Income Tax Appellate Tribunal - Ahmedabad
Ddit( Intl. Taxn.), Ahmedabad vs Suzlon Energy Ltd., Ahmedabad on 29 March, 2017
ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014
DDIT (Intl Tax) vs. Suzlon Energy Ltd
Assessment Year : 2011-12
Page 1 of 12
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "I" BENCH, AHMEDABAD
[Coram: Pramod Kumar AM and S S Godara JM]
ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014
Assessment Year: 2011-12
Dy. DIT (International Taxation) -I .........................Appellant
Ahmedabad
Vs.
Suzlon Energy Ltd., .......................Respondent &
'Suzlon', 5, Shrimali Society, Cross-Objector
Nr. Shri Krishna Complex,
Navrangpura, Ahmedabad
[PAN : AADCS 0472 N]
Appearances by:
OP Sharma for the appellant
TP Hemani for the respondent
Date of concluding the hearing : January 25, 2017
Date of pronouncing the order : March 29, 2017
O R D E R
Per Pramod Kumar AM:
ITA No. 2750/Ahd/2013 - By Revenue1. This appeal filed by the Assessing Officer challenges correctness of the order dated 27.09.2013 passed by the CIT(A) in the matter of tax withholding demands raised under Section 201 r.w.s. 196C and 115AC of the Income-tax Act, 1961 for the assessment year 2011-12.
2. Grievances raised by the appellant are as follows:
i) The Id. CIT(A) has erred in law and on facts in holding that the assessee was not liable to deduct tax at source u/s 196C r.w.s.
115AC on the interest payable on FCCBs.
ii) The Id CIT(A) has erred on facts and law in not considering the issue that assessee has taken liability of issuing FCCBs from India after taking approval of RBI (lndian Authority) as per rules and guidelines of RBI and has remitted interest from India as its liability duly recognized in his books of account prepared for Indian regulatory ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014 DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 2 of 12 authorities, resulting into income accruing and arising to the non- resident u/s 5(2) of the Act for which the deeming provisions of Section 9(1) are not applicable.
iii) The Ld. CIT(A) erred in law and on facts in holding that both sections 5(2) and 9(1)(v) of the Act are applicable to determine the situs of interest income in case of non-resident.
Iv) The Id. CIT(A) erred in law and on facts in holding that the interest paid by the assessee on its FCCBs is covered by exception to Sec. 9(1)(v)(b) of the Act and consequently it falls outside the ambit of deemed income arising and accruing in India and as a result out of Sec. 5 also.
v) The Id. CIT(A) erred in law and on facts in holding that there is ambiguity in determining whether income has been received or arisen in India and thus there is a need to travel from Sec. 5(2) to Sec. 9(1) of the Act.
vi) The Id. CIT(A) has erred in law by contradicting his own observation that Sec. 115AC is a code itself and then travelling to another charging section of the Act for deciding the taxability of interest income.
vii) Therefore the order of the Ld. CIT(A) deserves to be deleted and that of the AO restored.
viii)Any other ground that may be urged at the time of hearing.
3. Briefly stated, the relevant material facts are like this. The assessee had two series of foreign currency convertible bonds (FCCB) in financial year 2007-08. The FCCBs so issued, amounting to US $ 300 millions, were to mature in June 2012, and FCCBs of US $ 200 millions were to mature in October 2012. These FCCBs were restructured in May 2009 and, accordingly, zero coupon FCCB amounting to USD $ 9,40,04,000 were replaced with 7.50% interest bearing FCCB amounting to US $ 5,63,88,000.
4. As a part of this restructuring exercise, the assessee gave 'consent incentive' to the bond holders consenting for change of FCCB terms, amounting to Rs.27,10,21,199/-, through Deutshe Bank AG London. It is tax withholding requirement from these payments which is subject matter of dispute before us.
ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 3 of 12
5. The Assessing Officer was of the view that the amount so paid by the assessee, as consent incentive, was taxable, under Section 5(b), in India as 'interest', and, accordingly, tax should have been withheld under Section 195. Learned CIT(A), however, relying upon a decision of this Tribunal in the case of ACIT vs. Adani Enterprise Ltd [(2013) 141 ITD 206 (Ahd)], reversed the action of the Assessing Officer and observed as follows:-
"3.3 The Hon'ble Tribunal in Adani (supra) after considering all the aspects has held that (a) interest payment by the assessee to non-resident investors cannot be said to have accrued or arisen in India and it also cannot be said that this interest income can be deemed to have accrued or arisen in India; and therefore (b) no TDS is to be deducted by the assessee from this payment in question. Since the entire issue is squarely covered by Jurisdictional Ahmedabad Tribunal's order in Adani (supra), I respectfully follow the same; adopt the findings given therein.
3.4 Therefore, on both the counts, following the order of my predecessor in the immediate A.Y.2010-11 in appellant's own case and the Jurisdictional Tribunal's order in the case of Adani (supra), I hold that (a) the consent incentive which are in the nature of interest as held by AO and interest paid by the appellant on its FCCB is not accruing and arising in India and therefore not hit by first limb of section 5(2) of the IT. Act and also not deemed to accrue or arise in India since it is covered by exceptions to section 9(l)(v)(b) and consequently it is in no way chargeable to tax in India under any of the provision of I.T. Act in the hands of the Non-Resident FCCB Bond Holders; (b) the appellant company was not liable to deduct tax at source u/s 196C r.w.s. 115AC, on the consent incentive and interest on subject FCCBs issued by appellant and (c) Since there is no liability to deduct tax at source, as a consequence, therefore, there was no failure u/s 201 and the appellant- company cannot be treated as the assessee in default u/s 201(1) and 201(1A) of the Act."
6. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us.
7. Having heard the rival contentions and having perused the material on record, we find that the issue is now covered, by a decision of the co-ordinate bench, in assessee's own case for the assessment year 2010-11 wherein tax withholding liability from similar payments came up for examination. In the present case, the CIT(A) has simply followed his predecessor's order for the assessment year 2010-11 but that decision by the CIT(A) has now been confirmed by the Tribunal in a ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014 DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 4 of 12 judgment reported as Suzlon Energy Ltd vs. ACIT and vice versa [(2015) 64 taxman.com 114 (Ahd)] wherein the co-ordinate bench has, inter alia, observed as follows:-
"Now, we take ITA No. 3475/Ahd/2010 for A.Y. 2010-11. Revenue has filed this appeal on the following grounds:
"1. The Ld. CIT (A), Gandhinagar has erred in law and on facts in holding that the appellant company was not liable to deduct tax at source u/s.196C r.w.s. 115AC on the interest payable on FCCBs (i.e. consent incentive).
2. Ld. CIT (A) has erred on facts and law in not considering the issue that an Indian Company (assessee) has taken liability of issuing FCCBs from India after taking approval of Reserve Bank of India (Indian Authority), as per rules and guidelines of RBI and has remitted interest from India as its liability duly recognized in his books of account prepared for Indian regulatory authorities, resulting into income accruing and arising to the non-resident under section 5(2) of the Act for which the deeming provisions of Section 9(1) are not applicable.
3. The Ld. CIT (A) erred in law and on facts in holding that both sections 5(2) and 9(1) (v) of the Act, are applicable to determine the situs of interest income in case of non resident.
4. The Ld. CIT(A) also erred in law and on facts in holding that the interest paid by the appellant on its FCCBs is covered by exception to Section 9(1)(v)(b) of the Act and consequently it falls outside the ambit of deemed income arising and accruing in India and as a result out of Section 5 also.
5. The Ld. CIT(A) erred in law and on facts in holding that there is ambiguity in determining whether income has been received or arisen in India and thus there is a need to travel from Section 5(2) to Section 9(1) of the Act.
6. The Ld. CIT (A) has erred in law by contradicting his own observation that section 115AC is a code itself and then traveling to another charging section of the Act for deciding the taxability of interest income.
7. In view of the above facts and circumstances, it is prayed that the order of Ld. CIT (A) Gandhinagar be cancelled and that of A O restored to the above extent."
13.1 C.O. No.61/Ahd/2014 filed by assessee on following ground:
"1. Both the lower authorities have failed to appreciate that no surcharge is to be added while determining withholding tax on remittance being made to the Non- resident, and therefore, surcharge ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014 DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 5 of 12 ought not have been included while determining liability of TDS u/s.201(1) of the Act."
13.2 Similar issues arose In ITA No.3476/Ahd/2010 for same year and similar C.O. No.62/Ahd/2014 was filed on behalf of assessee.
13.3 Learned Counsel for assessee was fair enough not to press both Cross Objections. So, same are dismissed as not pressed.
14. In ITA No.3475/Ahd/2010, Assessing Officer observed that consequent to remittance by assessee amounting to Rs.68,70,18,465/- for consent incentive (interest) in the month of June 2009 and Rs.10,63,50,697/- for interest during year ended March 31, 2010 to Deutsche Bank AG, London Branch payable on Foreign Currency Convertible Bonds (FCCBs), issued by assessee i.e. Suzlon Energy Limited. No tax has been deducted at the time of remittance. Assessing Officer issued a show cause notice to assessee as to why proceedings u/s.201(1) & 201(1A) r.w.s. 196C be not initiated for the above fault. Assessing Officer held that consent incentive is in nature of interest in terms of definition contained in Section 2(28)A of the act. Not agreeing with the explanation given by assessee in response to this show cause notice through various written submissions made from time to time along with documentary evidences and detailed explanations, Assessing Officer brought on record that bonds have been issued by an Indian company and the consent incentive and interest has been paid by an Indian company from India only and further the obligation to pay the consent incentive and interest rested with assessee only. Therefore, according to him the consent incentive and interest has accrued or arisen in the hands of non-resident bondholders in India as soon as the interest became due to the Bondholders. According to him, the interest on FCCBs is chargeable to tax u/s 5(2) itself and assessee's assertion that same is covered by section 9 was found incorrect by Assessing Officer. According to him, when income is actually received or accrued in India, the provisions contained in section 5(2) is sufficient to create a charge in respect of a non-resident's income and resort to deeming provisions of section 9(1)(v) was not warranted, Commenting on the assessee's reference to the words "Subject to provisions of this Act", in section 5. Assessing Officer stated that this does not lead to the conclusion that charging provisions of section 5(2) is controlled by another charging provision in section 9(1). At the strength of above legal portion, Assessing Officer came to the conclusion that income derived from non- resident bondholders is chargeable u/s. 5(2] as income accrued in India and once it is covered u/s. 5(2) section 9(l)(v)(b) is not applicable. Assessing Officer also stated that Circular of CBDT (supra) cited by the assessee is not applicable to the present case as the same has been issued with regard to section 9(l)(i) and 9(l)(v) of the Act, but in present case, the provisions of section 5(2) are applicable and one need not travel to the provisions of section 9 of the Act.
14.1 Assessing Officer, in para 7.2 of the assessment order, went further to establish that even if we take the provisions of section 9(l)(v)(b), assessee's ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014 DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 6 of 12 case is not covered by the exclusions stated therein. The reasons advanced by the Assessing Officer for the exclusions being not applicable are as under:
"7.2 A close reading of the above subsection makes it dear that interest paid by a resident is chargeable to income tax except when the interest is payable in respect of any debt incurred for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India. This exclusion covers, the cases where the assessee through a 'branch office' or through a 'permanent establishment' carries out its business outside India or makes or earns income outside India. But in the present case there is no such branch office or permanent establishment of the assesses through -which the business of the assesses is carried out or through which it can source income. In view of the above, the exemption available as per sub clause (b) of clause
(v) of sub-section (2) of section 9 of the Act, is not applicable in present case and thus same is chargeable to tax in India."
Assessing Officer analysed the issue in context of issue of FCCB which is governed by "Issue of foreign currency convertible bonds and ordinary shares (through Depositary Receipt (Mechanism) Scheme, 1993" notified by Department of Economic Affairs No.GSR 700(E), dated 12 November, 1993 and Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme is the notified scheme for the purpose of section 115AG(l)(a) in respect of assessment year 2002-2003 and subsequent assessment years vide CBDT notification No.SO 987 (E) dated 10/09/2002 along with the notification of Department of Economic Affairs vide G.S.R. 89(E) dated February 15, 2008, to the point that irrespective of the end use of the proceeds, once the scheme is part of the section 115 AC of the Act deduction of tax at source @ 10% is mandated until such time the conversion option is exercised. He also referred to the prospectus issued by assessee at the time of issue of FCCBs wherein it was mentioned that payment of interest shall be subjected to provisions of section 115AC. Therefore, according to Assessing Officer, considering all the facts, assessee has to be treated as an assessee in default as per provisions of section 201(1), since the entire consent incentive and interest payable stands remitted without deduction of tax.
14.2 Matter was carried before the First Appellate Authority, wherein contentions were raised on behalf of assessee including synopsis of argument and having considered the same, CIT(A) granted relief to assessee. Same has been opposed on behalf of Revenue inter alia submitted that CIT(A) erred in law and facts in holding that assessee company was not liable to deduct tax at source 196C r.w.s. 115AC on the interest payable on FCCBs (i.e. consent incentive). CIT(A) erred on facts and law in not considering the issue that an Indian company has taken liability of issuing FCCBs from India after taking approval of Reserve Bank of India (Indian Authority) as per rules and guidelines of RBI and has remitted interest from India as liability duly recognized in his books of account prepared for Indian regulatory authorities, ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014 DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 7 of 12 resulting into income accruing and arising to non-resident u/s.5(2) of the Act for which deeming provisions of Section 9(1) are not applicable. CIT(A) erred in holding that both Sections 5(2) and 9(1)(v) of the Act, are applicable to determine the status of interest income in case of non resident. CIT(A) was not justified in holding that interest paid by assessee on its FCCBs is covered by exception to Section9(1)(v)(b) of the Act and consequently it falls outside the ambit of deemed income arising and accruing in India and as a result out of Section 5 also. CIT(A) erred in holding that there is ambiguity in determining whether income has been received or arisen in India and thus, there is a need to travel from Section 5(2) to Section 9(1) of the Act. CIT(A) erred in law by contradicting its own observation that Section 115AC is a code itself and then travelling to another charging Section of the Act for deciding the taxability of interest income. In view of above, learned Departmental Representative requested to set aside the order of CIT(A) and that of Assessing Officer be restored. On other hand, learned Authorized Representative supported the order of CIT(A) and stated that Assessing Officer erred in law and on facts in holding that assessee company was liable to deduct tax at source u/s.196C r.w.s. 115AC of the Income Tax Act on remittance to Deutsche Bank AG, London Branch for making payment of consent incentive on is behalf of foreign currency convertible bond holders. Assessing Officer erred in not appreciating the income of recipient non- resident is not at all chargeable to tax in India and therefore, there was no obligation to deduct tax at source and therefore no question of invoking provisions of Section 201(1) of the Act. Assessing Officer erred in not appreciating that by virtue of provisions of Section 9(1)(v)(b) of the Act, interest income cannot be said to have accrued or arisen as the said interest is paid for earning income from source outside India. Once income is not accrued or arisen, no question of tax deduction at source would arise. Assessing Officer erred in applying provisions of Section 5(2)(b) of the Act when the said provisions have no application whatsoever in the facts of the case. Assessing Officer erred in treating assessee company to be an assessee in default u/s.201(1) of Act in respect of tax allegedly deductible at source on subject remittance to Deutsche Bank AG, London Branch for making payment of consent incentive on its behalf to Foreign Currency Convertible Bond (FCCB) holders. Assessing Officer erred in applying the provisions of Section 195A of the Act whereas the said Section is not applicable to any income referred to in Section 196C of the Act. In view of this, learned Authorized Representative supported the order of CIT(A).
14.3 After going through rival submissions and material on record, we find that assessee had issued two series of Foreign Currency Convertible Bonds (FCCB) in F.Y. 2007-08, namely, FCCB for US $ 300 millions maturing in June 2012 and another FCCB for US$ 200 millions maturing in October 2012. The proceeds of subject FCCB were used for acquisition of shares in overseas subsidiary which is carrying on business outside India resulting in source of income outside India. The bonds have been issued under the permission of Reserve Bank of India under External Commercial Borrowing (ECB) guidelines. Assessee carried out restructuring of subject FCCB in May 2009 with permission of Reserve Bank of India and as a part of it and as a ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014 DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 8 of 12 part of it assessee replaced Zero coupon FCCB amounting to US$ 9,40,04,000/- with 7.50% interest bearing FCCB amounting to US$ 5,63,88,000/-. As a part of restructuring assessee company has made payment to non- resident bond holders on account of consent incentive for change in financial covenants of FCCB amounting to Rs.68,70,18,465/- through Deutsche Bank AG London Branch. Assessee company has also remitted interest on the said FCCB's amounting to Rs.10,63,50,697/- to non- resident bond-holders through Dutsche Bank AG London Branch. However, Assessing Officer passed the order invoking provisions of Section 201(1)/(1A) of Act after holding that assessee was liable to deduct tax at source u/s.196C r.w.s. 115AC of the Act on remittance made by assessee. Assessing Officer gave following reasoning while passing order:
(a) Assessing Officer was of the view that the Bonds were issued by an Indian Company and interest has been paid by an Indian Company from India only and further the obligation to pay the interest rested with assessee only and accordingly chargeable u/s.5(2) of the Act;
(b) For the said contention, Assessing Officer relied upon the Supreme Court decision in the case of Performing Rights Society Ltd. v. CIT [1977] 106 ITR 11 and Allahabad High Court decision in the case of Hira Mills Ltd. v. ITO [1946] 14 ITR 417;
(c) Assessing Officer was further of the view that once the income is covered u/s.5(2), Section 9(1)(v)(b) is not applicable;
(d) Assessing Officer was further of the view that the issue of FCCB is governed by "Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1992" and the said scheme is notified scheme for the purpose of Section 115AC(i)(a) of the Act and therefore, irrespective of the end use of the proceeds, once the scheme is part of the Section 115AC, deduction of tax at source @ 10% is mandate until such time the conversion option is exercised;
(e) Assessing Officer further went to establish that even if the provisions of Section 9(1)(v)(b) is applicable, the assessee's case will not be covered by the exclusions stated therein.
In this background, learned Authorized Representative submitted that issue is covered by Co-ordinate Bench decision in case of Addl. DIT (Intt. Taxation) v. Adani Enterprises Ltd. [2013] 141 ITD 206/29 taxmann.com 99 (Ahd. - Trib.) wherein ITAT after considering the contentions of Assessing Officer and case laws relied upon by him, held that interest paid by assessee to non-resident investor is specifically excluded from the deeming provisions as per Section 9(1)(v)(b), and therefore, such interest payment cannot be covered in the definition of income deemed to accrue or arise in India. It is further held that since income in question is falling within the ambit of this exclusion clause of income deemed to accrue or arise in India as per ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014 DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 9 of 12 Section 9(1)(v)(b), it cannot fall within the ambit of income accrued and arisen in India, and hence, the same cannot be said to be covered u/s.5(2) of the Act. Therefore, there was no need to deduct tax at source on such remittance.
14.4 In the present appellate proceedings ,the appellant submitted a paper book on 10-09-2010 containing the copy of all the documents; and submissions made to AO from time to time as well as written submissions once again compiling the argument advanced before AO along with explanation on the finding of AO. It was argued that the question of applying provisions of section 196C r.w.s 115AC arises only when the income is chargeable to tax in l:idia and in present case none of the remittances are not at all chargeable to tax in India in hands of FCCB Bondholders and hence there was no obligation on appellant to deduct tax at source and thus appellant can not be fastened with the default u/s. 201(l) and 201(1A) of the Act.
14.5 From detailed submission in this regard, we find that assessee has issued two series of Foreign Currency Convertible Bonds ('FCCB") in F.Y:
2007-08 namely; FCCB for US$ 300 Millions maturing in June 2012 and another FCCB for US$ 200 Millions maturing in October 2012. We find that proceeds of subject FCCB were used to be used and as a matter of fact used, for acquisition of shares in overseas subsidiary which was carrying on business outside India resulting in source of income outside India. We also find that the bonds have been issued under the permission of Reserve Bank of India under External Commercial Borrowing ('ECB') guidelines. However, due to financial constraint, assessee carried out restructuring of subject FCCB in May 2009 with the permission of Reserve Bank of India and pursuant to the same, assessee replaced Zero coupon FCCB amounting to US$ 9,40,04,000/- with 7.50% interest bearing FCCB amounting to US$ 5,63,88,000/-. As a part of restructuring of assessee company has made payment to non-resident bond holders on account of 'consent incentive' for changes in the financial covenants of the Foreign Currency Convertible Bonds amounting to Rs.68,70,18,465/- through Deutsche Bank AG London Branch. Assessee company had also remitted interest on said FCCB's amounting to Rs.10,63,50,697/- to the non- resident bond-holders through Deutsche Bank AG London Branch. Now, the question is whether these payments are subject to tax in the hands of the recipient Non-Residents? If the answer is in affirmative, the assessee is under an obligation to deduct tax at source and if the answer in negative, the assessee cannot be held liable to deduct tax and consequently, the orders u/s 201(1)/(1A) has to be quashed.
As stated earlier, the entire issue is squarely covered by the order of Co- ordinate bench of Ahmedabad in case of Adani Enterprises Ltd. (supra). We find that the facts of present case are identical to Adani Enterprises Ltd's case (supra) which can be summarized and compared in the following tabular chart:ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014
DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 10 of 12 Facts in the case of Adani Enterprise Ltd. Facts in the present case
(a)Adani Enterprise had issued FCCB in (a) The assessee has issued FCCB in New York and the proceeds from FCCB London and the proceeds of such were used for making overseas direct FCCBs were utilized for the purpose of investment in its Singapore subsidiary investments and acquisition of foreign such as Adani Shipping PTE Ltd., Adani subsidiaries outside India through Global PTE Ltd. etc.; foreign subsidiaries;
(b) Adani remitted interest to the Bank (b)The assessee remitted the amount
of New York, Mellon towards the due on account interest and consent
interest payable on FCCBs issued by incentives to Deutsche Bank AG,
Adani. London Branch as its agent to distribute
the interest and consent incentive
amount; which in turn gave to Deutsche
Trustees Co Limited London who stood
nominated as the trustee of the bond
holders and the said trustee made the
payment in foreign currency to the
clearing system where individual bond
holders are having accounts.
(c) Tribunal in its order on pg. no. 14 (c) In the present case also the AO on
vide para 11 has reproduced the para pg. no.9 vide para 6.1.4 has passed the
4.7 of AO's order, which shows that AO same observations as noted in para 4.7
was of the view that the Bonds were of Adani Enterprise Ltd. order. In the
issued by an Indian Company and present case also, AO was of the view
interest has been paid by an Indian that the Bonds were issued by an Indian
Company from India only and further the Company and interest has been paid by
obligation to pay the interest rested with an Indian Company from India only and the Assessee only and accordingly further the obligation to pay the interest chargeable u/s 5(2) of the Act; rested with the Assessee only and accordingly chargeable u/s 5(2) of the Act;
(d)For the said contention, AO relied (d)In this case also, for the above upon the Supreme Court decision in the contention AO has relied upon the case of Performing Rights Society Supreme Court decision in the case Ltd. case (supra) and Allahabad High of Performing Rights Society Coyrt decision in the case of Hira Mills Ltd.'s (supra) and Allahabad High Court Ltd. (supra) (refer pg. no. 12 of the decision in the case of Hira Mills order); Ltd. (supra); (Pg. Nos.6-8 vide para 6.1.3 of AO order)
(e) AO was further of the view that once (e)In the present case also, AO was the income is covered u/s 5(2), further of the view that once the income S.9(l)(v)(b) is not applicable; is covered u/s 5(2), S.9(l)(v)(b) is not applicable. (Pg. No.9 vide para 6.1.4 of AO order) ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014 DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 11 of 12
(f) AO was further of the view that the (f) In the present case also, AO was issue of FCCB is governed by "Issue of further of the view that the issue of Foreign Currency Convertible Bonds FCCB is governed by "Issue of Foreign and Ordinary Shares (Through Currency Convertible Bonds and Depositary Receipt Mechanism) Ordinary Shares (Through Depositary Scheme, 1993" and the said scheme is Receipt Mechanism) Scheme, 1993"
notified scheme for the purpose of and the said scheme is notified scheme S.115AC(i)(a)of the Act, and therefore, for the purpose of S.115AC(i)(a)of the irrespective of the end use of the Act, and therefore, irrespective of the proceeds, once the scheme is part of end use of the proceeds, once the the section 115AC, deduction of tax at scheme is part of the section 115AC, source @ 10% is mandate until such deduction of tax at source @ 10% is time the conversion option is exercised; mandate until such time the conversion option is exercised.(Pg.nos.l0-14 vide paras 6.2 to 6.6)
(g)AO further went to establish that (g)In the present case also, AO further even if the provisions of S.9(l)(v)(b) is went to establish that even if the applicable, the assessee's case will not provisions of S.9(l)(v)(b) is applicable, be covered by the exclusions stated the assessee's case will not be covered therein. by the exclusions stated therein; (Pg.
nos.14-15 vide paras 7 to 7.3) Therefore, Tribunal in Adani Enterprises Ltd.'s (supra) after considering the rival contentions, held that interest paid by assessee to non-resident investor is specifically excluded from the deeming provisions as per S.9(l)(v)(b), and therefore, such interest payment cannot be covered in definition of income deemed to accrue or arise in India. It was thus held that since the income in question is falling within the ambit of this exclusion clause of income deemed to accrue or arise in India as per S.9(l)(v)(b), it cannot fall within the ambit of income accrued and arisen in India, and hence, same cannot be said to be covered u/s 5(2) of the Act. Therefore, there was no occasion to deduct tax at source on such remittance. Respectfully following the decision of the co- ordinate bench of the Tribunal in the case of the Adani (supra), which is identical both in terms of the facts and laws relied upon by the Assessing Officer, we hold that since income in question is squarely falling under the exclusion clause of income deemed to accrue or arise in India u/s 9(l)(v)(b) of the Act, it cannot fall within the ambit of income accrued and arisen in India, and hence, the same cannot be said to be covered u/s 5(2) of the Act. Since the recipient non-resident are not taxable on this income in India, there was no obligation to deduct tax at source on such remittance. Hence, assessee cannot be held liable u/s. 201(1)/(1A) of the Act. In view of this legal discussion, this ground of Revenue is dismissed. Consequently Revenue's appeal in ITA No.3476/Ahd/10 is also dismissed."
8. In view of the above discussions and bearing in mind entirety of the case, we approve the order of the CIT(A) and decline to interfere in the matter.
9. In the result, the appeal is dismissed.
ITA No. 2750/Ahd/2013 & CO No.63/Ahd/2014DDIT (Intl Tax) vs. Suzlon Energy Ltd Assessment Year : 2011-12 Page 12 of 12 CO No.63/Ahd/2014 : By assessee
10. Learned representatives fairly agree that in the event of appeal being dismissed, CO will be rendered infructuous and need not be adjudicated upon.
11. In the result, the CO is dismissed as infructuous. Pronounced in the open Court on today on the 29th day of March, 2017. -
Sd/- Sd/-
S S Godara Pramod Kumar
(Judicial Member) (Accountant Member)
Ahmedabad, the 29th day of March, 2017
Copies to: (1) The appellant
(2) The respondent
(3) Commissioner
(4) CIT(A)
(5) Departmental Representative
(6) Guard File
By order
TRUE COPY
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad
1. Date of dictation: ........28.03.2017 - Four pages manuscript of Hon'ble AM attached.....................
2. Date on which the typed draft is placed before the Dictating Member: ....28.03.2017..........
3. Date on which the approved draft comes to the Sr. P.S./P.S.: ...... 29.03.2017...............
4. Date on which the fair order is placed before the Dictating Member for Pronouncement: ............
29.03.2017...............
5. Date on which the file goes to the Bench Clerk : ..... 29.03.2017....................
6. Date on which the file goes to the Head Clerk : ..................................
7. The date on which the file goes to the Assistant Registrar for signature on the order: ..........................
8. Date of Despatch of the Order: ........................