- (1.) The appellant - Taparia Tools Limited (hereinafter referred to as the 'assessee') is before us, having lost in the courts below. In these six appeals, the issue involved is identical, that too between the same parties. Necessity of six appeals is because of the reason that the same dispute pertains to three assessment years, namely, assessment years 1996-97, 1997-98 and 1998-99. The assessee had claimed deduction of revenue expenditure on account of interest payment in the sum of 2,72,25,000 paid to one M/s. MaliramMakharia Stock Brokers Pvt. Ltd. and 55,00,000 on account of interest payment given to M/s. Sharp Knife Company Pvt. Ltd. This was on account of upfront payments of interest given to the aforesaid two debenture holders in the assessment years 1996-97 and 1997-98 respectively. The Assessing Officer (for short, the 'AO'), however, treated it as the 'deferred revenue expenditure', to be written off over a period of five years and, therefore, in these assessment years he allowed only 1/5th of the payment made, though the entire payment was made in the assessment year 1996-97.
(2.) The question of law, in the given circumstances, which has arisen for consideration is as to whether the liability of the assesee to pay the interest upfront to the debenture holder is allowable as a deduction in the first year itself or it is to be spread over a period of five years, being the life of the debentures? This substantial question of law has arisen in the following circumstances:
(3.) In the debenture issue of the assessee two options as regards payment of interest thereupon were given to the subscribers/ debenture holders. They could either receive interest periodically, that is every half yearly @ 18% per annum over a period of five years, or else, the debenture holders could opt for one time upfront payment of X55 per debenture. In the second alternative, 55 per debenture was to be immediately paid as upfront on account of interest. At the end of five years period, the debentures were to be redeemed at the face value of X100.;