Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (9) TMI 1045 - ITAT MUMBAI

2015 (9) TMI 1045 - ITAT MUMBAI - TMI - Notional interest on the alleged loan given by the assessee to its AE - Held that:- Tribunal for AY 2008-09, has deleted the addition by following the decision rendered by Hon'ble Bombay High Court in the cases of Vodafone india Services Pvt Ltd Vs. Union of India and Ors (2014 (10) TMI 278 - BOMBAY HIGH COURT) and M/s Shell India Markets Pvt Ltd (2014 (11) TMI 897 - BOMBAY HIGH COURT). The Ld D.R did not dispute these facts. The notional interest has been .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

revaluation loss on index linked debentures - Held that:- It is an accepted and prudent accounting practice to provide for all known liabilities and losses as on the date of Balance Sheet. The accounting standards also mandate the companies to provide for known liabilities and losses. During the years under consideration, the claim of the assessee is that the nifty index level has gone up vis--vis the level existed at the time of allotment of debentures, meaning thereby the liability of the as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng to the liability quantified by the assessee. We notice that the terms and conditions relating to the debentures prescribe a particular methodology to arrive at the interest liability at the time of redemption of debentures. In our view, the liability of the assessee as on the Balance sheet date should be determined under the very same methodology. Accordingly, we are of the view that the computation made by the assessee requires verification at the end of the assessing officer. Thus we set as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as filed both the appeals challenging the assessment orders passed for assessment years 2009-10 and 2010-11 by the AO in conformity with the directions issued by the Dispute Resolution Panel (DRP) of the Act. Since issues urged in both the years are identical in nature, both these appeals were heard together and are being disposed of by this common order, for the sake of convenience. 2. The assessee is engaged in the business of securities trading, NBFC activities and is also a professional clea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

saction and determined the arms length price of shares at ₹ 51.74 per share. The difference between the ALP and the issue price was also treated as deemed loan by the TPO in AY 2008-09. During the two years under consideration, the TPO took the view that the deemed loan is continuing and accordingly computed the Notional interest on the deemed loan. The said notional interest determined by the TPO was also confirmed by Ld DRP and hence the AO assessed the same in both the years under consi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

68 ITR 01) and M/s Shell India Markets Pvt Ltd (369 ITR 516). The Ld D.R did not dispute these facts. 5. Thus, we notice that the very foundation, on which the notional interest has been levied i.e., the addition relating to the difference in issue price which was considered to be the deemed loan , has since been deleted by the Tribunal. In that case, the impugned addition pertaining to notional interest made in both the years under consideration does not survive and is accordingly liable to be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

009-10:- i) During the year, the assessee had issued 100% principally protected debentures at par, having a pre-defined return payable on the maturity of the debentures. The return on these debentures is determined based on the Nifty index level prevailing on the date of maturity. On the date of maturity, the investor would receive the principal of the debenture, as protected. In addition, the investor may also receive a coupon based on the Nifty index level prevailing on the date of maturity. i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ate of affairs of the business in the financial statements prepared and presented on the basis of such accounting policies. As per the standard, under the consideration of 'prudence', provisions should be made for all known liabilities and losses even though the amount cannot be determined with certainty and only represents a best estimate in the light of available information. iv) Mercantile system of accounting requires that all liabilities should be taken into consideration. It need n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

st is payable on the basis of Nifty index level and hence if the index level as on the balance sheet date is more than the level at which the debentures were issued, then interest liability is created as on the Balance sheet date. Hence the assessee is required to provide for the interest liability so arrived at in terms of mercantile system of accounting and accounting standard. Accordingly, the assessee has computed the interest element under the name Loss on revaluation of debentures and clai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

given a Coupon and the value of coupon shall be determined as per the pre-determined formula, which is based on the nifty index level at the time of allotment and the nifty index level at the time of redemption. The Ld A.R submitted that the assessee is also liable to deduct tax at source on the value of coupon at the time of redemption. He submitted that the liability arising on debentures is in effect, in the nature of interest only, but the interest element is linked to the Nifty index level .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s. Woodward Governor India (P) Ltd (2009)(312 ITR 254) and submitted that the ratio laid down by the Hon‟ble Apex Court in the above said case is applicable to the issue under consideration. He further submitted that the liability of the assessee has fallen down in subsequent years and hence the assessee has offered the reduction in liability as its income in AY 2011-12 and 2012-13. 9. On the contrary, the Ld D.R submitted that the debentures issued by the assessee are only principally pro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ption is more than the nifty index level that prevailed at the time of allotment of debentures. If the nifty index level at the time of redemption is lower than the nifty index level that prevailed at the time of allotment of debentures, then the assessee is not required to pay any amount over and above the principal amount of debentures. There should not be any dispute that the amount payable by the assessee to the debenture holders is, in effect, in the nature of interest compensation only. Th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

conditions. So whenever the nifty index level crosses the index level that prevailed at the time of allotment of debentures, the liability of the assessee would also simultaneously increase. Conversely, if the index level goes down, the liability of the assessee would also go down. 12. The Hon‟ble Supreme Court has considered the issue relating to the effect of changes in foreign exchange rates in the case of Woodward Governor India (P) Ltd (supra). In the case of foreign currency also, t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e date of balance sheet in respect of a revenue liability, on account of exchange difference, is an item of expenditure deductible u/s 37(1) of the Act. 13. In the instant case also, there is no dispute with regard to the fact that there exists a liability to pay coupon rate at the time of redemption of debentures. As stated earlier the liability would, however, depend upon the performance of nifty index level. So whenever the nifty index level crosses the index level that prevailed at the time .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version