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2016 (6) TMI 24 - AT - Income TaxTDS u/s 196C - non deduction of TDS on premium/interest payable on redemption of FCCB by amortization on pro-rata basis of implicit rate of return over the period of bonds along with the TDS payable and charged to the Securities Premium Account periodically assessee in default u/s. 201(1) & 201(1A) - Held that:- As during the financial year ended on 31st March 2011, there was no question of there being any income by way of interest, as the FCCB' s were zero percent bonds carrying no interest and only giving the bondholder a right to get a premium of 39.37% on maturity. We also found that no interest whatsoever was payable during the financial year ended 31 March 2011. The word "payable" requires that a liability must accrue against the assessee during the year ended 31 March 2011 for the payment of the alleged interest and that a corresponding right / debt has to accrue to the bondholder. In this connection reliance is placed on the decision of the Supreme Court in the case of E. D. Sassoon & Company Ltd. and Others v/s. CIT (1954 (5) TMI 2 - SUPREME Court ). The decision in the case of Pfizer Ltd. [2012 (11) TMI 164 - ITAT MUMBAI] is of relevance because in that case the ITAT has held that there was no question of treating the assessee as an "assessee in default" in respect of non-deduction of TDS, even though the assessee had made a provision for expenses in its books of accounts. Now, coming to the observation made by lower authorities to the effect that assessee itself has made entry in the books of accounts, therefore, liable to deduct tax thereon. It is now settled position by several decisions of Hon’ble Supreme Court including the latest decision in the case of Tools Ltd. Vs. JCIT (2015 (3) TMI 853 - SUPREME COURT ) that entries in the books of accounts are not relevant. In any event, the assessee has reversed the entry for TDS in the immediate next financial year.In view of the above, we do not find any merit in the AO's action for holding the assessee as “assessee in default” for non-deduction of tax at source. - Decided in favour of assessee.
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