COMMISSIONER OF INCOME TAX Vs. ASHOK LEYLAND LTD

JUDGEMENT

(1.) The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal in ITA No. 661/Mds/1995, dated 23.6.2003, raising the following substantial question of law.

(2.) The facts which are necessary for the disposal of this appeal are as under:

(3.) When a company issues debentures at a discount, it incurs a liability to pay a larger amount than what is borrowed. The liability to pay the discounted amount over and above the amount received for the debentures, is a liability which has been incurred by the company for the purposes of its business in order to generate funds for its business activities. The amounts so obtained by issue of debentures are used by the company for the purposes of its business. Hence, the liability to pay the discount would therefore be a revenue expenditure. [vide: Madras Industrial Investment Corporation Ltd. v. Commissioner of Income Tax, 1997 225 ITR 802.