TMI Blog2015 (9) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... no disallowance is called for out of administrative expenditure because dividend income is exempt and hence, proportionate disallowance out of administrative expenses is justified. Accordingly, we do not find any reason to interfere in the order of CIT(A) to that extent. Same is upheld. Allowability of deduction u/s.80IB on interest on FDR and ICD - Held that:- Net interest only should be considered for reducing from profits of business for computing deduction u/s.80-IB and for the purpose of computing net interest, only these expenditure, which are incurred for earning interest income should be considered and reduced from interest income. As a result, main ground is rejected, however assessee's alternative netting interest for the purpose of claiming deduction u/s. 80IB is allowed for statistical purpose as indicated above. Disallowance of sales commission - CIT(A) deleted the addition - Held that:- We find that CIT(A) has given clear finding on the issue that assessee has given evidence that the recipient provided information in respect of services which helped the sales to mature and realise and, therefore, payment of commission was justified and income of all units of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above. Since the matter has been remitted, penalty on this ground doesn't survive. In view of above, CIT(A)(A) was justified in deleting penalty. Penalty on account of disallowance u/s.14A - Held that:- CIT(A) has granted partial relief. ITAT has confirmed proportionate disallowance u/s. 14A out of administrative expenses on which penalty has been levied. In view of above, we find that assessee has furnished all the details. Assessee has neither consciously concealed any income nor has evaded any tax. In such circumstances, penalty was rightly deleted by CIT(A) on this account. Further mere disallowance u/s 14A out of administrative expenses cannot be justified penalty u/s 271(1)(c). Same has been rightly deleted by CIT(A). We uphold the same. Lianility to deduct tax at source u/s.196C r.w.s. 115AC on the interest payable on FCCBs - Held that:- interest paid by assessee to nonresident investor is specifically excluded from the deeming provisions as per S.9(1)(v)(b), and therefore, such interest payment cannot be covered in definition of income deemed to accrue or arise in India. It was thus held that since the income in question is falling within the ambit of this exclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 18,15,43,011/-. 4. Both the lower authorities have erred in law and on facts in not properly appreciating and considering various submissions, evidences and supporting placed on record during the course of the proceedings and not properly appreciating various facts and law in its proper respective. 5. Levy of interest u/s 234A/B/C/D of the Act is not justified. 6. Learned CIT(A) has erred in law and on facts in confirming the action of ld. AO in initiating penalty under section 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act. 3. At the outset of hearing learned Authorized Representative did not press ground nos. 4, 5 6. So, they are dismissed as not pressed. 3.1 Assessee is engaged in the business of manufacturing Wind Turbine Generators (WTGs) at various units, Daman and Pondicherry Dhule. 4. First issue is assessee's appeal for A.Y. 2007-08 is with regards to disallowing an amount of ₹ 2,66,38,938/- by invoking provisions of Section 14A. Assessing Officer found that assessee has made huge investments in its subsidiary companies and prefers shares amounting to ₹ 521,58,85,747/-. He fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable for assessment years prior to A.Y. 2008-09. Hence, for A.Ys. prior to A.Y. 2008-09 (as in the present case), Assessing Officer has to prove the nexus that borrowed funds have been used for making investments which generate tax free income prior to making disallowance u/s.14A. Assessing Officer has not recorded any finding regarding any direct nexus between interest bearing borrowed funds and investment in subsidiaries. Further, stand of assessee has been that assessee was having substantial interest free funds for making such investments. Assessee's total investments in Indian subsidiaries were only ₹ 176.25 crores whereas its share capital and reserves and surplus aggregated to ₹ 3,713.31 crores which is sufficient for investment in Indian subsidiaries. Further, according to learned Authorized Representative, assessee's own funds have increased by ₹ 891.06 crores (i.e. ₹ 3713.31 crores - ₹ 2,822.25 crores) during year under consideration which is more than in pursuant to the investments in Indian subsidiaries. Learned Authorized Representative further contended that assessee's cash profits were to the tune of ₹ 1,134. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not recorded any finding regarding any direct nexus between interest bearing borrowed funds and investment in subsidiaries. Apart from this, learned Authorized Representative submitted that assessee was having substantial interest free funds. So disallowance u/s.14A is not required as discussed above. We find that ITAT, Ahmedabad 'C' Bench in assessee's own case for A.Y. 2005-06 2006-07 reported in [2013] 32 taxmann.com 349 (Ahmedabad - Trib.) has dealt with similar issue and decided as under: 14. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Regarding the grounds raised by the revenue in respect of disallowance of interest expenditure made by the Assessing Officer under section 14A and deletion made by learned Commissioner of Income-tax (Appeals), we find that no interference is called for in the order of the learned Commissioner of Income-tax (Appeals). We hold so because we find that with regard to the investment of ₹ 5907.18 lakhs in foreign subsidiaries, no disallowance can be made under section 14A because dividend income from foreign subsidiaries is taxable in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocate directors' remuneration fee and traveling allowance towards earning dividend and to make proportionate disallowance under section 14A of the Income-tax Act, 1961, we are of the view that Assessing Officer should make proportionate disallowance only in respect of dividend income from Indian subsidiaries. We do not find any merit in the contention of assessee that no disallowance is called for out of administrative expenditure because dividend income is exempt and hence, proportionate disallowance out of administrative expenses is justified. Accordingly, we do not find any reason to interfere in the order of CIT(A) to that extent. Same is upheld. 5. Next issue in assessee's appeal for A.Y. 2007-08 is with regards to allowability of deduction u/s.80IB of the Act on interest on FDR and ICD amounting to ₹ 18,15,43,011/-. Assessing Officer observed that assessee has claimed deduction u/s.80IB for its Daman unit-II and Daman RBU unit-III @ 30%, while @ 100% for Pondicherry and Dhunetha unit at Daman. Assessing Officer has not granted the benefit of deduction u/s.80IB on interest on FDR and ICD amounting to ₹ 18,15,43,011/- relying on the decision of ITAT in it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aa) to section 80HHC for determining the profits of business. Although this judgment is in respect of deduction under section 80HHC but we find no reason as to why the same logic should not be applied in respect of deduction under section 80-IB of the Income-tax Act, 1961. We, therefore, hold that net interest only should be considered for reducing from profits of business for computing deduction under section 80-IB and for the purpose of computing net interest, only these expenditure, which are incurred for earning interest income should be considered and reduced from interest income. Ground No. 3 of the assessee is rejected whereas ground No. 4 of the assessee is allowed for statistical purposes. Facts being similar, so following same reasoning, we hold that net interest only should be considered for reducing from profits of business for computing deduction u/s.80-IB and for the purpose of computing net interest, only these expenditure, which are incurred for earning interest income should be considered and reduced from interest income. As a result, main ground is rejected, however assessee's alternative netting interest for the purpose of claiming deduction u/s. 80IB is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and for providing information which resulted in maturity of sales. Payments were made as per terms of agreement. This issue was discussed in detail by concerned CIT(A) in A.Y. 2006-07, wherein he has discussed the scope of services required to be done by the agents as per the agreements. So, his predecessor CIT(A) deleted the disallowance by holding that the payment of commission was genuine. But the year under consideration, assessee has given evidence that recipients have provided information about potential buyers and provided services, which helped the sales to be matured and realized and as the facts are similar in the instant year. So, CIT(A) held that payment of commission by assessee was justified. 8.2 Before us, learned Departmental Representative supported the order of Assessing Officer and CIT(A) was not justified in deleting the addition made on account of disallowance of sales commission expenses. Accordingly, the order of CIT(A) be set aside and that of Assessing Officer be restored. On other hand, learned Authorized Representative supported the order of CIT(A) and requested in light of ITAT, Ahmedabad decision in A.Y. 2005-06 06-07 to uphold the order of CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the interest of both the party that the remissior would not come on front line. In the case of the appellant, it is seen that: (i) all the payments were made by cheques and parties were genuine. The parties have confirmed the receipt of payments and rendering of services in the form of giving information about its customers ; (ii) all the agents are tax payers and the commission received by the assesseecompany is shown in their income-tax returns and the tax has been paid thereon : (iii) for the appellant, there is no motive to save taxes as units of appellant are eligible for deduction under section 80-IB : and (iv) all the recipients of the commission are independent persons and they are not related to the appellant-company ; (v) there is increase in the sales this year, which justifies the payment of commission ; (v) as per the hon'ble Supreme Court's decision relied on by the appellant, the Assessing Officer cannot sit in the judgment over commercial wisdom of the appellant and determine the reasonableness ofthe expenditure, unless the person is a related person to the assessee under section 40A(2)(b). As the appellant has given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers. Further, there is no evidence in support of the contention that the customers were induced by the agents to approach the appellantcompany. Hence, it is held that in respect of the six parties, the payment is not made for receiving the information, which resulted into maturity of sales. Therefore, I hold that the payment is not made in accordance with the terms of contract entered into in this respect and these payments are not made for the business purposes. The Assessing Officer was justified in disallowing the payment of commission in respect of these transactions and the disallowance of ₹ 42,81.600 is confirmed. However, the entire expenditure cannot be disallowed merely based on the statements of six customers, who form, a very negligible percentage of sales and the commission expenditure. Therefore, the appellant is allowed relief in respect of the balance amount of commission paid. 8. From the above paragraph of the order of the learned Commissioner of Income-tax (Appeals), we find that a clear finding is given by the learned Commissioner of Income-tax (Appeals) that the assessee has given evidence that the recipient provided information in respect of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different. In that case, this finding was recorded by the Tribunal that selling agency firm and the assessee has no genuine existence and such selling agency was found to be make believe document. The facts in the present case are not so. In the present case, a clear finding is given by the learned Commissioner of Income-tax (Appeals) that services were rendered by the commission agents and this finding of the learned Commissioner of Income-tax (Appeals) could not be controverted by the learned Departmental representative. Hence, this judgment of the hon'ble apex court does not render any help to the Revenue in the present case. In view of our above discussion, we do not find any reason to interfere in the order of the learned Commissioner of Income-tax (Appeals) on this issue. Accordingly, ground No. 1 of the Revenue as well as ground No. of the assessee's appeals is rejected. In this background, we find that CIT(A) has given clear finding on the issue that assessee has given evidence that the recipient provided information in respect of services which helped the sales to mature and realise and, therefore, payment of commission was justified and income of all units o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount arithmetically equal to customs duty or central excise duty actually paid by an individual importer-cum-manufacturer. It is also staled by the hon'ble apex court in paragraph 17 of this judgment that sub-section (2) of section 75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. We, therefore, feel that paragraphs 16, 17 and 18 of this judgment of the hon'ble apex court should be reproduced below for ready reference (page 233) : 16. DEPB is an incentive. It is given under the Duty Exemption Remission Scheme. Essentially, it is an export incentive. No doubt, the object behind DEPB is to neutralise the incidence of customs duty payment on the import content of export product. This neutralisation is provided for by credit to customs duty against export product. Under DEPB, an exporter may apply for credit as a percentage of the FOB value of exports made in freely convertible currency. Credit is available only against the export product and at rates specified by the DGFT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng out any operation on the goods or as is specified in the rules as the average amount of duty paid on the materials of that class or description used in the manufacture or processing of export goods or carrying out any operation on export goods of that class or description either by manufacturers generally or by persons processing or carrying on any operation generally or by any particular manufacturer or particular person carrying on any process or other operation, and interest if any payable thereon. 33. We also reproduce the relevant portion of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995 as per Notification No. 37 of 1995, dated May 26, 1995. 34. In the beginning to the notification, it is stated that on exercise of powers conferred by section 75 of the Customs Act, 1962, section 37 of the Central Excise Act, 1944, and section 93A read with section 75 of the Finance Act, 1944 these rules are made by the Central Government. Rule 6 is relevant and the same is reproduced below : Rule 6. Cases where amount or rate of drawback has not been determined.-(1)(a) Where no amount or rate of drawback has been determined in respect of any goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, an amount of ₹ 2,72,395 was paid by the assessee as customs duty, out of which ₹ 5,697 was deducted being at ₹ 3 per kg. for 1899 kg. being recoverable wastage and the balance amount was paid as duly drawback being ₹ 2,66.698. Similarly, for the assessment year 2006-07 also, the assessee has submitted complete details about duty drawback, as per which, duty paid by the assessee is of ₹ 15.71,42,086 and duty drawback received is ₹ 15,48,64,977. This goes to show that in both the years, there is direct and arithmetic correlation between the duty paid by the assessee and duty drawback received by the assessee. These facts along with relevant provisions of the Customs Act. 1962 and Custom and Central Excise Duty and Service Tax Drawback Rules, 1995 of which relevant portion is reproduced above, we find that the facts in the present case are distinguishable from the facts in the case of Liberty India (supra). In the case of Liberty India (supra), the issue was decided by the hon'ble apex court against the assessee on this basis that since the rule does not envisage refund of an amount arithmetically equal to customs duty paid by the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty drawback. As per the same, duty drawback has no arithmetical correlation with actual duty paid by the assessee but in the present case actual duty paid is refunded as duty drawback and hence, the facts of the present case are distinct than the facts in the case of Liberty India (supra) and, therefore, this judgment of the hon'ble apex court rendered in the case of Liberty India (supra) cannot be applied in the present case because we have seen that factually, all duty drawback received by the assessee is almost arithmetically equal to the duty paid by the assessee wherein some amount for which drawback was not allowed is on this basis that the same is relatable to recoverable wastage. Under these facts, it is established by the assessee that the duty drawback received by the assessee is arithmetically equal to the duty paid by the assessee and, therefore, in the facts of the present case. We are of the considered opinion that duty drawback in the present case is nothing but refund of duty paid by the assessee and, therefore, respectfully following the Tribunal decision rendered in the case of J.K. Aluminium Co. (supra) we decide this issue in favour of the assessee and hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n also, there is direct and arithmetic correlation between the duty paid by assessee and duty drawback received by the assessee. However, we find that while denying the benefit of deduction u/s.80IB on the duty draw back amount of ₹ 17.02 crore, Assessing Officer had simply at para 5.6 of page 21 of order held that since the claim of assessee was disallowed in A.Y. 2005-06 2006-07, the claim of assessee was disallowed. CIT(A) also while deciding the issue in favour of assessee had also simply followed earlier year's orders of CIT(A). We however find that while deciding the appeal for A.Y. 2006-07, the co-ordinate Bench of Tribunal has noted that the duty paid by the assessee and the duty draw back received by it has direct and arithmetic correlation but, in the year under appeal, there is no such finding of either of the lower authorities. In view of the aforesaid facts, we restore the issue back to the file of Assessing Officer to decide the issue afresh in the light of the decision of Tribunal in assessee's own case for earlier years and in accordance with law. The Assessing Officer shall grant adequate opportunity of hearing to the assessee. Thus, this ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion was paid on the remissier by the appellant. Further, for deduction u/s.80IB of the Act, whether interest income is derived from industrial undertaking or net and whether gross or nor interest is to be excluded and disallowance u/s.14A are highly disputable and debatable issues as there are various contradictory decisions of High Courts and Tribunals. When all the facts were disclosed by the appellant regarding claim u/s.80IB and when the appellant has claimed that it has not incurred any administrative expenses for earning dividend income and so no disallowance be made u/s.14A and claim of the appellant has been rejected relying on different judicial decisions, it can not be said that there is furnishing of inaccurate particulars of income. Further it is not the case that explanation of the appellant in respect of the various claims which have been disallowed and for which penalty has been levied has not been substantiated or found to be false so as to attract explanation 1 to section 271(1)(c). Further merely because the additions stood confirmed at the first appellate stage, there is no justification in holding that there is concealment of income and/or filing of inaccurate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of respective parties to prove the same. Assessing Officer examined/verified assessee's customers who may or may not be aware of the remissiers and the services rendered by them directly to assessee instead of examining the actual recipient of the commission. None of the customers verified by Assessing Officer were cross examined by assessee. Many of the customers did not understand the exact nature of the questioning and therefore in a confused state of mind gave misleading and inaccurate answers. Assessing Officer has not verified all the key persons involved in the purchase of windmill at the end of the respective customers who might be aware of such remissiers being involved in the said transactions. All remissiers were completely unconnected to the assessee. They were paying taxes and the transactions were entered into with a commercial motive and not with a motive to save taxes as units of assessee were eligible for deduction u/s.801B. All the transactions in respect of which commission has been paid are also on similar footing. Without prejudice to the quantum addition sustained by ITAT, we find that full details of sales commission paid to remissiers alongwith names of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividend earned to the turnover. Such investments have been made by the appellant in its associate concerns for the purposes of promoting, supporting and protecting business interest of the appellant out of commercial expediency and business prudence. Assessing Officer has while working out disallowance u/s. 14A, included the amount of investment in Foreign Subsidiaries also, income of dividend from which is taxable as evident from Page 14-15 of the Assessment Order. Out of total investment of ₹ 97,74,38,092/-, a sum of ₹ 59,07,18,092/- pertains to the investments in foreign subsidiaries. Since the dividend received from foreign companies is taxable, provisions of Section 14A cannot be invoked with regard to same. Rule 8D prescribed for working out disallowance u/s 14A is not applicable for Asst. Years prior to AY 2008-09. Hence, for A.Ys. prior to A.Y. 2008-09 (as in the present case). Assessing Officer has to prove the nexus that borrowed funds have been used for making investments which generate tax free income prior to making disallowance u/s 14A. In absence of Assessing Officer proving such a nexus, the method of adopting assessee's claim cannot be disturbed. Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 6. The Ld. CIT (A) has erred in law by contradicting his own observation that section 115AC is a code itself and then traveling to another charging section of the Act for deciding the taxability of interest income. 7. In view of the above facts and circumstances, it is prayed that the order of Ld. CIT (A) Gandhinagar be cancelled and that of A O restored to the above extent. 13.1 C.O. No.61/Ahd/2014 filed by assessee on following ground: 1. Both the lower authorities have failed to appreciate that no surcharge is to be added while determining withholding tax on remittance being made to the Nonresident, and therefore, surcharge ought not have been included while determining liability of TDS u/s.201(1) of the Act. 13.2 Similar issues arose In ITA No.3476/Ahd/2010 for same year and similar C.O. No.62/Ahd/2014 was filed on behalf of assessee. 13.3 Learned Counsel for assessee was fair enough not to press both Cross Objections. So, same are dismissed as not pressed. 14. In ITA No.3475/Ahd/2010, Assessing Officer observed that consequent to remittance by assessee amounting to ₹ 68,70,18,465/- for consent incentive (interest) in the month o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but in present case, the provisions of section 5(2) are applicable and one need not travel to the provisions of section 9 of the Act. 14.1 Assessing Officer, in para 7.2 of the assessment order, went further to establish that even if we take the provisions of section 9(1)(v)(b), assessee's case is not covered by the exclusions stated therein. The reasons advanced by the Assessing Officer for the exclusions being not applicable are as under: 7.2 A close reading of the above subsection makes it dear that interest paid by a resident is chargeable to income tax except when the interest is payable in respect of any debt incurred for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India. This exclusion covers, the cases where the assessee through a 'branch office' or through a 'permanent establishment' carries out its business outside India or makes or earns income outside India. But in the present case there is no such branch office or permanent establishment of the assesses through -which the business of the assesses is carried out or through which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties, resulting into income accruing and arising to non-resident u/s.5(2) of the Act for which deeming provisions of Section 9(1) are not applicable. CIT(A) erred in holding that both Sections 5(2) and 9(1)(v) of the Act, are applicable to determine the status of interest income in case of non resident. CIT(A) was not justified in holding that interest paid by assessee on its FCCBs is covered by exception to Section9(1)(v)(b) of the Act and consequently it falls outside the ambit of deemed income arising and accruing in India and as a result out of Section 5 also. CIT(A) erred in holding that there is ambiguity in determining whether income has been received or arisen in India and thus, there is a need to travel from Section 5(2) to Section 9(1) of the Act. CIT(A) erred in law by contradicting its own observation that Section 115AC is a code itself and then travelling to another charging Section of the Act for deciding the taxability of interest income. In view of above, learned Departmental Representative requested to set aside the order of CIT(A) and that of Assessing Officer be restored. On other hand, learned Authorized Representative supported the order of CIT(A) and stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on FCCB amounting to US$ 9,40,04,000/- with 7.50% interest bearing FCCB amounting to US$ 5,63,88,000/-. As a part of restructuring assessee company has made payment to nonresident bond holders on account of consent incentive for change in financial covenants of FCCB amounting to ₹ 68,70,18,465/- through Deutsche Bank AG London Branch. Assessee company has also remitted interest on the said FCCB's amounting to ₹ 10,63,50,697/- to non-resident bond-holders through Dutsche Bank AG London Branch. However, Assessing Officer passed the order invoking provisions of Section 201(1)/ (1A) of Act after holding that assessee was liable to deduct tax at source u/s.196C r.w.s. 115AC of the Act on remittance made by assessee. Assessing Officer gave following reasoning while passing order: (a) Assessing Officer was of the view that the Bonds were issued by an Indian Company and interest has been paid by an Indian Company from India only and further the obligation to pay the interest rested with assessee only and accordingly chargeable u/s.5(2) of the Act; (b) For the said contention, Assessing Officer relie upon the Supreme Court decision in the case of Performing Rights Soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are not at all chargeable to tax in India in hands of FCCB Bondholders and hence there was no obligation on appellant to deduct tax at source and thus appellant can not be fastened with the default u/s. 201(1) and 201(1A) of the Act. 14.5 From detailed submission in this regard, we find that assessee has issued two series of Foreign Currency Convertible Bonds ('FCCB ) in F.Y: 2007-08 namely; FCCB for US$ 300 Millions maturing in June 2012 and another FCCB for US$ 200 Millions maturing in October 2012. We find that proceeds of subject FCCB were used to be used and as a matter of fact used, for acquisition of shares in overseas subsidiary which was carrying on business outside India resulting in source of income outside India. We also find that the bonds have been issued under the permission of Reserve Bank of India under External Commercial Borrowing ('ECB') guidelines. However, due to financial constraint, assessee carried out restructuring of subject FCCB in May 2009 with the permission of Reserve Bank of India and pursuant to the same, assessee replaced Zero coupon FCCB amounting to US$ 9,40,04,000/- with 7.50% interest bearing FCCB amounting to US$ 5,63,88,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 and the said scheme is notified scheme for the purpose of S.115AC(i)(a)of the Act, and therefore, irrespective of the end use of the proceeds, once the scheme is part of the section 115AC, deduction of tax at source @ 10% is mandate until such time the conversion option is exercised; (g)AO further went to establish that even if the provisions of S.9(1)(v)(b) is applicable, the assessee's case will not be covered by the exclusions stated therein. (a) The assessee has issued FCCB in London and the proceeds of such FCCBs were utilized for the purpose of investments and acquisition of foreign subsidiaries outside India through foreign subsidiaries; (b)The assessee remitted the amount due on account interest and consent incentives to Deutsche Bank AG, London Branch as its agent to distribute the interest and consent incentive amount; which in turn gave to Deutsche Trustees Co Limited London who stood nominated as the trustee of the bond holders and the said trustee made the payment in foreign currency to the clearing system where individual bond holders are having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at source on such remittance. Respectfully following the decision of the coordinate bench of the Tribunal in the case of the Adani (supra), which is identical both in terms of the facts and laws relied upon by the Assessing Officer, we hold that since income in question is squarely falling under the exclusion clause of income deemed to accrue or arise in India u/s 9(1)(v)(b) of the Act, it cannot fall within the ambit of income accrued and arisen in India, and hence, the same cannot be said to be covered u/s 5(2) of the Act. Since the recipient non-resident are not taxable on this income in India, there was no obligation to deduct tax at source on such remittance. Hence, assessee cannot be held liable u/s. 201(1)/(1A) of the Act. In view of this legal discussion, this ground of Revenue is dismissed. Consequently Revenue's appeal in ITA No.3476/Ahd/10 is also dismissed. 15. In result, Assessee's appeal in ITA No.3773/Ahd/08 is partly allowed whereas Revenue's appeals in ITA No. 113/Ahd/2009 is partly allowed, ITA Nos.2052/Ahd/09, 3475/Ahd/2010 3476/Ahd/10 are dismissed as indicated above and assessee's Cross Objections in C.O. Nos. 61 62/Ahd/2014 for both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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