Subscribe To Our Free Newsletter:

CIT vs. Secure Meters (Rajashthan High Court)

COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: August 13, 2009 (Date of publication)
AY:
FILE:
CITATION:

Click here to download the judgement (secure_meter_convertible_debenture_expenditure.pdf)

Expenditure on convertible debentures is deductible

The assessee incurred expenditure on issue of convertible debentures. The department claimed that convertible debentures were akin to shares and that in line with the judgement of the Supreme Court in Brooke Bond 225 ITR 798 the expenditure was capital in nature. HELD rejecting the claim that:

A debenture, when issued, is a loan. The fact that it is convertible does not militate against it being a loan. In accordance with India Cement 60 ITR 52 (SC), expenditure on a loan is always revenue in nature even if the loan is taken for capital purposes. Consequently, the expenditure on convertible debentures is admissible as revenue expenditure.

Note: The Department’s SLP against this judgement has been dismissed (included in the above file).
See Also: Ashima Syntex 100 ITD 247 (Ahd) (SB) where a contrary view was taken and Ganesh Benzoplast 111 TTJ (Mum) 385 where a favourable view was taken.