JUDGMENT : I.P. Mukerji, J. 1. On 18th August, 2008 this appeal was admitted by a Division Bench of this Court, to be heard on the following questions of law: "(i) Whether on the facts and in the circumstances of the case the Learned Tribunal erred in law in deleting the addition made on account of front end fees of Rs.61,69,000/- without considering that the same is capital in nature and the benefit of this claim should be spread over to different years and followed mechanically its orders for earlier years although appeals against those orders have already been filed and the same are pending before the Hon'ble Court. (iii) Whether on the facts and in the circumstances of the case, the Learned Tribunal erred in deleting the addition made by Assessing Officer of unrealized foreign exchange gain of Rs.7,20,12,479/-. 2. These questions of law arose from a judgment and order of the Income Tax appellate tribunal 'A' Bench dated 29th February, 2008 in respect of the assessment year 2004-05, to be heard in this appeal under Section 260A of the Income Tax Act, 1961. 3. While obtaining a new loan, the assessee had to pay a fee to the bank or financial institution described as "front end fees." An expenditure of Rs.61,69,000/- shown by the assessee on this account was deleted by the department. The assessee had claimed amortization of the expense under Section 35D of the Income Tax Act, 1961. According to the department, this expenditure could be claimed once and could not be spread over a period of ten years under Section 35D. This expense, according to them was not one which would fall within the conditions stipulated in Section 35D(1) and (2) of the said Act. 4. Mr. Khaitan appearing for the assessee showed us Section 2(28A) of the said Act. In this sub-section interest is defined in the following manner: "28A :- 'interest' means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised." 5. He argued that the front end fees paid by the assessee could be equated with "any service fee or other charge" provided in that sub-section and constitute a part of interest payment made by the assessee. Therefore, if this loan was of a particular duration and interest was paid at intervals, this front end fee should be added to the interest amount and would be a part of interest. Therefore, the interest amount including the "front end fees" is to be treated as an expenditure and could be amortized under Section 35D. 6. He argued that kind of an expense could be so amortized was supported by a Supreme Court judgment in the case of Madras Industrial Investment Corporation Ltd. Vs. Commissioner of Income Tax reported in 225 ITR 802. 7. The learned tribunal in its impugned judgment and order felt itself bound by its earlier orders. Following the decision of the Tribunal for the Assessment Year 2003-04 dated 23rd November, 2007 the department's appeal was dismissed. 8. Now, I express my views on this subject. 9. The facts of the above Supreme Court case need to be analysed. In December, 1966 the company issued debentures at a discount. Debentures worth Rs.1.5 crores were issued at an aggregate discount of Rs.3 lakhs. The debenture was redeemable over a period of 12 years. So the assessee company divided Rs.3 lakhs by 12 years and claimed Rs.12,500/- as proportionate amount of discount for the assessment year 1968-69. The question arose was whether this expenditure could be spread over 12 years. The High Court at Bombay ruled that Rs.2,87,500/- could not be claimed as business expenditure which could be amortised. 10. The Supreme Court reversed this decision. It held that providing a discount resulted in a liability for the company because at the end of the day it had to pay the whole amount with interest to the depositor. So the payment of the discounted sum could be treated as business expenditure. The Court said that expenditure was not necessarily confined to the money which had been actually paid. It covered a liability which had occurred or which had been incurred although it may have to be discharged at a future date. The aforesaid liability had been incurred by the company for the purposes of its business and hence could be termed as expenditure. It covered a liability which had occurred or which had been incurred although it may have to be discharged at a future date. The aforesaid liability had been incurred by the company for the purposes of its business and hence could be termed as expenditure. Since it was utilized for the purposes of the business of the assessee. This expenditure to discharge the liability could be termed as revenue expenditure. Under Section 37 of the Income Tax Act, 1961 any expenditure except those referred to Sections 32 to 36 expended wholly and exclusively for the purpose of business should be allowed in computing income chargeable under the head "profits and gains of business and profession". Ordinarily this revenue expenditure is allowed in its entirety in the year in which it occurred. It could not be spread over a number of years. By issuing debentures the assessee incurred liability to pay the discount in the year of its issue. There was a continuing benefit spread over a number of years. The liability should therefore be spread over the period of the debentures. 11. In my opinion, the facts of this case are very similar to those before the Supreme Court. Here the assessee was required to pay front end fee to obtain loan from a bank or financial institution. It also had to pay interest. As I have observed above, the front end fee is part of interest under Section 2(28A) of the said Act. Now this interest payment was spread over the duration of the loan. Therefore, the front ends fee constituted interest liability of the assessee spread over a period of time. Obtaining the loan and paying interest to service it ensured long term benefit to the assessee. Hence, this expenditure was revenue and not capital. Furthermore, according to the above decision, the assessee was entitled to amortize it. 12. In my view, the tribunal merely followed its earlier decision. 13. I am of the view that the tribunal is required to re-determine this issue by considering Madras Industrial Investment Corporation Ltd. Vs. Commissioner of Income Tax reported in 225 ITR 802 and determine the allowable revenue, expenses of the assessee for the relevant assessment year. The impugned order of the tribunal dated 29th February, 2008 is set aside with regard to the issue concerning front end fee. Commissioner of Income Tax reported in 225 ITR 802 and determine the allowable revenue, expenses of the assessee for the relevant assessment year. The impugned order of the tribunal dated 29th February, 2008 is set aside with regard to the issue concerning front end fee. The tribunal shall make a fresh determination, upon hearing the parties and by a reasoned order within a period of six months from the date of communication of this order. 14. The second question to be answered is as follows:- "(ii) Whether on the facts and in the circumstances of the case, the Learned Tribunal erred in deleting the addition made by Assessing Officer of unrealized foreign exchange gain of Rs.7,20,12,479/-." 15. The Assessing Officer added a sum of Rs.7,20,12,479/- on account of unrealized foreign exchange gain. The Assessing Officer was of the view that since the assessee was following the mercantile system of accounting they could not avoid the said amount being assessed as its income during the relevant financial year. It was contended on behalf of the assessee that this profit was only notional calculated on the basis of the foreign exchange rate on the last day of the previous year. There was no actual gain. 16. The Commissioner of Income Tax, Appeals in his order dated 29th November, 2006 directed deletion of the same. 17. The tribunal by its impugned order dated 23rd November, 2007 upheld the order of the Commissioner of Income Tax. 18. Mr. Khaitan, learned Senior Advocate appearing for the respondent assessee conceded that the decision of the Supreme Court in the case of Commissioner of Income Tax Vs. Woodward Governor India P. Ltd. reported in 312 ITR 254 was in favour of the revenue. 19. Therefore, the first question is answered in the affirmative in favour of the assessee. The impugned order of the tribunal in so far as it deals with front end fee is set aside and remanded to the tribunal to decide this issue afresh in accordance with law upon giving an opportunity of hearing to all parties within six months of communication of this order. 20. The second question is answered in favour of the revenue as the issue is covered against the assessee by the above judgment of the Supreme Court. That part of the impugned order dealing with unrealized foreign exchange gain is set aside. 20. The second question is answered in favour of the revenue as the issue is covered against the assessee by the above judgment of the Supreme Court. That part of the impugned order dealing with unrealized foreign exchange gain is set aside. The tribunal shall recompute the assessment of the assessee in terms of this judgment and order. 21. After making the determination, in respect of both the issues above, the tribunal is at liberty to remand the matter to the assessing officer to make a recomputation of the income of the assessee. 22. The appeal ITA 496 of 2008 is disposed of accordingly. 23. Certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities. I agree.