY ARGUMENT WITH RESPECT TO REOPENING OF THE ASSES SMENT. 13 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 FURTHER SINCE WE HAVE ALLOWED THE APPEAL OF THE REV ENUE THE CROSS OBJECTIONS RAISED BY THE ASSESSEE STANDS DISM ISSED. 12) ASSESSMENT YEAR 2007-08 : - A) REVENUES APPEAL: DEDUCTION WITH RESPECT TO AMOR TIZATION OF PREMIUM ON DEBENTURES:- THE ASSESSEE COMPANY HAD ISSUED 67,500 DEBENTURES HAVING FACE VALUE OF RS.3,000/- PER DEBENTURE TO M/ S. EXIM RAJATHI PVT. LTD., AFTER RECEIVING THE CONSIDERATIO N OF RS.6,25,00,000/-. THEREAFTER THE ASSESSEE CLAIMED D EDUCTION TOWARDS INTEREST ON THOSE DEBENTURES BEING AMORTIZA TION OF THE AMOUNT PAYABLE AFTER THE EXPIRY OF 10 YEARS IN EQUA L INSTALLMENTS OF RS.2,02,50,000/- FOR THE RELEVANT ASSESSMENT YEA R 2007-08 BY RELYING ON THE DECISION OF THE HONBLE APEX COURT I N THE CASE MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED RE PORTED IN 228 ITR 802. IT APPEARS THAT THE COMPUTATION MADE BY TH E ASSESSEE IN THAT REGARD IS AS FOLLOWS:- FUTURE VALUE (FV) = P X [1+(1+R)] N , WHERE P=PRINCIPAL, R=RATE OF INTEREST FOR THE PERIOD, N=NUMBER OF REST S. APPLYING THE ABOVE FORMULA, THE FUTURE VALUE OF .6.75 CRORES AT 13.02% P.A. (1.160%) P.M) AT MONTHLY RESTS FOR 10 YEARS (I .E. 120 MONTHS) WORKS OUT AT .27.00 CRORES. THUS, THE PREMIUM FOR THE TEN YEAR PERIOD WORKS OUT TO 20.25 CRORES ( 27.00 CRORES 6.75 CRORES). HENCE, APPLYING THE ABOVE RATE OF 13. 02% P.A. OR 14 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 1.160% P.M. AS CLAIMED TO HAVE BEEN ADMITTED BY THE APPELLANT, THE AMORTIZATION OF PREMIUM COMES TO ONLY 2,02,50,000/-. HOWEVER THE LD.AO OPINED THAT THE ABOVE REFER RED DECISION IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND THER EAFTER COMPUTED THE ALLOWABLE DEDUCTION AT RS.1,00,57,500/ - BY OBSERVING AS UNDER:- SINCE, DEBENTURES WERE ISSUED AT 0% INTEREST AND T HE DEEMED DEFERRED INTEREST RATE CHARGEABLE FOR THE DEBENTURE VALUE OF RS.6,75,00,000/- TO BE REDEEMED AFTER 10 YEARS WORK ED OUT AS UNDER:- P 1 + R N = A 100 6,75,00,000 (1+4/100) 10 =6,75,00,000 + 2,02,50,00 0 R = 14.9% HENCE, THE PREMIUM TO BE AMORTIZED FOR EACH YEAR SH OULD BE IN ALGEBRAIC PROPORTION AT THE RATE OF 14.9% COMPOUND INTEREST PER ANNUM AND IT BEING THE FIRST YEAR, THE QUANTUM OF PREMIUM ALLOWABLE FOR DEDUCTION WOULD BE RS.1,00,57,500/- ( 67500000 X 14.9%) AS AGAINST THE CLAIM OF RS.2,02,50,000/- B Y THE ASSESSEE. 12.1 ON APPEAL THE LD.CIT(A) RELYING IN THE DECISIO N OF THE CHENNAI BENCH OF THE TRIBUNAL IN ITA NO.407/10-11/A -III DATED 28.03.2011 AND THE DECISION OF THE HONBLE APEX COU RT IN THE CASE MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMIT ED REPORTED IN 15 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 225 ITR 802 HELD 12.92% AS THE INTEREST RATE THAT W OULD BE APPROPRIATE BY OBSERVING AS UNDER: 6. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, I C ONSIDER THE CLAIM OF THE APPELLANT ON PREMIUM ACCRUED ON DEBENT URES OF 2,02,50,000/- @ 12.92% AS REASONABLE WHICH WORKS OU T TO 1,87,95,259. THE ASSESSING OFFICER IS DIRECTED TO ADOPT THE SAME FIGURE INSTEAD OF 2,02,50,000. THEREFORE THE BALANCE AMOUNT OF 14,54,741 IS CONFIRMED OUT OF THE ADDITION MADE BY THE ASSESSING OFFICER. THE APPELLANT GET A PART REL IEF ON THIS GROUND. 7. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED T O RESTRICT THE DISALLOWANCE OF INTEREST FOR THE YEAR UNDER CONSIDE RATION AT 14,54,741 IN THE PLACE OF 1,00,57,500. THEREBY THE APPELLANTS LOSS GETS REDUCED TO THE EXTENT OF 14,54,741/-. 12.2 BEFORE US THE LD.DR ARGUED IN SUPPORT OF THE O RDER OF THE LD.AO AND PLEADED FOR REINSTATING THE SAME WHILE AS THE LD.AR ARGUED IN SUPPORT OF THE COMPUTATION MADE BY THE AS SESSEE AND PLEADED THAT DEDUCTION ON ACCOUNT OF AMORTIZATION O F PREMIUM SHOULD BE GRANTED AT RS.2,02,50,000/-. 12.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIAL ON RECORD. THE HONBLE APEX COURT IN T HE CASE MADRAS INDUSTRIAL CORPORATION LTD SUPRA HAD HELD TH AT THE LIABILITY ACCRUED ON ACCOUNT OF EXPENDITURE INCURRED FOR REDE EMING THE DEBENTURES SHOULD BE SPREAD OVER THE PERIOD OF THE DEBENTURES. 16 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 THE GIST OF THE DECISION OF THE HONBLE APEX COURT IS EXTRACTED HEREIN BELOW FOR REFERENCE:- ORDINARILY, REVENUE EXPENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS MUST BE ALL OWED IN ITS ENTIRETY IN THE YEAR IN WHICH IT IS INCURRED. IT CANNOT BE SPRE AD OVER A NUMBER OF YEARS EVEN IF THE ASSESSEE HAS WRITTEN IT OFF IN HI S BOOKS, OVER A PERIOD OF YEARS. HOWEVER, THE FACTS MAY JUSTIFY AN ASSESSEE W HO HAS INCURRED EXPENDITURE IN A PARTICULAR YEAR TO SPREAD AND CLAI M IT OVER A PERIOD OF ENSUING YEARS. IN FACT, ALLOWING THE ENTIRE EXPENDI TURE IN ONE YEAR MIGHT GIVE A VERY DISTORTED PICTURE OF THE PROFITS OF A P ARTICULAR YEAR. ISSUING DEBENTURES IS AN INSTANCE WHERE, ALTHOUGH THE ASSES SEE HAS INCURRED THE LIABILITY TO PAY THE DISCOUNT IN THE YEAR OF ISSUE OF DEBENTURES, THE PAYMENT IS TO SECURE A BENEFIT OVER A NUMBER OF YEA RS. THERE IS A CONTINUING BENEFIT TO THE BUSINESS OF THE COMPANY O VER THE ENTIRE PERIOD. THE LIABILITY SHOULD, THEREFORE, BE SPREAD OVER THE PERIOD OF THE DEBENTURES. THE APPELLANT-COMPANY ISSUED DEBENTURES IN DECEMBER , 1966, AT A DISCOUNT. THE TOTAL DISCOUNT ON THE ISSUE OF RS. 1. 5 CRORES AMOUNTED TO RS. 3 LAKHS. FOR THE ASSESSMENT YEAR 1968-69, THE A PPELLANT-COMPANY WROTE OFF RS. 12,500 OUT OF THE TOTAL DISCOUNT OF R S. 3 LAKHS BEING THE PROPORTIONATE AMOUNT OF DISCOUNT FOR THE PERIOD OF SIX MONTHS ENDING WITH JUNE 30, 1967, TAKING INTO ACCOUNT THE PERIOD OF 12 YEARS WHICH WAS THE PERIOD OF REDEMPTION AND DIVIDING THE DISCOUNT OF RS. 3 LAKHS OVER THE PERIOD OF 12 YEARS. THE INCOME-TAX OFFICER DISALLOW ED THE CLAIM BUT THE APPELLATE ASSISTANT COMMISSIONER ALLOWED THE DEDUCT ION OF RS. 12,500. THE TRIBUNAL HELD THAT THE ENTIRE EXPENDITURE OF RS . 3,00,000 WAS ALLOWABLE AS EXPENDITURE INCURRED FOR THE PURPOSE O F BUSINESS. ON A REFERENCE, THE HIGH COURT NOTED THAT OUT OF THE TOT AL DISCOUNT OF RS. 3,00,000 AN AMOUNT OF RS. 12,500 HAD BEEN ALLOWED W HICH THE DEPARTMENT HAD NOT CHALLENGED. HENCE, THE HIGH COUR T WAS CONCERNED ONLY WITH THE BALANCE AMOUNT OF RS. 2,87,500 WHICH THE HIGH COURT HELD, COULD NOT BE CONSIDERED AS EXPENDITURE. ON APPEAL T O THE SUPREME COURT: HELD, REVERSING THE DECISION OF THE HIGH COURT, THA T THE LIABILITY TO PAY THE DISCOUNTED AMOUNT OVER AND ABOVE THE AMOUNT REC EIVED FOR THE DEBENTURES WAS A LIABILITY INCURRED BY THE COMPANY FOR THE PURPOSES OF ITS BUSINESS IN ORDER TO GENERATE FUNDS FOR ITS BUSINES S ACTIVITIES. IT WAS, THEREFORE, EXPENDITURE. THE APPELLANT-COMPANY HAD, IN ITS RETURN, CORRECTLY CLAIMED A DEDUCTION ONLY IN RESPECT OF TH E PROPORTIONATE PART OF DISCOUNT OF RS. 12,500 OVER THE RELEVANT ACCOUNTING PERIOD IN QUESTION. THIS WAS ALSO IN CONFORMITY WITH THE ACCOUNTING PRA CTICE OF SHOWING THE DISCOUNT IN THE 'DISCOUNT ON DEBENTURES ACCOUNT' WH ICH WAS WRITTEN OFF OVER THE PERIOD OF THE DEBENTURES. THE APPELLANT-CO MPANY WAS ENTITLED TO DEDUCT A SUM OF RS. 12,500 OUT OF THE DISCOUNT OF R S. 3,00,000 IN THE 17 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 RELEVANT ASSESSMENT YEAR. THE BALANCE EXPENDITURE O F RS. 2,87,500 COULD NOT BE DEDUCTED IN THE ASSESSMENT YEAR 1968-69. FROM THE ABOVE IT IS CRYSTAL CLEAR THAT THE INTERES T / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE ACCRUED TO THE ASSESSEE FOR REDEEMING THE DEBENTURE S SHOULD BE SPREAD OVER THE PERIOD OF THE DEBENTURES. IN THE CA SE OF THE ASSESSEE, THE ASSESSEE HAS RECEIVED RS.6,25,00,000/ - FROM M/S. EXIM RAJATHI PVT. LTD., TO ACQUIRE 67,500 DEBENTURE S HAVING FACE VALUE OF RS.3,000/- PER DEBENTURE TO BE REDEEMED AF TER THE EXPIRY OF 10 YEARS. THEREFORE THE ASSESSEE HAS TO RE-PAY RS.20,25,00,000/- (67500 X 3000) ON REDEMPTION OF D EBENTURES AT THE END OF THE 10 TH YEAR. THEREFORE THE INTEREST / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, W ORKS OUT TO RS.14 CRORES (20,25,00,000 6,25,00,000). THIS COS T HAS TO BE SPREAD OVER FOR THE PERIOD OF DEBENTURES AS HELD BY THE HONBLE APEX COURT IN THE CASE MADRAS INDUSTRIAL CORPORATIO N LIMITED CITED SUPRA. HENCE THE ALLOWABLE DEDUCTION FOR THE RELEVANT ASSESSMENT YEARS INCLUDING THE ASSESSMENT YEAR 2007 -08 WOULD BE RS.1,40,00,000/- (RS.14,00,00,000//10). HENCE WE HEREBY DIRECT THE LD.AO TO GRANT THE DEDUCTION OF RS.1,40, 00,000/- IN THE RELEVANT ASSESSMENT YEAR TOWARDS THE INTEREST / FIN ANCIAL CHARGE / 18 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, O N DEBENTURES REDEEMABLE AFTER THE PERIOD OF 10 YEARS. B) ASSESSEES CROSS OBJECTION:- SINCE WE HAVE DECIDED THE ISSUE WITH RESPECT TO GRA NTING OF DEDUCTION TOWARDS THE INTEREST / FINANCIAL CHARG E / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, ON DEBENTURE S REDEEMABLE AFTER THE PERIOD OF 10 YEARS IN THE CASE OF THE ASS ESSEE HEREIN ABOVE IN THE REVENUES APPEAL, THE CROSS OBJECTION RAISED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LD.CIT(A) FO R DISALLOWING THE AMOUNT OF RS.14,54,741/- AS AGAINST THE TOTAL C LAIM OF DEDUCTION OF RS.2,02,50,000/- TOWARDS AMORTIZATION OF PREMIUM ON DEBENTURES STANDS DISMISSED. 13. ASSESSMENT YEAR 2008-09 A) REVENUES APPEAL:- THE IDENTICAL ISSUE IN THE REVENUES APPEAL FOR T HE ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED IN FAVOUR OF THE REVENUE BY HOLDING AS FOLLOWS: FROM THE ABOVE IT IS CRYSTAL CLEAR THAT THE INTERE ST / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AC CRUE TO THE ASSESSEE FOR RENEWING THE DEBENTURES SHOULD BE SPREAD OVER THE PERIOD OF THE DEBENTURES. IN THE CA SE OF 19 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 THE ASSESSEE, THE ASSESSEE HAS RECEIVED RS.6,25,00, 000/- FROM M/S. EXIM RAJATHI PVT. LTD., TO ACQUIRE 67,500 DEBENTURES HAVING FACE VALUE OF RS.3,000/- PER DEBE NTURE TO BE REDEEMED AFTER THE EXPIRY OF 10 YEARS. THEREF ORE THE ASSESSEE HAS TO RE-PAY RS.20,25,00,000/- (67500 X 3000) ON REDEMPTION OF DEBENTURES AT THE END OF THE 10 TH YEAR. THEREFORE THE INTEREST / FINANCIAL CHARGE / P REMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, WORKS OUT TO RS.14 CRORES (20,25,00,000 6,25,00,000). THIS COS T HAS TO BE SPREAD OVER FOR THE PERIOD OF DEBENTURES AS H ELD BY THE HONBLE APEX COURT IN THE CASE MADRAS INDUSTRIA L CORPORATION LIMITED CITED SUPRA. HENCE THE ALLOWAB LE DEDUCTION FOR THE RELEVANT ASSESSMENT YEARS INCLUDI NG THE ASSESSMENT YEAR 2007-08 WOULD BE RS.1,40,00,000/- (RS.14,00,00,000//10). HENCE WE HEREBY DIRECT THE L D.AO TO GRANT THE DEDUCTION OF RS.1,40,00,000/- IN THE R ELEVANT ASSESSMENT YEAR TOWARDS THE INTEREST / FINANCIAL CH ARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, O N THE DEBENTURES REDEEMABLE AFTER THE PERIOD OF 10 YEARS. BEING THE 2 ND YEAR OF THE ISSUANCE OF 67,500 DEBENTURES REDEEMABLE ON THE EXPIRY OF 10 YEARS, AS HELD HEREI N ABOVE, WE HEREBY DIRECT THE LD.AO TO GRANT THE DEDUCTION OF R S.1,40,00,000/- TOWARDS THE INTEREST / FINANCIAL CHARGE / PREMIUM O N AMORTIZATION ETC., AS THE CASE MAY BE, FOR THE RELEVANT ASSESSME NT YEAR ALSO . 20 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 B) ASSESSEES CROSS OBJECTION:- GROUND NO.1 : SINCE WE HAVE DECIDED THE ISSUE WITH RESPECT TO GRANTING OF DEDUCTION TOWARDS THE INTEREST / FINANC IAL CHARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, O N DEBENTURES REDEEMABLE AFTER THE PERIOD OF 10 YEARS IN THE CASE OF THE ASSESSEE HEREIN ABOVE IN THE REVENUES APPEAL, THE CROSS OBJECTION RAISED BY THE ASSESSEE AGGRIEVED BY THE O RDER OF THE LD.CIT(A) FOR DISALLOWING THE AMOUNT OF RS.14,54,74 1/- AS AGAINST THE TOTAL CLAIM OF DEDUCTION OF RS.2,02,50,000/- TO WARDS AMORTIZATION OF PREMIUM ON DEBENTURES STANDS DISMIS SED. GROUND NO.2 : OMITTING TO ADJUDICATE THE ISSUE WITH RESPECT TO DISALLOWANCE OF REVENUE EXPENDITURE OF RS.42,25, 206/- BY HOLDING IT TO BE CAPITAL IN NATURE:- DURING THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.83,71,424/- TOWARDS RENO VATION OF THE 3 RD FLOOR. THE ASSESSEE BIFURCATED THE AMOUNT OF RS.42 ,25,206/- AS REVENUE EXPENDITURE AND THE BALANCE AMOUNT AS CA PITAL EXPENDITURE. SINCE THE ASSESSEE COULD NOT FURNISH D ETAILS AS TO HOW THE EXPENDITURE WAS BIFURCATED THE LD.AO TREATE D THE AMOUNT OF RS.42,25,206/- ALSO AS CAPITAL EXPENDITURE. THE ASSESSEE CARRIED THE MATTER ON APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) 21 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 AFTER EXAMINING THE ISSUE DIRECTED THE LD.AO TO VER IFY WHETHER DEPRECIATION IS ALLOWABLE AS PER LAW AS CONTESTED B Y THE LD.AR. IN THE CROSS OBJECTION THE ASSESSEE HAS RAISED THE GRO UND STATING THAT THE LD.CIT(A) HAS FAILED TO APPRECIATE THE FAC T THAT THE EXPENDITURE OF RS.42,25,206/- INCURRED FOR RENOVATI ON WAS REVENUE IN NATURE. HOWEVER EVEN BEFORE US AT THIS S TAGE NEITHER THE ASSESSEE NOR THE LD.AR HAS SUBMITTED ANY DETAIL S WITH RESPECT TO THE NATURE OF EXPENDITURE INCURRED. THER EFORE WE DO NOT FIND IT NECESSARY TO INTERFERE IN THE ORDER OF THE LD.CIT(A) WHO HAS DIRECTED THE LD.AO TO GRANT DEPRECIATION TO THE ASS ESSEE WITH RESPECT TO THE CAPITAL EXPENDITURE INCURRED IN ACCO RDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. 14) ASSESSMENT YEAR 2009-10 A) REVENUES APPEAL: THE IDENTICAL ISSUE IN THE REVENUES APPEAL FO R THE ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED IN FAVOUR OF THE REVENUE BY HOLDING AS FOLLOWS: FROM THE ABOVE IT IS CRYSTAL CLEAR THAT THE INTERE ST / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AC CRUE TO THE ASSESSEE FOR RENEWING THE DEBENTURES SHOULD BE SPREAD OVER THE PERIOD OF THE DEBENTURES. IN THE CA SE OF THE ASSESSEE, THE ASSESSEE HAS RECEIVED RS.6,25,00, 000/- 22 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 FROM M/S. EXIM RAJATHI PVT. LTD., TO ACQUIRE 67,500 DEBENTURES HAVING FACE VALUE OF RS.3,000/- PER DEBE NTURE TO BE REDEEMED AFTER THE EXPIRY OF 10 YEARS. THEREF ORE THE ASSESSEE HAS TO RE-PAY RS.20,25,00,000/- (67500 X 3000) ON REDEMPTION OF DEBENTURES AT THE END OF THE 10 TH YEAR. THEREFORE THE INTEREST / FINANCIAL CHARGE / P REMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, WORKS OUT TO RS.14 CRORES (20,25,00,000 6,25,00,000). THIS COS T HAS TO BE SPREAD OVER FOR THE PERIOD OF DEBENTURES AS H ELD BY THE HONBLE APEX COURT IN THE CASE MADRAS INDUSTRIA L CORPORATION LIMITED CITED SUPRA. HENCE THE ALLOWAB LE DEDUCTION FOR THE RELEVANT ASSESSMENT YEARS INCLUDI NG THE ASSESSMENT YEAR 2007-08 WOULD BE RS.1,40,00,000/- (RS.14,00,00,000//10). HENCE WE HEREBY DIRECT THE L D.AO TO GRANT THE DEDUCTION OF RS.1,40,00,000/- IN THE R ELEVANT ASSESSMENT YEAR TOWARDS THE INTEREST / FINANCIAL CH ARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, O N THE DEBENTURES REDEEMABLE AFTER THE PERIOD OF 10 YEARS. BEING THE 3 RD YEAR OF THE ISSUANCE OF 67,500 DEBENTURES REDEEMABLE ON THE EXPIRY OF 10 YEARS, AS HELD HEREI N ABOVE, WE HEREBY DIRECT THE LD.AO TO GRANT THE DEDUCTION OF R S.1,40,00,000/- TOWARDS THE INTEREST / FINANCIAL CHARGE / PREMIUM O N AMORTIZATION ETC., AS THE CASE MAY BE, FOR THE RELEVANT ASSESSME NT YEAR ALSO . 23 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 B) ASSESSEES CROSS OBJECTION SINCE WE HAVE DECIDED THE ISSUE WITH RESPECT TO GRA NTING OF DEDUCTION TOWARDS THE INTEREST / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, ON DEBENTURE S REDEEMABLE AFTER THE PERIOD OF 10 YEARS IN THE CASE OF THE ASS ESSEE HEREIN ABOVE IN THE REVENUES APPEAL, THE CROSS OBJECTION RAISED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LD.CIT(A) FO R DISALLOWING THE AMOUNT OF RS.14,54,741/- AS AGAINST THE TOTAL C LAIM OF DEDUCTION OF RS.2,02,50,000/- TOWARDS AMORTIZATION OF PREMIUM ON DEBENTURES STANDS DISMISSED. 15) ASSESSMENT YEAR 2010-11 A) REVENUES APPEAL: THE IDENTICAL ISSUE IN THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED IN FAVOUR OF THE REV ENUE BY HOLDING AS FOLLOWS: FROM THE ABOVE IT IS CRYSTAL CLEAR THAT THE INTERE ST / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AC CRUE TO THE ASSESSEE FOR RENEWING THE DEBENTURES SHOULD BE SPREAD OVER THE PERIOD OF THE DEBENTURES. IN THE CA SE OF THE ASSESSEE, THE ASSESSEE HAS RECEIVED RS.6,25,00, 000/- FROM M/S. EXIM RAJATHI PVT. LTD., TO ACQUIRE 67,500 DEBENTURES HAVING FACE VALUE OF RS.3,000/- PER DEBE NTURE TO BE REDEEMED AFTER THE EXPIRY OF 10 YEARS. THEREF ORE 24 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 THE ASSESSEE HAS TO RE-PAY RS.20,25,00,000/- (67500 X 3000) ON REDEMPTION OF DEBENTURES AT THE END OF THE 10 TH YEAR. THEREFORE THE INTEREST / FINANCIAL CHARGE / P REMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, WORKS OUT TO RS.14 CRORES (20,25,00,000 6,25,00,000). THIS COS T HAS TO BE SPREAD OVER FOR THE PERIOD OF DEBENTURES AS H ELD BY THE HONBLE APEX COURT IN THE CASE MADRAS INDUSTRIA L CORPORATION LIMITED CITED SUPRA. HENCE THE ALLOWAB LE DEDUCTION FOR THE RELEVANT ASSESSMENT YEARS INCLUDI NG THE ASSESSMENT YEAR 2007-08 WOULD BE RS.1,40,00,000/- (RS.14,00,00,000//10). HENCE WE HEREBY DIRECT THE L D.AO TO GRANT THE DEDUCTION OF RS.1,40,00,000/- IN THE R ELEVANT ASSESSMENT YEAR TOWARDS THE INTEREST / FINANCIAL CH ARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, O N THE DEBENTURES REDEEMABLE AFTER THE PERIOD OF 10 YEARS. BEING THE 4 TH YEAR OF THE ISSUANCE OF 67,500 DEBENTURES REDEEMABLE ON THE EXPIRY OF 10 YEARS, AS HELD HEREI N ABOVE, WE HEREBY DIRECT THE LD.AO TO GRANT THE DEDUCTION OF R S.1,40,00,000/- TOWARDS THE INTEREST / FINANCIAL CHARGE / PREMIUM O N AMORTIZATION ETC., AS THE CASE MAY BE, FOR THE RELEVANT ASSESSME NT YEAR ALSO . B) ASSESSEES CROSS OBJECTION SINCE WE HAVE DECIDED THE ISSUE WITH RESPECT TO GRA NTING OF DEDUCTION TOWARDS THE INTEREST / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, ON DEBENTURE S REDEEMABLE 25 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 AFTER THE PERIOD OF 10 YEARS IN THE CASE OF THE ASS ESSEE HEREIN ABOVE IN THE REVENUES APPEAL, THE CROSS OBJECTION RAISED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LD.CIT(A) FO R DISALLOWING THE AMOUNT OF RS.14,54,741/- AS AGAINST THE TOTAL C LAIM OF DEDUCTION OF RS.2,02,50,000/- TOWARDS AMORTIZATION OF PREMIUM ON DEBENTURES STANDS DISMISSED. 16) ASSESSMENT YEAR 2011-12 A) REVENUES APPEAL: THE IDENTICAL ISSUE IN THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED IN FAVOUR OF THE REV ENUE BY HOLDING AS FOLLOWS: FROM THE ABOVE IT IS CRYSTAL CLEAR THAT THE INTERE ST / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AC CRUE TO THE ASSESSEE FOR RENEWING THE DEBENTURES SHOULD BE SPREAD OVER THE PERIOD OF THE DEBENTURES. IN THE CA SE OF THE ASSESSEE, THE ASSESSEE HAS RECEIVED RS.6,25,00, 000/- FROM M/S. EXIM RAJATHI PVT. LTD., TO ACQUIRE 67,500 DEBENTURES HAVING FACE VALUE OF RS.3,000/- PER DEBE NTURE TO BE REDEEMED AFTER THE EXPIRY OF 10 YEARS. THEREF ORE THE ASSESSEE HAS TO RE-PAY RS.20,25,00,000/- (67500 X 3000) ON REDEMPTION OF DEBENTURES AT THE END OF THE 10 TH YEAR. THEREFORE THE INTEREST / FINANCIAL CHARGE / P REMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, WORKS OUT TO RS.14 CRORES (20,25,00,000 6,25,00,000). THIS COS T HAS TO BE SPREAD OVER FOR THE PERIOD OF DEBENTURES AS H ELD BY 26 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 THE HONBLE APEX COURT IN THE CASE MADRAS INDUSTRIA L CORPORATION LIMITED CITED SUPRA. HENCE THE ALLOWAB LE DEDUCTION FOR THE RELEVANT ASSESSMENT YEARS INCLUDI NG THE ASSESSMENT YEAR 2007-08 WOULD BE RS.1,40,00,000/- (RS.14,00,00,000//10). HENCE WE HEREBY DIRECT THE L D.AO TO GRANT THE DEDUCTION OF RS.1,40,00,000/- IN THE R ELEVANT ASSESSMENT YEAR TOWARDS THE INTEREST / FINANCIAL CH ARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, O N THE DEBENTURES REDEEMABLE AFTER THE PERIOD OF 10 YEARS. BEING THE 5 TH YEAR OF THE ISSUANCE OF 67,500 DEBENTURES REDEEMABLE ON THE EXPIRY OF 10 YEARS, AS HELD HEREI N ABOVE, WE HEREBY DIRECT THE LD.AO TO GRANT THE DEDUCTION OF R S.1,40,00,000/- TOWARDS THE INTEREST / FINANCIAL CHARGE / PREMIUM O N AMORTIZATION ETC., AS THE CASE MAY BE, FOR THE RELEVANT ASSESSME NT YEAR ALSO . B) ASSESSEES CROSS OBJECTION SINCE WE HAVE DECIDED THE ISSUE WITH RESPECT TO GRA NTING OF DEDUCTION TOWARDS THE INTEREST / FINANCIAL CHARGE / PREMIUM ON AMORTIZATION ETC., AS THE CASE MAY BE, ON DEBENTURE S REDEEMABLE AFTER THE PERIOD OF 10 YEARS IN THE CASE OF THE ASS ESSEE HEREIN ABOVE IN THE REVENUES APPEAL, THE CROSS OBJECTION RAISED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LD.CIT(A) FO R DISALLOWING THE AMOUNT OF RS.14,54,741/- AS AGAINST THE TOTAL C LAIM OF 27 ITA NOS. 1543&1544/MDS/2012,1348 TO 1350 & 1657/MDS/2014 CO NOS.72, 73, 112,113 & 114/MDS/2014 & 132/MDS/2015 DEDUCTION OF RS.2,02,50,000/- TOWARDS AMORTIZATION OF PREMIUM ON DEBENTURES STANDS DISMISSED. 17. IN THE RESULT THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2003-04 IS ALLOWED AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. THE APPEALS OF THE REVENUE FOR THE AS SESSMENT YEARS 2007-08 TO 2011-12 ARE PARTLY ALLOWED IN REVE NUES FAVOUR AND THE RELEVANT CROSS OBJECTIONS RAISED BY THE ASS ESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 18 TH JANUARY, 2018 AT CHENNAI. SD/- SD/- ( ! ' . #$ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) % & /JUDICIAL MEMBER & / ACCOUNTANT MEMBER '% /CHENNAI, (& /DATED 18 TH JANUARY, 2018 RSR & *+ ,+ /COPY TO: 1. /ASSESSEE 2. /REVENUE 3. / ( )/CIT(A) 4. / /CIT 5. +01 2 /DR 6. 13 /GF