By Ajay R. Singh, Advocate
CIT vs. M/s. Faze Three Ltd. [ Income tax Appeal no 1761
of 2014, dt : 16/03/2017 (Bombay High Court)].
[M/s. Faze Three Ltd
vs. ACIT. [ITA No.5449/MUM/2011 ; Bench
: F ; date:16/08/2013 ; A Y: 2007- 2008. MUM.
ITAT ]
In the course of assessment the assessee filed
a letter claiming deduction of Rs. 2.24 crore towards expenses incurred on
issue of FCCBs. It was claimed that the assessee missed to lodge claim for
deduction in the computation of total income. The AO refused the claim by
relying on the decision of the Hon’ble Supreme Court in Goetz India vs. CIT [284
ITR 323] by assigning the reason that since revised return was not filed, this
claim was not entertainable. The learned CIT(A) upheld the assessment order on
this issue.
The Tribunal held that
there is no bar on the appellate authorities in considering a claim made by the
assessee otherwise than by filing a revised return. Thus, the question arose
for consideration was as to whether the expenses on issue of FCCBs can be
allowed as deduction or not.
The Tribunal relied on
the decision of Hon’ble Rajasthan High Court in CIT vs. Secure Meters Ltd. [(2010)
321 ITR 611 (Raj.)] wherein it has been
held that the debentures when issued are only a loan. Any expenses
incurred on issuing debenture, whether convertible or non-convertible is
allowable deduction. Similarly, the Hon’ble Punjab & Haryana High Court in CIT
vs. Sukhjit Starch & Chemicals Ltd. [(2010) 326 ITR 29 (P&H)] has
also held that the expenditure on the issue of convertible debentures is
admissible. The Tribunal observed that
there is no qualitative difference between the issuance of debentures or bonds.
Both fall in the realm of loan. Thus the Tribunal held
that the assessee was entitled to
deduction for this amount.
Being aggrieved, the
Revenue filed an appeal to the High Court. The Court observed that the preliminary issue arising herein stands concluded against
the Revenue and in favour of the Assessee by the decision of this Court in CIT
vs. Pruthvi Brokers and Shareholders Pvt. Ltd., 349 ITR 336 .
As regards, the expenditure incurred on the
issue of FCCBs should be considered as capital expenditure and not be allowed
as revenue expenditure. The Hon Court
relied on the decision of the Delhi High Court in CIT vs. Havells
India Ltd., 352 ITR 376 – wherein on an identical fact situation, the
appeal of the Revenue was dismissed. The Revenue was not able to show any reason which would
require the court to take a view different from that taken by the various High
Courts in the country on an identical issue. In the above circumstances, the
revenue, Appeal was dismissed.
