Y.R. Meena, J. - (1.) ON an application under Section 256(2) of the Income-tax Act, 1961, this court has directed the Tribunal to refer the following question set out at page 2 of the paper book for our opinion : "Whether, the finding of the Tribunal that the assessee is entitled to the deduction of expenses on account of issue of debentures amounting to Rs. 67,18,758 was based on any relevant material or otherwise perverse ?"
(2.) IN compliance with our direction the aforesaid question has been referred for our opinion. The assessee is a public limited company mainly carrying on the business of running hotels popularly known as "Oberoi Hotels". The assessment year is 1982-83. Assessment was completed on March 17, 1986, on a total income of Rs. 3,77,12,470. The Commissioner of Income-tax on a scrutiny of the assessment records found that the Assessing Officer has wrongly allowed Rs. 67,18,758 as revenue expenditure while completing the assessment for the assessment year 1982-83. Therefore, he issued a show-cause notice to the assessee why the assessment order should not be set aside and the deduction of amount of Rs. 67,18,758 should not be withdrawn ? After hearing the assessee, the Commissioner of Income-tax in his order under Section 263 of the Income-tax Act directed the Assessing Officer to withdraw the allowance of Rs. 67,18,758 which was allowed in the assessment order under Section 143(3) of the Act.
(3.) DURING the course of the assessment, the Assessing Officer has considered the fact that the assessee-company has issued 7,50,000 secured debentures of Rs. 100 each for a total value of Rs. 7.50 crores. The value of the debentures together with interest was to be repaid by the assessee-company within eleven years. Considered the submissions, the claim of the assessee was allowed. The Commissioner of Income-tax in an order under Section 263 has directed to withdraw the deduction of the amount pertaining to the expenditure in connection with the debentures on the ground that after the insertion of Section 35D the decision of the Supreme Court in India Cements Ltd. v. CIT , is no more a good law and that the expenses cannot be allowed in the light of the decision of the Supreme Court in the case of India Cements Ltd. v. CIT . In appeal before the Tribunal, the Tribunal has taken the view that even after the insertion of Section 35D in the Act of 1961, the expenses on the issue of debentures cannot be disallowed, as the decision of the Supreme Court in the case of India Cements Ltd. v. CIT , still holds the field. Therefore, expenses on the issue of debentures, for short-term loan, can be allowed as revenue expenses.;