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2016 (5) TMI 360 - AT - Income TaxForeign Currency Convertible Bonds (FCCBs) - allowability of the claim of expenses - capital expenditure or revenue expenditure - Held that:- In the instant case, Ld AR for Assessee demonstrated that the Assessee earned substantial business from abroad after acquiring the foreign companies with the said FCC Bonds. The impugned expenditure incurred were incurred undisputedly by the Assessee in connection with FCCBs which were applied for acquiring the foreign companies which brought more business for the Assessee. Thus, there is nexus to the business of the Assessee. - Decided in favour of assessee We have held that the expenses in question are in principle of revenue nature. It is the trite law such expenses incurred 9n connection with raising of debts / FCC Bonds constitute allowable expenditure of the Assessee. We dismiss the revenue's finding that the said expenditure is expended in connection with issue of equity shares as the said Bond subscription $ 5.5 million was ultimately refunded with Interest after the lock in period. - Decided in favour of assessee Disallowance u/s 14A - Held that:- Assessee has an additional ground mentioning that some investments made in the subsidiaries yielded dividends chargeable to tax in India. Such investments should be kept outside the scope of the provisions of Rule 8D of the IT Rules, 1962 while determining the quantity to be disallowed u/s 14A of the Act. In this regard, Ld Counsel for the assessee cited various decisions and various arguments in support of his claim. One of such judgment is pronounced by the Hon‟ble Delhi High Court in the case of Joint Investments Private Limited [2015 (3) TMI 155 - DELHI HIGH COURT ] which is relevant for the proposition that the disallowable amount u/s 14A must not mean that the entire exempt income should be disallowed. Various decisions have come up on this issue involving the disallowance u/s 14A r.w. Rule 8D of the Act. This issue requires reconsideration and fresh decision by the AO in the light of the said decisions on the issue. - Decided in favour of assessee for statistical purposes Disallowance of deduction of bad debts - Held that:- AO has not been able to point out an instance of bad debts where the action of the appellant was mala fide. An assessee is entitled to re-evaluate and revalue its debtors from time to time failing which he will have unrealistic realizable figures in his books of accounts and the appellant has exactly done the same in this case. In view of the above facts, the disallowance on account of bad debts is directed to be deleted - Decided in favour of assessee
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