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11. The next issue raised by the Revenue in ITA No.1697/Mds/2014 is as under:

"5.1 The ld. CIT(A) erred in deleting the disallowance u/s 40(a)(i) on FCCB of ₹ 12.09 crore made by the AO, by holding that the assessee is required to deduct tax on the maturity of the FCCBs at the end of five year one month only; that since the assessee had bought back the FCCBs midway, TDS provisions u/s.195 are not applicable as per CBDT Circular No.4/2004."

-58- ITA 1695 to 1697 & CO 84/Mds/14 the Act and brought to tax the amount of ₹ 25.61 crores. Aggrieved, the assessee went in appeal before the CIT(Appeals).

18.1 After verifying the details of approval letters given by the RBI as well as correspondence with YES Bank and allotment of LRN approving the FCCB loan obtained as per ECB/FCCB Guidelines and also Certification of Form No.83 issued by the YES Bank to the RBI, the CIT(Appeals), observed that the FCCB loan obtained is in compliance of ECB Guideline as well as the assessee is required to submit ECB-2 Return as per Circular No.60 dated 31.1.2004 on monthly basis giving the details of withdrawals of Foreign loan amount, utilization, repayment, conversion, redemption and other payments etc., starting from March 2006, the details filed by the assessee as mentioned amply proved that the loan obtained in the form of FCCBs at 75 million US$ following the guidelines and circulars issued by the RBI from time to time.

SICAL LOGISTICS LIMITED STATEMENT OF UTILIZATION OF FCCB FUNDS Particulars Debit / Utilization US $ ₹ Purchase of Ship / Dredger 4,63,28,582 2,08,04,42,330 Platform Vessel - TORINO and Dredger - PORTOFINO by transfer / investment in Bergen Offshore Logistics Pte Ltd. and its 100% subsidiary Norsea Global Offshore Pte Ltd.

  Purchase of Railway License            1,12,40,292    50,00,00,000
  Licensing Fees for purchase       of
  Category I Concessionair

  Purchase of Land for Rail Terminal
  Development

  Bangalore                               40,55,964     18,04,20,776
  Minjur                                   5,61,117       2,49,60,050
  Mumbai                                  21,59,093       9,60,42,571
  Anupampattu                             75,03,020      33,37,55,562

  Purchase of Trucks                         54,893        24,41,796
                               -65-                    ITA 1695 to 1697
                                                       & CO 84/Mds/14


  FCCB Issue Expenses                   30,97,038       13,71,00,169
  Total Funds raised through issue of 7,50,00,000     3,35,51,63,254
  FCCB

                               -71-                  ITA 1695 to 1697
                                                     & CO 84/Mds/14

18.13      After going through the statutory permission obtained

by the assessee company from RBI, which has authorized Yes Bank, Chennai, which is considered as Authorized Dealer (AD) to obtain External Commercial Borrowings (ECB) in the form of FCCBs, the CIT(Appeals) observed that the assessee company is also submitted a statement of utilization of FCCB Funds, wherein the assessee has used the entire amount of FCCBs for purchasing of capital asset such as purchase of Ship/Dredger, purchase of Railway License, purchase of Land for Rail Terminal Development at Bangalore, Minjur, Mumbai and Anupampattu. Apart from the above purchase of capital assets, the assessee has also purchased some Trucks. The entire amount of FCCB funds has been utilized as per the RBI Guidelines and accordingly, invested in capital assets as it is seen from the statement of utilization of FCCBs funds. Once the Foreign loan was taken for the purpose of capital assets, any gain connected with the assets will result into capital receipts. The CIT(Appeals) also observed that it is clear by several judicial pronouncements even though it is connected with forward contract in Foreign currency which was obtained for purchase of capital assets, that