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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: Sh. Amit ShuklaDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the assessee against the orders of the ld. CIT(A)-28, New Delhi dated 22.09.2017 and 24.11.2017.
Since, the issues involved in both the appeals are identical, they were heard together and being adjudicated by a common order.
Heard the arguments of both the parties and perused the material available on record.
2 SH Tech Park Developers Pvt. Ltd.
We have considered the facts of the case, basis of disallowance made by the AO and submissions of the assessee. From the facts, it is clear that main issue involved herein is whether the expenditure of Rs.15,06,60,000/- is in the nature of premium on redemption of 8% Optionally Convertible Debentures (OCDs), as claimed by assessee or interest expenditure liable for TDS as per provisions of 194A, as held by AO or not. Facts revealed that the assessee company, had issued 88,25,85,590 CCDs to M/s Zaheer Mauritius @ Rs.1/- per debenture in the year 2007, and subsequently, M/s Zaheer Mauritius transferred these CCDs to M/s Vatika Ltd. on different dates in different years. Out of these CCDs, M/s Vatika Ltd., acquired 93000000 debentures during the year under consideration for Rs.24,32,52,242/-. These CCDs were converted into OCDs carrying coupon of 8% per annum payable quarterly and premium on redemption was determined @ 162%/175%/200% of the face value of OCDs if redeemed within 12 months/after 12 months/after 24 months of holding. Thus, on redemption, premium was worked out at Rs.15,06,60,000/- and paid by assessee company to M/s Vatika Ltd. and claimed it as a revenue expenditure.
M/s Vatika Ltd. has offered the amount to tax under the head “Capital Gains”.
The revenue held that, a. Since no TDS has been deducted u/s 194A of the Act on the amount of the premium paid which is in the nature of the interest, the amount is not allowable u/s 40(a)(ia) of the Act.
3 SH Tech Park Developers Pvt. Ltd.
We have gone through the entire issue and find that the assessee has fulfilled the conditions prescribed by the first provisions to Section 201(1) of the Act for availing the benefit under that Section that the assessee would furnish a certificate under prescribed Form No. 26A as per Rule 31 of the Income Tax Rules, 1962. We find that the receipts have been duly offered by the recipient, hence, the liability casted upon the assessee in this instant case stands discharged. Hence, no disallowance is called for.
b. The revenue claimed that the premium claimed as revenue expenditure is collusive in nature.
On going through the records, we find that the OCDs were converted into CCDs and the premium has been paid after obtaining the valuation of the equity shares with regard to CCDs issued by the assessee company and the valuation carried has been duly certified by the Chartered Accountants as per the Rules laid down. The revenue has not pointed out any mistakes or inaccuracies in the valuation of the shares. Hence, the premium cannot be brought to tax. Further, placing reliance on the judgment of,
a. CIT Vs. Tungabhadra Industries Ltd. 2 SCL 42 (Calcutta) b. Shree Rajasthan Synyex Ltd. Vs. Union of India 1985 taxmann.com 413 (Rajasthan) c. Raymonds Ltd. Vs. DCIT 80 TTJ 120 (Mumbai) d. CIT Vs. MP Financial Corporation 180 ITR 327 (MP) e. Madras Industrial Investments Corpn. Ltd. Vs. CIT 12 SCL 139 (SC),
In the result, the appeals of the assessee are allowed. Order Pronounced in the Open Court on 20/01/2022.