CIT Vs. INDUSTRLAL CREDIT & DEVELOPMENT SYNDICATE LTD.

JUDGEMENT

(1.) AT the instance of revenue the Income Tax Appellate Tribunal, Bangalore Bench (hereinafter referred to as 'the Tribunal') has referred the following question of law for our opinion under section 256(1) of the Income Tax Act (hereinafter referred to as 'the Act') :

(2.) THE facts leading to this reference are as under :

(3.) PER contra, the learned senior counsel Sri Sarangan appearing along with Sri Parthasarathy, learned counsel for the respondent, submitted that admittedly the assessee had issued debentures which in substance, is a loan borrowed by the assessee for carrying on its business which has been repaid by redemption of these debentures at a price lesser than the face value. That difference in the amount was shown in the accounts as surplus. On the date of redemption, the said surplus amount is taken into the P&L; a/c since it was earlier shown as a liability of the assessee. On the due date of redemption, this amount was taken to the P&L; a/c and it is shown as a capital receipt and not as a trading receipt and therefore, the assessee is not liable to pay tax and the judgments relied upon by the counsel appearing for the revenue are not applicable to the facts of this case.