Allowability of Interest / Service Charges on Funds raised to Subscribe Debentures for acquiring controlling interest

The brief facts are that the assessee, an investment company had reported for the assessment years 1992–93, a loan transaction to fund its subscription to the tune of  Rs. 1,50,00,000/- in Shreyans Industries Ltd. The assessee was a shareholder in that company and wished to subscribe to certain debentures which had both convertible and non-convertible elements. The assessee was an existing shareholder with 28% equity holding in the company. The LIC Mutual Funds which financed these debentures, through an agreement, required the assessee to ensure that the debentures were subscribed in i...