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"30. The assessee in Ground No.3, 4 and 6 has challenged the addition confirmed by CIT(A) out of FCCB interest paid.

31. The AO in his reasons recorded has laid great emphasis on application of funds. The AO in this regard has relied upon the report of SEBI and report of DIT (Intelligence), New Delhi. As per AO, the funds raised by issue of FCCB were used for investment purposes outside India and the same were used in various Yield Management Certificates (YMCs). The AO in course of re- assessment proceedings referred to various investments for different period the chart of which appears on the page 18 of the re-assessment order. The reasoning of the AO is that the FCCB funds we reused in business and the same has been diverted for non business purposes by investing the funds in YMCs. AO had disallowed the entire FCCB interest on the ground that the FCCB funds were found to be non genuine and addition was made u/s.68. Thus the claim of the AO was that the entire FCCB interest is disallowable as non genuine expenditure following the addition u/s.68 of the FCCB funds.

36. CIT(A) has confirmed the disallowance out of FCCB expenses in the ratio of FCCB interest disallowed to total interest claimed.

As per CIT(A), the facts and circumstances as discussed in context of FCCB interest expense is equally applicable to FCCB expenses. He accordingly disallowed the FCCB expenses in the ratio of FCCB interest expenses disallowed to total FCCB interest expenses claimed. As stated in respect of FCCB interest the AO has disallowed entire FCCB expenses on the ground that FCCB funds have been considered to be non genuine and provisions of section 68 were applied. CIT(A) has treated the FCCB funds as properly explained and has deleted the FCCB expenses except a part thereof which was disallowed as the funds were used for investments purpose outside India which as per him was non business purpose.

4. We have heard the submissions of the parties and also perused the material on record. As pointed out by the Ld. counsel, this issue is covered in favour of the assessee. The coordinate Bench has decided the issue in the assessee's own case for the A.Y. 2007-08 holding as under:-

"25. The next grounds of appeal of the Revenue is against the deletion of FCCB issue expenses and FCCB interest. The AO had disallowed the FCCB issue expenses of Rs.285828246 and FCCB interest of Rs.331693100. The AO has disallowed the above expenses relating to FCCB on the premise that the ITA Nos. 1927, 2549 & 2550/MUM/2017 Assessment Years: 2009-10 and 2010-11 FCCB funds are non genuine as held by him while making the addition of FCCB proceeds u/s.68.

Since we have held that the nature and source of funds of FCCB is fully explained and that the addition u/s.68 was rightly deleted by CIT(A), the addition of FCCB expenses and FCCB interest are also rightly deleted by CIT(A). CIT(A) has partially upheld the disallowance of FCCB interest and FCCB expenses on the reason of deployment of the funds in various securities. The said addition is a subject matter of assessee's appeal and is separately decided in subsequent paras. Thus, the addition of FCCB interest and FCCB expenses deleted by CIT(A) is correct as addition u/s.68 relating to FCCB funds is deleted."