PCIT Vs SpiceJet Limited (Delhi High Court)
Premium payable on redemption of Foreign Currency Convertible Bonds (FCCBs) issued for raising business funds is revenue expenditure, and though the liability arises in the year of issue, it may be proportionately spread over the maturity period of the bonds.
The Delhi High Court dismissed the Revenue’s appeals after condoning the delay in re-filing, holding that no substantial question of law arose on the issue of redemption of Foreign Currency Convertible Bonds (FCCBs). The Court noted that the ITAT had followed earlier Delhi High Court decisions, including CIT v. Jagatjit Industries, in treating expenditure relating to FCCBs as revenue expenditure. The Revenue argued that, although the issue of revenue expenditure was settled, the expenditure should have been spread over the five-year life of the FCCBs instead of being claimed in the first year. The Court observed that expenditure incurred in connection with the issue of debentures or obtaining a loan constitutes revenue expenditure and referred to Madras Industrial Investment Corporation Ltd. v. CIT. It further noted that Jagatjit Industries had held that the liability to pay premium arises in the year the debentures are issued and may be proportionately spread over the maturity period. However, since this issue had not been raised before the Commissioner of Income Tax (Appeals) or the ITAT, the Court held that no fresh adjudication was required and dismissed the appeals.
