The issuance of debentures incurs an immediate liability for expense deduction, with strict adherence to revenue recognition principles as outlined in Supreme Court precedents.

1. Annexure C order dated 09/09/2009 passed by the Income Tax Appellate Tribunal, Cochin Bench in the appeal preferred by the assessee, virtually unsettling Annexure A order passed by the Assessing Officer and Annexure B order passed by the Commissioner of Income Tax [Appeals], both in favour of the Revenue, in respect of the assessment year 1999 - '00 is put to challenge at the instance of the Revenue.

2. The assessee company engaged in the business of manufacture and sale of automotive tyres, tubes..etc. filed its return on 30/12/1999. The assessment was completed as per Annexure A order, which being detrimental to the rights and interest of the assessee, was challenged by filing an appeal before the Commissioner of Income Tax. The Commissioner passed Annexure B order dated 31/12/2004, whereby some relief was extended to the assessee, but declining it under some other heads. This made the assessee to file further appeal before the Tribunal. After considering the facts and figures, the relevant provisions of law and the precedents cited, the version of the assessee was accepted and relief was granted; which made the Revenue to feel aggrieved, who has approached this Court by filing the present appeal.

3. When the matter came up for consideration on 27/09/2010, notice was ordered on all questions of law raised by the appellant. The questions suggested by the Revenue, as involving 'substantial questions of law' are in the following terms:
1. Whether, on the facts and in the circumstances of the case -
i. The Tribunal is right in law in deleting the disallowance of Rs.1,07,99,770/- made towards expenditure relating to prior years in respect of issue of non - convertible debentures and redemption premium ?
ii. is not the allowance at 1/8th of the expenses for the assessment year 1999-2000 in accord with the decision of the Supreme Court and the Tribunal is justified in allowing the entire claim.
2. Whether, on the facts and in the circumstances of the case and also considering the import of the word "due date" the Tribunal is right in law in deleting the disallowance made under S.36(1)(va) being delayed payment of employees and employer's contribution to PF and ESIC ?
3. Whether the Tribunal is right in allowing 80IA deduction from gross total income ?

4. With regard to the first question, the factual aspects, as discussed in paragraph 5 of 'Annexure A' order, is extracted below:
"5. The assessee had issued 27,87,040 - 17% Non convertible Debenture of Rs. 100 each on 31/10/1991. The debentures are redeemable at a premium of Rs.5/- per debenture. Out of the face value of Rs. 27.87 crores Rs. 8.78 crores was redeemed in the F.Y 1997-78 and Rs. 8.50 crores in the FY 1998 - '99. The aggregate amount of premium paid on the redemption in these years was Rs. 1,25,41 ,670/-. The gross amount of premium paid was debited to the share premium account, but the same was claimed in toto as a deduction in computing the total income for the year. The premium payable on redemption of the debenture is expenses for the borrowing and therefore, is allowable as deduction under S.37 in computing the income. But the benefit of the money borrowed through debentures was derived by the assessee over a period of eight years in this case. The main expenditure on barrowal is the interest and the same is paid over a period and deduction claimed is also over a period of eight years. Hence the premium payable on redemption which is also an expenditure in borrowal can be allowed as deduction over a period of eight years. As such Rs. 17,41,900/- (2787040 X 5/8) alone is the expenditure for the year and the remaining sum of Rs. 1,07,99,770 is expenditure relating to p