This Tax Alert summarizes a recent ruling of the Supreme Court (SC), in the case of Taparia Tools Ltd. (Taxpayer), wherein the issue was whether a taxpayer can be permitted full deduction under the provisions of the Indian Tax Laws (ITL) for upfront payment of debenture interest, though such payment has been amortised over the tenure of the debenture in the books of account. The SC, based on the facts, held that since the Taxpayer had claimed deduction for the full amount of upfront interest payment, the same should be allowed in the year of payment and should not be spread over the term of the debentures. The SC reiterated that there is no concept of deferred revenue expenditure under the ITL. Furthermore, the SC also ruled that the treatment given in the books of account is not an estoppel against the statute to claim deduction.
Thursday, March 26, 2015
Supreme Court rules on year of deductibility of debenture interest paid upfront
This Tax Alert summarizes a recent ruling of the Supreme Court (SC), in the case of Taparia Tools Ltd. (Taxpayer), wherein the issue was whether a taxpayer can be permitted full deduction under the provisions of the Indian Tax Laws (ITL) for upfront payment of debenture interest, though such payment has been amortised over the tenure of the debenture in the books of account. The SC, based on the facts, held that since the Taxpayer had claimed deduction for the full amount of upfront interest payment, the same should be allowed in the year of payment and should not be spread over the term of the debentures. The SC reiterated that there is no concept of deferred revenue expenditure under the ITL. Furthermore, the SC also ruled that the treatment given in the books of account is not an estoppel against the statute to claim deduction.
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