TMI Blog2019 (10) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... 9%.Therefore,reversing the order of the FAA,we decide third Ground of appeal in favour of the assessee . Disallowance u/s 14A - Computation of book profits u/s 115JB - HELD THAT:- t is not in dispute that there was no exempt income claimed by the assessee. The law is now very well settled that when there is no exempt income, there cannot be application of disallowance u/s 14A of the Act. Accordingly, we direct the ld AO to delete the disallowance made u/s 14A of the Act both under normal provisions of the Act as well as in the computation of book profits u/s 115JB of the Act. Addition u/s 41(1) - reduction in its liability of buyback during the year of its Foreign Currency Convertible Bonds (FCCB) - HELD THAT:- No dispute that the proceeds of the FCCBs were utilized by the assessee for acquisition of shares of its wholly owned subsidiary in USA. Hence it could be safely concluded that the FCCBs were utilized for capital purposes. We find that the assessee had undertaken the buyback of few FCCBs at a discounted value , which resulted in rebut, or remission of a part of the FCCBs. The assessee claimed the gains earned (reduction in the liability) on the buyback of FCCBs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be applied over and above the LIBOR rate in the facts and circumstances of the case. 3. We have heard the rival submissions and perused the materials available on record. We find that the assessee company is engaged in the business of Information Technology Enabled Transaction Processing Services. We find that the assessee had extended loan to First Ring Inc. US (FR US) and Firstsource Business Process Solutions, USA (FBPS) (i.e AEs) on which interest was charged at the rate of 6% and 7.50% per annum respectively. These loans were sourced in foreign currency and loans were also provided in foreign currency i.e US Dollars. The loan amount outstanding as on 1.4.2009 in respect of FR US was USD 17453676 and loan amount outstanding as on 1.4.2010 in respect of FBPS was USD 9267755. On 31.12.2009, FR US merged with FBPS. During the financial year 2010-11, the entire loan was repaid by FBPS to assessee company. We find that the assessee had submitted that the loans to the AEs were provided from its own funds sourced in US Dollar in as much as during September 2004, there was a capital infusion in the assessee company amounting to ₹ 1619 million ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact of availability of own funds with the assessee for providing loans to its AEs and by placing reliance on the decision of Hon ble Jurisdictional High Court in the case of Tata Autocomp Systems Ltd reported in (2015) 56 taxmann.com 206 (Bombay) and the decision of the Hon ble Delhi High Court in the case of Cotton Naturals (I) (P) Ltd reported in (2015) 55 taxmann.com 523 (Delhi), held that LIBOR rates should be adopted to benchmark the receipt of interest by the assessee from its AEs. The ld CITA also observed that in the assessee s own case, the ld TPO himself had adopted LIBOR rate as the benchmark for determination of ALP of receipt of interest on loans. Accordingly, the ld CITA allowed the claim of the assessee and directed the ld TPO to delete the ALP adjustment made in the sum of ₹ 3,29,66,045/-. 3.3. We find that this issue is squarely covered by the decision of this tribunal in assessee s own case for the Asst Year 2008-09 in ITA No.1725/Mum/2014 dated 27.6.2017 wherein it was held :- 3.4.We have heard the rival submissions and perused the material before us. We find that the assessee had advanced loan to its AE in US Dollar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CITA confirming the action of the ld AO of holding that the amount of ₹ 7,57,00,711/- being the reduction in its liability of buyback during the year of its Foreign Currency Convertible Bonds (FCCB) as taxable u/s 41(1) of the Act in the facts and circumstances of the case. 5.1. The brief facts of this issue are that the assessee issued FCCBs of USD 27.50 crores on 3.12.2007 redeemable on 4.12.2012 at 139.37% of the principal amount (implicit interest rate of 6.86% per annum) . The end proceeds of the FCCBs were utilized by the assessee for investing in its wholly owned subsidiary in the United States of America. During the year under consideration, pursuant to RBI notification, the assessee bought back 129 FCCBs under the Automatic Route. The assessee claimed the gains earned on the buyback of the FCCBs of ₹ 7,57,00,711/- as non-taxable while filing the return of income. The assessee placed reliance on the decision of Hon ble Jurisdictional High Court in the case of CIT vs Xylon Holdings P Ltd reported in 211 Taxman 108 (Bom) before the ld AO to justify its contentions. The ld AO observed that the assessee had utilsied the proceeds raised from the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest within a stipulated time. 11. It is a well-settled principle that creditor or his successor may exercise their Right of Waiver unilaterally to absolve the debtor from his liability to repay. After such exercise, the debtor is deemed to be absolved from the liability of repayment of loan subject to the conditions of waiver. The waiver may be a partly waiver i.e., waiver of part of the principal or interest repayable, or a complete waiver of both the loan as well as interest amounts. Hence, waiver of loan by the creditor results in the debtor having extra cash in his hand. It is receipt in the hands of the debtor/assessee. The short but cogent issue in the instant case arises whether waiver of loan by the creditor is taxable as a perquisite under Section 28 (iv) of the IT Act or taxable as a remission of liability under Section 41 (1) of the IT Act. 12. The first issue is the applicability of Section 28 (iv) of the IT Act in the present case. Before moving further, we deem it apposite to reproduce the relevant provision herein below:- '28. Profits and gains of business or profession.- The fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession in respect of which the allowance or deduction has been made is in existence in that year or not; or ** ** ** 15. On a perusal of the said provision, it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax under Section 41 of the IT Act. The objective behind this Section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability. It is undisputed fact that the Respondent had been paying interest at 6 % per annum to the KJC as per the contract but the assessee never claimed deduction for payment of interest under Section 36 (1) (iii) of the IT Act. In the case at han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he gains earned on reduction of liability on the buyback of FCCBs at a discounted value in the sum of ₹ 7,57,00,711/- cannot be brought to tax in the facts and circumstances of the instant case. Accordingly, the Grounds 2.1. to 2.3.raised by the assessee are allowed. 6. The Ground Nos. 3.1. to 3..3 raised by the assessee are challenging the action of the ld CITA in confirming the action of the ld AO of recomputing the deductions u/s 10A, 10B and 10AA of the Act by setting off the losses of non-STP / non-tax holiday units. 6.1. We have heard the rival submissions. We find that the issue in dispute is covered by the decision of this tribunal in favour of the assessee in its own case for the Asst Year 2012-13 in IT(TP)A No. 2258/Mum/2017 dated 12.4.2019 wherein it was held as under:- 7. We shall now advert to the part disallowance by the A.O of the assesses claim of deduction under Sec.10AA of the I.T Act. As per the facts discernible from the orders of the lower authorities, it stands revealed that the assessee had claimed deduction under Sec.10AA in respect of the eligible units at ₹ 48,13,86,995/-, as against its busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial force in the contention advanced by the ld. A.R before us. In fact, the issue under consideration had came up for adjudication before a coordinate bench of the Tribunal i.e ITAT F Bench, Mumbai in the assesses own case i.e Firstsource Solution Ltd. Vs. DCIT 6(2)/ACIT-5(2), Mumbai (ITA No. 4752/Mum/2009, ITA No. 4053/Mum/2008 and ITA No. 2658/Mum/2011) for A.Y 2004-05 A.Y. 2005-06. The Tribunal after giving a thoughtful consideration to the issue as to whether the profits on STP units were to be adjusted against the loss of non-STP units, had after relying on the judgment of the Hon‟ble High Court of Bombay in the case of CIT Vs. Black Beatch Consulting Pvt. Ltd. (2012) 348 ITR 72 (Bom) and that of the Hon‟ble Supreme Court in the case of CIT Vs. Yokogawa India Ltd. (2017) 391 ITR 274(SC) had directed the A.O to allow the deduction under Sec.10A of the I.T Act without setting off of loss from non-STP units. In our considered view as the provisions of Sec.10AA are pari materia to those envisaged in Sec.10A, therefore, the view taken by Tribunal in the assesses own case for the aforementioned preceding years i.e A.Y. 2004-05 and A.Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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