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2018 (5) TMI 945 - ITAT MUMBAIGrant of credit for taxes deducted at source on interest received on FCCB’s - Held that:- As in context of the issue under consideration in the assessee’s own case for A.Y 2010-11 on a similar footing the matter requires to be restored to the file of the A.O, for making necessary verifications as regards the assessee’s claim for grant of credit for taxes deducted at source on interest received on FCCB’s during the year under consideration. Therefore, restore the issue to the file of the A.O with a direction to verify the assessee’s claim in respect of the grant of credit of TDS. The A.O is directed to satisfy himself that the amount of TDS had been deposited into government treasury and that the assessee is the lawful deductee in respect of the said amount. The A.O shall further satisfy himself on the aspect that the gross amount of interest had been considered as the income of the assessee and that no other person has or will claim credit of the said amount of taxes. We hold and direct accordingly. The Ground of appeal No.1 is allowed for statistical purposes. Taxing the total assessed income of the assessee at the rate of 42.23% [i.e tax rate of 40% (plus) 2.5% surcharge and 3% education cess] as against the applicable rate of 10% as per India-Cyprus Double Taxation Avoidance Agreement - Held that:- The consultancy receipts of the assessee, being in the nature of FTS would thus justifiably be brought to tax as per Article 12 of the India-Cyprus tax treaty at the rate of 10% of the gross amount of the consultancy receipts. We thus direct the A.O to subject the fee from consultancy services received by the assessee at the rate of 10% as provided in Article 12 of the India-Cyprus tax treaty. We are further persuaded to be in agreement with the contention of the ld. A.R that the interest income from FCCBs held by the assessee are subject to deduction of tax at source @ 10% as per Sec. 115AC(1)(a) of the Income Tax Act, 1961. We thus in terms of our aforesaid observations direct the A.O to subject the interest income from FCCBs to tax @ 10% as per the provision of Sec. 115AC of the Act. Before parting, we may herein observe that the A.O while bringing the aforesaid amount to tax shall duly consider the claim of the assessee that amount of tax already had been deducted at source on the aforesaid interest income by the issuer company and deposited in the Government treasury. The Ground of appeal is allowed in terms of our aforesaid observations. Levy of interest under Sec. 234B and 234C - Held that:- As the assessee is a non-resident company, therefore, a duty stands cast upon the payer to pay the tax at source, and resultantly no obligation for payment of advance tax was cast upon the assessee. We thus being of the considered view that in the backdrop of the judgment of the Hon’ble High Court of Bombay in the case of NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT), no interest under Sec. 234B and 234C could have validly been imposed on the assessee. We thus direct the deletion of the interest imposed. Default in deduction of tax at source on the interest payments on the FCCB’s issued to non-residents - Held that:- As the interest income in the hands of the recipients fell within the sweep of the exclusions carved in Sec. 9(1)(v)(b) and hence was not covered by Sec. 5(2), therefore, there was no occasion on the part of the assessee appellant before them to have deducted tax at source on the said amount. We thus in terms of our aforesaid observations are of the considered view that no infirmity emerges from the order of the DRP, who had directed the A.O to exclude the interest income received by the assessee from the FCCB’s issued by Suzlon Energy Limited, after making necessary verifications. Conversion price of the FCCB’s of Suzlon Energy Limited was not liable to be brought to tax in India - Held that:- We find ourselves to be in agreement with the view taken by the DRP that as the monies were raised by Suzlon Energy Limited outside India, therefore, as per Sec. 9(1)(i) of the Act, the income emanating on the FCCB’s from the sources outside India is not to be deemed to accrue or arise in India. We thus finding no infirmity in the order of the DRP, therefore, uphold its order in context of the issue under consideration. The Grounds of appeal Nos. 1 to 7 raised by the revenue before us are dismissed in terms of our aforesaid observations.
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