Case Law Details
Since the entire liability to pay the discount had been incurred in the accounting year in question, the assessee was entitled to deduct the entire amount of Rs 3,00,000 in that accounting year This conclusion does not appear to be justified looking to the nature of the liability It is true that the liability has been incurred in the accounting year But the liability is a continuing liability which stretches over a period of 12 years It is, therefore, a liability spread over a period of 12 years Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year Thus in the case of Hindustan Aluminium Corporation Ltd Vs CIT [1983] 144 ITR 474, the Calcutta High Court upheld the claim of the assessee to spread out a lump sum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question
Issuing debentures at a discount is another such instance where, although the assessee has incurred the liability to pay the discount in the year of issue of debentures, the payment is to secure a benefit over a number of years There is a continuing benefit to the business of the company over the entire period The liability should, therefore, be spread over the period of the debentures
(1997) 225 ITR 802 (SC)
(1997) 4 SCC 666
IN THE SUPREME COURT OF INDIA
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