Delhi High Court: Pr. Commissioner of Income Tax v. SpiceJet Ltd. [ITA Nos. 539/2026 & 540/2026]
The Court dismissed the Revenue appeals, holding that expenditure incurred in connection with the issue of Foreign Currency Convertible Bonds (FCCB’s) is allowable as revenue expenditure under Section 37(1) of the Income Tax Act, 1961. The Assessee had claimed deduction of expenditure incurred towards the issue of FCCB’s. The Revenue contended that since the FCCB’s were convertible into equity shares, the expenditure was capital in nature as it resulted in strengthening of the assessee capital base. It was further argued that the expenditure could not be claimed entirely in the year of issue and ought to have been spread over the life of the FCCB’s. Rejecting the revenue contention, the High Court held that it is a settled position of law that expenditure incurred in connection with the issue of debentures or for obtaining a loan constitutes revenue expenditure. Relying upon the decisions of the Supreme Court in India Cements Ltd. v. CIT and Madras Industrial Investment Corporation Ltd. v. CIT, as well as its earlier decision in Jagatjit Industries Ltd., the Court held that the liability is incurred the moment the FCCBs are issued and the funds are utilised for the purposes of the business. The Court further observed that the issue regarding proportionate amortisation had not been raised before the lower authorities and, in any event, stood concluded by its earlier decisions. Holding that no substantial question of law arose for consideration, the High Court dismissed the Revenue’s appeals.
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