DCIT CC 7(2).MUMBAI, MUMBAI vs. MAN INDUSTRIES (INDIA) LIMITED, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated
29.11.2024 passed by the Ld. Commissioner of Income-tax
(Appeals) – 49, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2020-21, raising following grounds:
1. Whether, on the facts and circumstances of the case and in law, the Learned CTT(A) erred in permitting the deduction of interest on ECB amounting to Rs.
1,35.71,435/- under section 40(a)(ia) of the Act, without considering the payment of interest on the ECB to the Singap outside section 2. Whethe in law.
1,30,7
Act rea withou
3. Whethe in law,
59.64,3
year 2
capital the red
(FCCBs
4. The or facts of of the A 5. The ap and/or appeal submis
2. Briefly stated fa is engaged in the bu diameter carbon st transmission applica and portable water. T year under considera
Rs.94,60,38,420/-. T selected for scrutiny
Income-tax Act, 196
with. The assessmen
06.05.2022 after mak
(a) Rs.1,35,71,4
Ma
IT pore branch of ICICT Bank Ltd as a pay e India, and thereby granting the exemp n 194A(iii)(a) of the Act er. on the facts and circumstances of th
. the L carned CTT(A) erred in allowing a 70,695/-under the provisions of section ad with Rule 8D of the Income Tax Ru ut properly appreciating the facts of the ca er, on the facts and circumstances of th
, the Learned CIT(A) erred in allowing a 352/-as depreciation claimed for the a 2020-21 on the written down value (W lized withholding tax (WHT) paid on the p demption of Foreign Currency Convert s) during the assessment year 2013-14. rder of the Ld. CIT(A) is erroneous in la f the case and is liable to be set aside an AO be restored?
ppellant craves leave to add to alter, ame r delete any or all of the above said l. The appellant reserves its right to f ssion in the appeal acts of the case are that the ass usiness of manufacturing and teel line pipes required for ation for gas, crude oil, petroche
The assessee filed its return of ation on 31.12.2020 declaring
The return of income filed by th y assessment and statutory no 1 (in short ‘the Act’) were issue nt order u/s 143(3) of the Act wa king following addition:
435/- u/s 40(a)(ia) of the Act.
an Industries (India) Ltd
2
TA No. 619/MUM/2025
ment made ption under he case and a sum of Rs:
14A of the ules, 1962, ase he case and sum of Rs.
assessment
WDV) of the premium for tible Bonds aw and on nd the order end, modify grounds of file Further sessee company export of large high pressure emical products f income for the total income of he assessee was otices under the ed and complied as completed on (b) Rs.1,30,70,6
(c) Rs.59,64,352
3. On further ap additions. Aggrieved
Appellate Tribunal grounds as reproduce
4. Before us, the L containing pages 1 to 4.1 Addressing the Departmental Repres deleted the addition finding in assessmen
Ld. CIT(A) has wrong subjected to Bankin which are covered u liability of deduction
5. Before us, the which is a copy o
Accountant of asses entity, wherein it is Borrowings(ECB) wa form No. 15CA, a cop
Ma
IT 695/- u/s 14A and 2/- on disallowance of depreciat ppeal, the Ld. CIT(A) deleted d, the Revenue is before t
(in short the ‘Tribunal’) by ed above.
Ld. Counsel for the assessee file o 104. e ground No. 1 of the ap sentative (DR) submitted that u/s 40(a)(ia) of the Act mere nt year 2014-15. Further, he sub gly held that foreign branch of ng Regulation Act, 1949 and th u/s 194A(3)(iii) of the Act are tax at source on the interest rec
Ld. DR referred to Paper Boo of form No. 15CB issued by ssee in relation interest paym reported that interest on Exter as paid to ‘non-resident’ entity py of which is available on Paper an Industries (India) Ltd
3
TA No. 619/MUM/2025
tion.
d all the three the Income-tax way of raising ed a Paper Book ppeal, the Ld.
Ld. CIT(A) has ely following his bmitted that the f Indian Bank is herefore, Banks exempted from ceived.
ok pages 6 to 7
the Chartered ment to foreign rnal Commercial y. Similarly, in r Book page 8 to 9, also interest pay resident’ entity. The (available on paper b the Reserve Bank remittance abroad, mentioned as ‘S00IL minimum term loan from ‘non-resident’. A available on Paper Bo
Bank was ‘original le
‘facility agent’. He s payment made to S
‘facility fee’ which is (paper book page -39
pay to the facility age
The Ld. DR submitt
Banking Regulation foreign branch of In Bank Regulation Act assessment order a 01.12.2008 issued b that while complying certain juri iction, t activity which is no Accordingly, the Ld.
Ma
IT yment on ECB has been repor e Ld. DR also referred to the book pages 10-12) filed by the of India(RBI), which is an therein also the relevant c
L’ with reference to repaymen n with maturity more than on Accordingly to the Ld. DR as pe ook page 18 to 104 Bahrain Bra ender’ and Singapore Branch m submitted that it was not cle
Singapore branch included pa prescribed under clause 11.1 o
9), under which the borrower w ent US Dollar 25,000 per annum ted that Assessing Officer has Act provisions to point out ndian banks are not strictly re t. The Ld. DR referred to the and submitted that in the no by the Reserve Bank of India, g with the Country Regulatory R the branch might be required t ot permitted under the RBI
. DR submitted that Banking an Industries (India) Ltd
4
TA No. 619/MUM/2025
rted to a ‘non- e Form No. A2
assessee before application for code has been nt of long and ne year received r the agreement anch of the ICICI merely acted as ar whether the ayment against of the agreement was required to m as agency fee.
referred to the difference that egulated by the para 4.5 of the otification dated it is mentioned
Requirements in to undertake an Regulation Act.
Regulation Act cannot be extended t
Bank. Accordingly, u foreign branch of Ind of deduction of tax at 6. On the contrary that in identical cas
4609, 4610 and 461
2011-12, the Co-ord branch of the India
Banking Regulation resident Indian to s deduction of tax at so has been made to t therefore ratio in the of the assessee.
7. We have heard the relevant mater disallowance of Rs.1,
Act for non-deductio
Singapore Branch of foreign branch of the Regulation Act, 1959
not liable for deducti
The relevant finding o
Ma
IT to the operations of the foreign b under the provisions of section dian Bank cannot be exempted f t source.
y, the Ld. counsel for the asse se of Bajaj Eco Tec Products
1/Mum/2016 for assessment y dinate Bench of the Tribunal h n Banks are squarely covered
Act and therefore, any paymen such branch is exempted u/s ource. In the instant case also in the Singapore Branch of the I said decision is squarely applic rival submissions of the parti rials on record. The issue
,35,71,435/- in terms of section n of tax at source on said inter f the ICICI Bank. According to e Indian banks are covered und and therefore, any interest pay ion of tax at source u/s 194A(3
of the Ld. CIT(A) is reproduced a an Industries (India) Ltd
5
TA No. 619/MUM/2025
branch of Indian
194A(3)(iii), the from the liability essee submitted
Ltd. in ITA No.
ears 2009-10 to held that foreign d by the Indian nt made by the 194A(3)(iii) for nterest payment
ICICI Bank and cable in the case ies and perused in dispute is n 40(a)(ia) of the rest payment to o the Ld. CIT(A) der the Banking yment to them is 3)(iii) of the Act.
as under:

“7.1.1 Decision - I disallowance of Rs 1,3
had failed to deduct T branch of ICICI Bank proviso to section 194A on the interest paid to Indian banks are not therefore not covered identical issue in the demand was raised u/
to Singapore branch of appellant by holding t the Banking regulation of the Act. The relev reproduced for referen
“8.1 I have considered
201(1)/201(1A) and th in the appeal arises o u/s. 201(1) raised by raised after treating t the remittances of Rs.
branch of ICICI Bank
77,15,838 and Rs. 83,
8.2 The appellant com
Bank without deduct deduction of tax on s
194A(3)(iii)(a) of the I. T
194A. 52(1) Any perso who is responsible for than income by way o income to the account by issue of a cheque o income-tax thereon at ………..
………..
(3) The provisions of su paid to Any banking company

Based on these two o
Act does not apply on payment made to such 194A. AO has further
Reserve Bank of India banks branches and with the host-country r be required to underta

This notification has Banking Regulation Ac of Indian bank.
8.4 The appellant has reproduced in the pa notification of the RBI
Same reads as under-
“3. In the course of op abroad, it is possible requirements in certa activity which is not p public sector bank. In they obtain from the R or 19(1)(c) as the case
While referring to the that nowhere in the R business operations of Regulation Act. I find said notification stipu
India should be obtain activity which is not p that these branches ar
8.5 The appella
Regulation
Act, the explanation to [Explanation - For the p
(a) in the case of a ban in (b) in the case of a ban
(a) all its subsidiahes banking exclusively ou
(b) all its branches whe
Ma
IT observations , it was inferred that the Bank n the foreign branches of Indian banks and h foreign branches is not covered by the prov referred to the notification dated 01.12.2008
a which says that “In the course of operations subsidiaries abroad, it is possible that wh regulatory requirements in certain juri iction ake an activity which is not permitted unde been interpreted as an admission by the ct cannot be extended to the operation of the f s challenged the addition made on the groun aras above. Appellant has referred to the p
I dated 01.12.2008, which was relied upon perations of the Indian banks’ branches and e that while complying with the host-count in juri ictions, they might be required to permitted under the BR Act/the respective such circumstances, the banks are advised
RBI/Government of India necessary permissio may be for undertaking such activities.”
Notification dated 1/12/2008, the appellan
RBI notification dated 01.12.2008 is it menti f the foreign branch are outside the purview o the observation made by the appellant to be ulates that the necessary permission of the ned by the Indian banks branches abroad to permitted under the Banking Regulation Act, re under the purview of the Banking Regulatio ant has further quoted section 35 of which reads as under:
purpose of this section, the expression "bank nking company incorporated outside India, al nking company incorporated in India - s formed for the purpose of carrying on the utside India; and ether situated in India or outside India.]
an Industries (India) Ltd
7
TA No. 619/MUM/2025
king regulation d therefore the viso to Section issued by the s of the Indian hile complying ns, they might er the BR Act
RBI that the foreign branch nds which are para 3 of the n by the AO .
d subsidiaries try regulatory undertake an statute of the to ensure that on u/s. 6(1)(m) nt has argued ioned that the of the Banking e in order. The RBI/Govt, of undertake an which implies on Act.
f the Banking king company"
ll its branches e business of Further ,as per the sec a new place of busines
It is evident from the Indian banks are cove covered under the prov
In the appellate proce issued by DCIT, Circ certified that the ICICI the purpose of the Inco offshore branches i.e.
Lanka, Qatar is taxabl interest paid to the Si assessed as income of ICICI Bank is akin to are exempt from TDS a The appellant has relie
TDS(lnternational Taxa has been decided int t
Considering the overa relied upon I am of the branch of ICICI Bank
Act and is not liable f demand of Rs. 3,37,25
is directed to delete the I find that the issue in discussed above. For t the Tax Residency Cer of Income Tax2 (3)(2),
India as per the prov global income includin
Bahrain, Sri Lanka, Du is taxable in India.
Following my decision made to Singapore br
194A(3)(iii) and is the rightly not deducted T
40a(ia) of the Act cann
Rs.1,35,71,435/-.
Ground No. 1 is allowe
7.1 We find that the Ltd. (supra) held that Ma
IT ction 23 of the Banking Regulation Act, bank ss in India or Abroad without the prior approv above referred sections that the foreign br ered under the Banking Regulation Act,1949
viso to section 194A(3) of the Act.
eedings, a certificate dated 01.03.2013 in th cle-3(1), Mumbai was submitted. As per th
I Bank Ltd. (PAN: AAACI1195H) is a residen ome Tax Act, 1961 and the global income inc
Singapore, Hongkong, Bahrain, United Stat le in India and assessed under PAN No. AAA ngapore Branch of the ICICI Bank is taxable f ICICI Bank Ltd. Payment made to the Singap the payment made to ICICI Bank Ltd and su as per the provision of Section 194A(3) of the A ed upon the decision of Bajaj Ecotech Product ation) by Hon’ble ITAT, Mumbai, where the i he favour of the assessee.
all facts and circumstances of the case and t e view that the payment of interest made to is covered under provision of Section 194A( for deduction of TDS. The order of the AO
5,871/- u/s. 201(1)/201(1A) cannot be susta e demand”.
the present appeal is identical to the issue fo the year under consideration, the appellant ha rtificate dated 14.05.2019 issued by the Dy.
Mumbai, certifying that ICICI Bank Ltd is visions of section 6(3) of the I.T.Act, 1961 ( ng that of its offshore branches in Singapor ubai International Finance Centre, Qatar and n for the AY 2014,15, I hold that the payme ranch of ICICI bank is covered under prov erefore not liable for deduction of TDS. The TDS on the said payment. Therefore, the disa not be upheld. The AO is directed to delete t ed.”
e Tribunal in the case of Bajaj E t interest payment to Singapore an Industries (India) Ltd
8
TA No. 619/MUM/2025
(3)(iii)(a) of the in raising the ained. The AO or AY 201415, as relied upon Commissioner a resident of ("Act") and its re, Hongkong,
United States ent of interest viso to section appellant has allowance u/s he addition of Eco Tec Products
Branch of ICICI

Bank Ltd. was not li
Singapore branch wa and hence was not 194A(3)(iii) of the Act reproduced as under “11. We have heard record and gone throu of the impugned disp external commercial
Singapore branch. As p
Ltd. acted as an arr commercial borrowing external commercial bo to Rs.11,69,45,505/-
Assessing Officer hel
201(1)/201(1A) of the non resident entity lo section 195 of the Ac assessee has failed to assessee in default a 201(1)/201(1A) of the A 12. basis of Form 15CA resident entity ICICI B observed that as per t is a borrower and ICIC agent which arranged institutions to be asse a letter dated 31.01.20
assessee. As per wh arranger cum facility institutions assembled although the assessee failed to file any evid dated 15.03.2007. Th agreement, the various the ICICI Bank Ltd., c is only the agent for ar
13. It is the contentio branch is a main lend facilitate external comm the agreement dated 1
name of the original le further referring to the Ma
IT iable for deduction of tax at so as subjected to Indian Banking t liable for deduction of tax t. The relevant finding of the Tr
:
both the sides and perused the materials ugh the orders of the authorities below. The f pute is that the assessee has borrowed 20
borrowings by an agreement with ICICI per the said agreement dated 15.03.2007, th ranger and agent to facilitate 20 milliion gs to the assessee. The assessee has pai orrowings to ICICI Bank Ltd, Singapore branc for the assessment years 2009-10 to 2
ld that the assessee as an assessee in Act, on the ground that the assessee has pai ocated outside India which comes within th ct. The Assessing Officer further observed t deduct tax at source u/s. 195, he held the as and computed short deduction of tax and Act.
A and 15CB that the assessee has made pay
Bank Ltd., Singapore branch. The Assessing the clauses of agreement dated 15.03.2017,
CI Bank Ltd, Singapore branch is an arrange d external commercial borrowings from a grou mbled by the arranger. The Assessing Office
007 of ICICI Bank Ltd., Singapore branch add hich, the assessee is a borrower, ICICI Ba agent and the lender of the loan are a grou d to by the arranger. According to the Asse e claims to have made payment to a resid dences to justify its arguments other than t he Assessing Officer further observed that as s clauses in agreement as well as the letter ategorically states that ICICI Bank Ltd., Sing rranging external commercial borrowings.
on of the assessee that the ICICI Bank Lt der and also acted as an arranger cum fac mercial borrowings at U 20 million which is 15.03.2007 as per which Schedule 1, clearly ender as ICICI Bank Ltd., Singapore branch.
e letter addressed by the office of the Jt. C an Industries (India) Ltd
9
TA No. 619/MUM/2025
ource in view of g Regulation Act at source u/s ribunal(supra) is s available on factual matrix
0 million U CI Bank Ltd., he ICICI Bank
U external id interest on ch aggregating
2011-12. The default u/s.
id interest to a e provision of that since the ssessee as an interest u/s.
yment to a non
Officer further the assessee er cum facility up of financial er has referred dressed to the ank Ltd is an up of financial essing Officer, dent entity, he the agreement s per the said addressed by gapore branch td., Singapore cility agent to s evident from y specifies the The assessee
CIT (O )-3(1),

Mumbai dated 27.04.2
branches at Singapore having its registered o
Ltd is an Indian resid global income of the IC chargeable to tax in In Mumbai, India. The a 194A(3)(iii) of the Act, purview of provisions invoking the provision interest u/s. 201(1)/20
14. There is no disput including its offshore
CIT(O )- 3(1), Mumba
Bank Ltd is an Indian and the global income chargeable to tax in In fact that any paymen within the purview of The only dispute is w commercial borrowings commercial borrowing commercial borrowings loan. Therefore, any in coming within the pro made to a resident b section 195 of the Act.
a banking company is primary dispute is wi and the lender of ex
CIT(O )-3(1), Mumba clarified. To that exten to the lender of extern that the ICICI Bank commercial borrowing agreement between th
ICICI Bank Ltd is acti further states in Sche branch is original lend branch dated 31.01.2
arranger and facility institutions to be asse other as per the asse opinion that the issue the claim of the asses lender. The assessee
In case, the Assessing lender of external com tax at source u/s. 201
file of the Assessing O of the evidences filed b
Ma
IT 2011 as per which the ICICI Bank Ltd includin e and Hongkong are the part of the ICICI Ba office at Vadodra. The letter further states th dent company in terms of section 6(3) of the ICICI Bank Ltd., including that of the offshor ndia and is assessed to tax under the PAN: AA assessee contended that as per the provisio any payment made to a banking company a s of TDS, therefore, the Assessing Officer n of section 195 to compute short deductio
01(1A) of the Act.
te with regard to the residential status of ICI e branches at Singapore, Hongkong. The ai has clarified vide its letter dated 24.01.20
n resident company in terms of section 6(3)( e of the ICICI Bank Ltd including the offsh ndia and is assessed to tax in India. It is als nt made to a resident banking company d
TDS as per the provision of section 194A(3) with regard to the residential status of lend s to the assessee and interest payment on gs. The assessee claims that it has borro s from Singapore branch and which is a main nterest payment to ICICI Bank Ltd., Singapore visions of section 195 of the Act. No doubt, banking company is outside the purview of . Similarly, any payment made to a non-resid s coming within the provision of section 195 o ith regard to the residential status of payee xternal commercial borrowings. As per the ai, the residential status of the ICICI Bank L nt there is no dispute. The remaining dispute nal commercial borrowings. Although the ass
Ltd. is the main lender for U 20 mi gs, the facts available on record states ot he assessee and the bank dated 15.03.200
ng as an arranger cum facility agent. The sa edule 1 at pg. 59 states that ICICI Bank L der. But the letter written by the ICICI Bank L
2007 states that ICICI Bank Ltd., Singapore agent and the lender of the loan is a grou mbled by the arranger. The facts are contrad essee's own record. Therefore, we are of th needs to be reexamined by the Assessing Off ssee that ICICI Bank Ltd., Singapore branc is directed to substantiate its case with furth g Officer found that ICICI Bank Ltd., Singap mmercial borrowing, than there is no default in (1)/201(1A) of the Act. Hence, we set aside th
Officer with a direction to consider the issue a by the assessee and pass a proper order as an Industries (India) Ltd
10
TA No. 619/MUM/2025
ng its offshore ank Ltd., India hat ICICI Bank e Act, and the re branches is AACI1145H in ons of section are outside the was erred in on of tax and ICI Bank Ltd., office of Jt.
011 that ICICI
(iii) of the Act, hore branch is so undisputed does not come
(iii) of the Act.
der of external such external owed external n lender of the e branch is not any payment f provision of dent including of the Act. The e in Singapore e letter of Jt.
Ltd., has been is with regard sessee claims illion external therwise. The 07 states that aid agreement
Ltd, Singapore
Ltd., Singapore branch is an up of financial dictory to each he considered fficer in light of h is the main her evidences.
pore branch is n deduction of he issue to the afresh in light per law.”

"On hearing perusal of t
Authorities ha exempt incom
Authorities re
Income Tax Ap
"does not for Ma
IT ed that the investment was made stake on the subsidiary comp ould not be considered for working u/s 14
considered the submission of the appella disallowance u/s 14A was made under R
Tax Rules, where proportionate interest ds was disallowed. In the present is made under new Rule 8 where 1% o ent is disallowed. The decision of Hon'ble y not be applicable for the present year. A d that the disallowance, be restricted to h is Rs Nil for this year. I have conside upon by the appellant, wherein it is h u/s 14A should not exceed the exem to the decision of Hon'ble Supreme Cour al) 1 v. Chettinad Logistics (P.) Ltd., m 250 (SC), where in it is held as under of the Income-tax Act, 1961, read with ru
Rules, 1962 -Expenditure incurred in includible in total income (General year 2011-12-High Court by impugned ord can only be triggered, if, assessee seeks against income which does not form p r Act; rule 8D only provides for a method xpenditure incurred in relation to income, of total income of assessee and it canno ided in section 14A - It further held th me i.e., dividend, was earned in relevant ssee, section 14A could not be invoked impugned order was to be dismissed avour of assessee) h Court of Bombay in the case of T
Nagpur v. Ballarpur Industries Lt
ITA no. 51 of 2016 has held as under:
the learned Counsel for the Departmen the impugned orders, it appears tha ave recorded a clear finding of fact that t me earned by the assessee. While hold elied on the judgment of the Delhi Hi
Appeal No. 749/2014, which holds that th rm part of the total income" in Section an Industries (India) Ltd
12
TA No. 619/MUM/2025
for having panies and 4A.
ant. In the AY
Rule 8D(ii) of t on interest t case, the of average of e ITAT for AY
Appellant has o the exempt red the case held that the mpt income. I rt in the case
, [2018] 95
ule BD of the n relation to principle) - der held that to square off part of total to determine
, which does ot go beyond hat where no t assessment
Whether SLP
- Held, yes
The PCIT-3, td, Bombay nt and on a at both the there was no ding so, the igh Court in he expression n 14A of the Income Tax A receipt of the during the re any expendit
Income Tax A 14A of the In this case as the relevant
Officer that a the same wa case, the Aut assessee in received by th total income."
Respectfully f and the case disallowance received exem addition of Rs
Ground no 2
9. We have heard the relevant materia deleted the addition m was received by the The Ld. CIT(A) has f
Juri ictional High
Ltd.(supra). Since e case of the assessee, order of the Ld. CIT issue in dispute. The accordingly dismissed
Ma
IT Act, 1961 envisages that there should b e income, which is not includible in the t elevant previous year for the purpose of ture incurred in relation to the said
Appellate Tribunal held that the provision ncome Tax Act, 1961 would not apply to no exempt income was received or recei previous year. It is not the case of th any actual income was received by the a as includible in the total income. In the thorities held that since the investments the sister concerns were not the ac he assessee, they could not have been inc
"
following the judicial pronouncements e laws relied upon by the appellant, I h u/s 14A can be made since the appel mpt income in the year. AO is directed s 1,30,70,695/-.
is allowed.”
rival submissions of the parti als on record. We find that the mainly for the reason that no ex assessee during the year unde followed the binding precedent
Court in the case of Ballar evidently there is no exempted
, therefore, we do not find any T(A) in following the binding pr e ground No. 2 of the appeal of d.
an Industries (India) Ltd
13
TA No. 619/MUM/2025
be an actual total income, f disallowing income. The ns of Section o the facts of ivable during he Assessing assessee and facts of the made by the ctual income cluded in the cited above hold that no llant has not to delete the ies and perused e Ld. CIT(A) has xempted income r consideration.
t of the Hon’ble rpur Industries d income in the infirmity in the recedent on the f the Revenue is 10. In ground No.
depreciation claimed capitalized withholdin of foreign currency issue in dispute are Assessing Officer disa on the portion of premium paid on fore submitted by the as assessee paid total p by grossing up the a payment of withholdi premium on redem amount of TDS, it bondholders and thu and allowable expen assessee redeemed
1,12,05,07,097/- by Identical provision w
2014-15
to 2017- disallowance made by 9. We heard facts relevant payable on withholding ta crores. In the Ma
IT 3 Revenue has challenged by the assessee on written do ng tax paid on the premium for convertible bonds. The facts in that during the year under co allowed depreciation claimed of withholding tax capitalized o eign currency convertible bonds ssessee that while redeeming premium of Rs.124,45,40,750/- amount of withholding tax. It w ing tax of Rs. 124,45,40,750/- w ption and had the assessee would had to pay higher p us the TDS so deducted forms p nditure. In the year under con
FCCB and paid total pre grossing up the amount of w was claimed by the assessee in a -18, wherein the Tribunal y the Assessing Officer observin the rival contentions and perused the t to the issue are that the assessee has bo the FCCB premium paid by the as ax liability so borne by the assessee wa e normal course, the TDS amount would an Industries (India) Ltd
14
TA No. 619/MUM/2025
disallowance of own value of the r the redemption n brief qua the nsideration, the f Rs.59,64,352/- on payment for s (FCCB). It was the FCCB, the - in AY 2013-14
was claimed that was nothing but not borne the premium to the part of premium nsideration, the emium of Rs.
withholding tax.
assessment year deleted such ng as under:
record. The orne the TDS sessee. The as Rs. 12.40
d be reduced from the amo will be paid to of the payee, the instant ca on the amou become additi the premium portion of prem of Rs. 12.40 cr the year relev thereon, whic
2013-14. The hence the reve stated by Ld
CIT(A), vide
No.7530/Mum/
"98. The is deletion of the AO on premium.
99. During observed th bond holde deprecation
Rs.1,68,96, the assess excess pay added the s
100. The observing withholding is also no withholding assessee is in question
101. After h note that premium o
Ma
IT unt payable to the payee and the net a to him. The TDS amount will be remitted who can adjust the same against his ta ase, since the assessee has borne the TD nt of premium payable on FCCD, the ional cost to the assessee. Hence it will g payable on FCCB. The assessee has c mium amount, which included the above rores. The amount was capitalized by the vant to AY 2013-14 and it also claimed ch was disallowed by the assessing o
Ld CIT(A), however, deleted the disall enue filed appeal before the Tribunal in t
A.R, the ITAT has confirmed the order p its order dated
25.11.2021
pass m/2019, with the following observations:- sue raised in the 6th ground of appeal is f addition of Rs.1,68,96,638/- by CIT(A) n account of Depreciation of claimed on g the course of Assessment Proceedin hat the assessee has made excess pay er to the extent of Rs.12,40,33,655/- and n on capitalized premium amo
338/- was claimed by the assesse. Th sment proceedings noted that deprecia yment made to FCCB holders can not be same to the income of the assessee.
Id CIT(A) allowed the appeal of the that the AO has not disputed the fa g tax is paid actually paid by the Assesse ot a case wherein the assessee ha g tax from the bond holder. The payment s its business decision and accordingly n should be allowed.
hearing the parties and material placed b the assesse has redeemed FCCB and of 1,12,05,07,097/- by grossing up the an Industries (India) Ltd
15
TA No. 619/MUM/2025
amount alone to the credit ax liability. In DS deductible same would go to increase capitalized a said amount e assessee in depreciation officer in AY lowance and that year. As passed by Ld sed in ITA s against the as made by n account of ng the A.O.
yment to the d accordingly ounting to e AO during ation on the allowed and assesse by act that the ee. Further it as recovered made by the the payment before us, we d paid total amount by withholding deposited b part of that section 195
withholding amount of p redemption been provi below:
"In a ca section arrange in the f the per purpos income deduct financia the ne arrange
101.1 We n by the dec
Standard P
(Madras H
No. 7660/M been decid following th order of I
Revenue's a Thus, we noti the first year o
10. Under the could not ha depreciation h above said p decision rend
Bodal Chemic
Ma
IT g tax. In other words the TDS de by the assesse on behalf bondholders wa t. Besides we note that claim was in acco
5A of the Income Tax Act, 1961 as the Co g tax of Rs. 12,40,33,655/- by the gros premium and paid Rs.112,05,07,097/- as n of FCCB to bondholder. We also note ided in the section 195A itself which ase other than that referred to in sub-se n
192, where under an agreemen ement, the tax chargeable on any incom foregoing provisions of this Chapter is to rson by whom the income is payable, t es of deduction of tax under those pro e shall be increased to such amount as tion of tax thereon at the rates in fo al year in which such income is payable et amount payable under such ag ement."
note that the case of the assesse is squa isions in the case of Commissioner of In Polygraph Machines (P) Ltd. (2002) 124
High Court) and ACIT 2(1) V. M/s. BOB C
Mum/2011-Tribunal, Mumbai wherein th ed in favour of the assesse. We therefore he ratio laid down in the above decision
Id. CIT(A) by dismissing the ground.
appeal."
ice that the claim of depreciation has bee of claim.
ese facts, it is contention of the assessee ave disallowed in the subsequent year has been allowed in the first year. We no proposition of the assessee finds supp dered by Ahmedabad bench of ITAT in cals Ltd (supra), wherein it was held that an Industries (India) Ltd
16
TA No. 619/MUM/2025
educted and as treated as ordance with ompany paid ssing up the s premium on e that it has is extracted ection (1A) of nt or other me referred to be borne by then, for the visions such would, after force for the e, be equal to greement or arely covered ncome Tax V.
taxman 669
Card Ltd. ITA he issue has e respectfully n uphold the no.6 of the en allowed in e that the AO rs, since the otice that the ort from the the case of the revenue, once by the asses assessee in th the earlier as claim of depre claim, the sam the claim of d
Hence, there i
11. In our vie angle also. Th character of t would be lost case of Bhara dated 15-10-2
"(i) The asset w dated clubbed meanin asset hotchpo depreci assets block concern

(ii) The disturb of s. 32
discard previou event, of that amoun down v
(iii) Tho
"used"
express
Ma
IT e allowed the deduction for the deprecia ssee, then it is debarred to reject the he subsequent year on the WDV carried f ssessment year. Though the AO had dis reciation made in AY 2013-14, being the me was deleted by Ld CIT(A) and the IT depreciation made in the first year has b is merit in the above said contention of th w, the issue before us can be looked at f here should not be any dispute that the the asset, which has entered into the blo t. It was so held by Hon'ble Delhi High at Aluminium Co Ltd (ITA No.532 and ot
2009) as under:- e rationale and purpose for which the con was introduced, as reflected in the CBD
23.09.1988 is that once the various d together and become 'block asset ng of s. 2(11), it becomes one asset. Every is acquired, it is to be thrown into otch, ie., block asset on meeting the re iation being allowable at the same rate lose their identity and become an insepa asset insofar as calculation of dep ned; e fusion of various assets into the block bed only when the eventuality contained
32 takes place, viz., when a particular a ded or destroyed in the previous year (ot us year in which first brought in use). E the amount by which the moneys payab particular building, machinery, etc. toget t of scrap value is to be deducted from value of the 'block asset'; ough as per s. 32(1) the asset is to be for the purpose of business or prof sion "used for the purpose of business w an Industries (India) Ltd
17
TA No. 619/MUM/2025
ation claimed claim of the forward from sallowed the first year of TAT. As such een allowed.
e assessee.
from another identity and ock of asset,
Court in the thers of 2006
ncept of block
DT's Circular assets are within the y time, a new the common quirement of e. Individual arable part of preciation is k asset gets in clause (iii) asset is sold, ther than the Even in that ble in respect ther with the total written e owned and ofession, the when applied to block specific lost the block a 32 asse depreci require first ye asset individ
In the instant the premium a of block asse inseparable depreciation is the depreciati
12. On merits taken the vie premium paya to increase t allowable the followed the d the case of S above said de
TDS liability consideration.
Court is extrac
"2. The that th respect foreign of the investm accepte suo mo
1961. T the ass collabo per the Tribuna the valu
Ma
IT k asset would mean use of block asset c items in the said block as individual eir identity after becoming inseparable asset; (iv) The fact that under the second ets acquired after 30th Sept shall be en iation of amount admissible does ement of user of individual asset remains ear when the particular asset is acquired is required. In subsequent years, t ual assets is not required."
case also, the TDS liability borne by the amount, after it is thrown into the commo t in AY 2013-14 has lost its identity and part of block Asset insofar as ca s concerned. Hence the AO could not hav ion claim as made in the first year.
s, we notice that the co-ordinate bench ew that the TDS liability (withholding able on FCCB and borne by the assesse the cost of asset and accordingly dep ereon. In this regard, the co-ordinate decision rendered by Hon'ble Madras H
Standard Polygraph Machines (P) Ltd (su ecision, the Hon'ble Madras High Court h borne by the assessee shall form
. The decision rendered by Hon'ble M cted below:- e assessment year is 1981-82. The asses he amount of income-tax paid by the t of the consideration paid by the asse collaborator should also form part of the plant and machinery on which depre ment allowance should be allowed. Tha ed by the ITO, but negatived by the Com otu revision under section 263 of the inc
The Tribunal has held that the amount of sessee should be regarded as liability of rator which the assessee had undertake e agreement entered into with the colla al, therefore, held that it should be treate ue of plant and machinery of the assesse an Industries (India) Ltd
18
TA No. 619/MUM/2025
and not any assets have part of the proviso to s.
titled to 50%
not mean intact. In the d, user of the the user of assessee on n hotchpotch d become an alculation of ve disallowed has already tax) on the ee, would go preciation is bench has High Court in upra). In the held that the part of the Madras High ssee claimed assessee in essee to the e actual cost eciation and at claim was mmissioner in come-tax Act, f tax paid by of the foreign en to pay as aborator. The ed as part of ee.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

Ma
IT s be free to examine the tax liability, be given thereon. Hence, a future conting y not happen, cannot be a ground t claimed on the amount of withholding t and which has been capitalized.
spute being identical to the issue in the case of the assessee i g the finding of the Tribunal (su
CIT(A) on the issue in dispute e is accordingly dismissed.
he appeal of the Revenue is all nced in the open Court on 24 AJAGOPAL)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu an Industries (India) Ltd
21
TA No. 619/MUM/2025
if any/ tax gency, which to deny the tax borne by e decided by the itself, therefore, upra), we uphold
. The ground of lowed partly for /11/2025. d/-
KASH KANT)
ANT MEMBER
R, gistrar) umbai