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Commissioner Of Income Tax Delhi Versus M.M. Aqua Technologies Ltd.

2016 (7) TMI 1093 - DELHI HIGH COURT

Review petition - Interest amount by way of a term 'debenture' - whether amounts to actual payment of as contemplated by Section 43B - Held that:- Though debentures are securities and are actionable claim the essential fact is that they are instruments of debt, by the company acknowledging its indebtedness to pay the amount specified. Does this amount to “payment” under Section 43-B. This court is of opinion that there is no question of any error in the judgment under review. The clear purport o .....

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ll of the judgment and order of this court, dated 18.05.2015, allowing the revenue s appeal under Section 263-A of the Income Tax Act ( the Act ). 2. The brief facts are that the assessee claimed deduction to the tune of ₹ 2,84,71,384/-under Section 43B of the Act, in the computation of income. The interest was paid to the financial institutions during the assessment year in question by issuing non-convertible debentures to such institutions. The Assessing Officer (AO) had rejected the ass .....

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question of law, on 20-04-2005: "Whether the funding of the interest amount by way of a term 'debenture' amounts to actual payment of as contemplated by Section 43B of the Income Tax Act, 1961?" 3. In the judgment, the court upheld the contentions of the revenue that it was only actual payment of amounts, which qualified for the benefit under Section 43-B. The assessee had succeeded before the CIT and the ITAT in saying that issuance of debenture amounted to payment, qualifyin .....

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single entry for the net effect would suffice instead of a two way traffic of separate entries of receipt and payment. The assessee had in addition, in the appeal before this court, relied on Standard Chartered Bank v Andhra Bank, 2006 (6) SCC 94 which had held that a debenture amounted to an actionable claim. The revenue had relied on the decision reported in Kalpana Lamps and Components Ltd. v. DCIT, (2001) 255 ITR 491, where it was held that mere postponement of the liability to pay interest .....

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l, in view of the clear terms ( any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid. ). The court also noticed that the explanation, as well as Explanation 3D were introduced by the Finance Act, 2006 with retrospective effect, from 01.04.1989 and 01.04.1997 respectively. Thus, these two explanations were not present at the time the impugned order was passed. The Court held that: Explanation 3C, having retrospect .....

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It is urged in the review, and contended by learned senior counsel Mr. Bishwajit Bhattacharyya, that there are glaring errors in the judgment of which review is sought. It is urged that this Court failed to attach due importance to the binding dicta in Standard Chartered (supra). It was submitted that the Court held that since there is no prescribed mode of transfer of debenture under the Transfer of Property Act and given that it is an actionable claim, the issuance of debentures by the assess .....

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im' in Section 3 of the Transfer of Property Act. An actionable claim is of course as its nomenclature suggests, only a claim. A claim might connote a demand, but in the context of the definition it is a right, albeit an incorporeal one. Every claim is not an actionable claim. It must be a claim either to a debt or to a beneficial interest in movable property. The beneficial interest is not the movable property itself, and may be existent, accruing, conditional or contingent. The movable pro .....

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crips are being bought and sold freely in the market as goods and when they have a value of their own unrelated to the goods which can be imported thereunder, it is idle to contend that they are in the nature of actionable claims". It was assumed that actionable claims are not transferable for value and that that was the difference between 'actionable claims' and those other goods which are covered by the definition of 'goods' in the Sale of Goods Act, 1930 and the Sales Tax .....

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ee Jaffer Meher Ali Vs. Budge-Budge Jute Mills Co.(1906) 33 Cal.702). There may also be assignments of an actionable claim dehors Section 130 (See Bharat Nidhi Ltd. Vs. Takhatmat (1969) 1 SCR 595). Negotiable Instruments, another species of actionable claim, are transferable under the Negotiable Instruments Act 1881. Transferability is therefore not the point of distinction between actionable claims and other goods which can be sold. The distinction lies in the definition of actionable claim. Th .....

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been held to be an actionable claim (State of Bihar v Maharajadhiraja Sir Kameshwar Singhhttps://indiankanoon.org/doc/49043/ 1952 SCR 889, 910). A right to the credit in a provident fund account has also been held to an actionable claim (Official Trustee, Bengal v L. Chippendale AIR 1944 (Cal.) 335; Bhupati Mohan Das v Phanindra Chandra Chakravarthy & Anr AIR 1935 (Cal.) 756). In our opinion a sale of a lottery ticket also amounts to the transfer of an actionable claim. 6. Mr. Bhattacharyya .....

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ghted that instead of deciding whether funding of interest liability through debenture qualified for benefit under Section 43-B, this court erroneously answered the following question: Whether the funding of the interest amount by way of a term loan amounts to actual payment as contemplated by Section 43B of the Income-tax Act, 1961?" 7. The question which has to be decided is whether the decision of this court, which held that because of Explanation 3C to Section 43-B, any adjustment other .....

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ment that issuance of debentures amounted to payment, it is noteworthy that the Supreme Court ruled as to what is the true nature and character of a debenture. In R.D. Goyal v. Reliance Industries Ltd 2003(1) SCC 81 it was held that: 'Share' has been defined in Section 2(46) of the Companies Act to mean a share in the share capital of a company which in turn would mean that it would represent contribution of the shareholder towards the share capital of the company. On the other hand, a d .....

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the definition of goods, inasmuch as, although the shares and stocks are included in the definition of goods but debentures are not. Thus, though debentures are securities and are actionable claim the essential fact is that they are instruments of debt, by the company acknowledging its indebtedness to pay the amount specified. Does this amount to payment under Section 43-B. This court is of opinion that there is no question of any error in the judgment under review. The clear purport of the stat .....

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