In Shanders Properties Pvt. Ltd Vs. ITO, the ITAT Bangalore directed the AO to allow the expenditure incurred in relation to issuance of debentures as it constitute revenue expenditure under the provisions of the Income Tax Act.
In the instant case, the Assessing Officer disallowed the assessee’s claim for expenditure towards issuance of debentures for the reason that it is in the nature of capital expenditure. On first appeal, the first appellate authority confirmed the order on the basis of the decisions of the Gujarat High court and Mumbai Tribunal.
After considering arguments from both sides and the orders of the lower authorities, the bench noticed that the Rajasthan High Court had examined this issue in the light of the Hon’ble Apex Court judgment and various judgments of different High Courts and finally concluded that debenture when issued is a loan, and, therefore, whether it is convertible or non-convertible, does not militate against the nature of the debenture, being loan, and therefore the expenditure incurred would be admissible as revenue expenditure.
O R D E R
2.1 The learned CIT(A) has erred in facts and in law in confirming the dis allowance of expenditure incurred in relation to issue of debentures amounting to Rs 19,38,800 (only 2 items), as capital expenditure.
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