×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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13-01-2020, OK Play India, Section 40(a)(ia), 195, Tribunal Delhi
This appeal by the assessee is directed against order dated 31/03/2016 passed by the ld. Commissioner of Income-tax (Appeals)-1, Gurgaon [in short ‘the ld. CIT(A)’] for assessment year 2011-12 raising following grounds:
1 That the learned Commissioner of Income Tax (Appeals) 1, Gurgaon has grossly erred both in law and on facts in upholding an addition of Rs. 9,46,73,015/- representing discount on buy back on Foreign Currency Convertible Bonds (“FCCB”)
1.1 That the learned Assessing Officer has failed to appreciate that the loan raised by way of FCCB was for capital purposes and therefore any discount on buy back is capital receipt and thus not taxable.
1.2 That the conclusion of the learned Commissioner of Income Tax (Appeals) that FCCB was neither debt and nor shares in the instant year but hybrid instrument is factually and legally misconceived and therefore untenable.
1.3 That various judgments relied upon by the learned Commissioner of Income Tax (Appeals) to bring to tax the aforesaid capital receipt are wholly inapplicable to the facts of the case of the appellant company.
2. That the learned Commissioner of Income Tax (appeals) has further erred both in law and on facts in upholding the disallowan e of claim of deduction of following business expenditure incurred by the appellant company by invoking section 40(a)(ia) of the Act:
2.1 That the learned Commissioner of Income Tax (Appeals) while upholding the disallowance has fail d to appreciate that sum of Rs. 98,41,570/- represented payment made to a banking company to which Banking Regulation Act was applicable and was a resident and therefore section 195 of the Act had no application and thus invocation of section 40(a)(i) of the Act was perse misplaced m sconceived and untenable.
2.2 That e n otherwise the learned Commissioner of Income Tax (Appeals) has failed to appreciate that section 40(a)(ia) of the Act has no application viz-aviz alleged default of non deduction of TDS u/s 195 of the Act.
2.3 That the finding of the learned Commissioner of Income Tax (Appeals) that appellant has not explained the nature of transaction with HSIIDC because if the same is processing charges paid, then TDS provision would apply and disallowance of expense for non deduction of TDS was justified” is factually and legally erroneous and overlooks the submission of the appellant that HSIIDC Ltd. is a financial corporation which is covered as exempted from tax deduction as per section 194A(3)(iii)(b) and therefore no disallowance was warranted.
3. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts is not specifically deleting the disallowance of Rs. 5,82,825/- and Rs. 4,80,480/- made by invoking section 194C read with section 40(a)(ia) of the Act.
It is therefore prayed that addition/disallowances made and sustained by the learned Commissioner of Income Tax (Appeals) may kindly be deleted and appeal of the appellant company be allowed.
2. Briefly stated facts of the case are that the assessee was engaged in manufacturing and trading of plastic moulded toys, school furniture, playground equipment, infrastructure and automotive products etc. The assessee filed return of income on 26/09/2011, declaring loss of ₹ 9,10,87,560/-. The case was selected for scrutiny assessment. The scrutiny assessment under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was completed on 07/03/2014, wherein certain addition/disallowance were made. Aggrieved, the assessee filed appeal before the ld. CIT(A), who partly allowed the appeal of the assessee. Aggrieved with the addition sustained by the Ld. CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
3. The first ground raised by the assessee is against upholding the addition of ₹ 9,46,70,015/- for a discount on buy-back of Foreign Currency Convertible Bonds (FCCB).
3.1 The brief facts related to this issue are that, the assessee raised an amount of ₹ 40,41,71,000/-by way of issue of Foreign Currency Convertible Bonds (FCCB) in financial year 2007-08 relevant to assessment year 2008-09 from two overseas entities. As a result of exchange fluctuation, the FCCB loan at the beginning of the instant year stood at ₹ 44,97,59,000 (Rs.40,41,71,000 + ₹ 4,55,88,000). During the previous year relevant to the assessment year, the assessee bought back the FCCB at a discount of 24% of the face value of the FCCB and