2023 (8) TMI 298 - SCH - Income Tax

Interpretation of Section 47(xa) on bond acquisition date upheld, affirming 1993 vs. 2008 schemes.

The Court upheld the interpretation of Section 47 (xa) regarding the date of acquisition of bonds and underlying shares, emphasizing the distinction ... Taxation on Foreign Currency Convertible Bonds - interpretation of Section 47 (xa) which was introduced through an amendment from the Finance Act, 2008 with effect from 01.10.2008 - determinative time for valuation - whether date of acquisition of the bonds by the assessee was the determinative time for its valuation and not the date of acquisition of the underlying shares? - HELD THAT:- Having considered the submission as well as the judgment of the Punjab and Haryana High Court in SHRI NAVEEN BHATIA [2015 (10) TMI 402 - PUNJAB & HARYANA HIGH COURT] (which seems to have been rendered in the context of situation existing prior to introduction of Section 47 (xa) ) as well as the provisions of the concerned scheme i.e. Foreign Currency Exchangeable Bond Scheme, 2008 dated 10.08.2008 {introduced prior to the insertion of Section 47 (xa)} this Court is of the opinion that the bonds in question did not answer the description of the 2008 Scheme, but rather were in conformity with the earlier scheme relating to the issue of FECB (a scheme introduced in 1993). The distinction between the two schemes is that one relates to issuance of Exchange Convertible Bonds, whereas the other relates to Foreign Currency Exchangeable Bonds. Having regard to the significance to this distinction, this Court is of the opinion that there is no infirmity with the reasoning of the Bombay High Court [2019 (4) TMI 106 - BOMBAY HIGH COURT]. Issues involved:The interpretation of Section 47 (xa) in relation to the date of acquisition of bonds and underlying shares.Judgment Summary:Interpretation of Section 47 (xa):The revenue sought to argue the interpretation of Section 47 (xa) in conjunction with Section 115AC, emphasizing the date of acquisition of bonds by the assessee for valuation purposes. The Court analyzed the provisions introduced through an amendment from the Finance Act, 2008, effective from 01.10.2008. It noted the relevance of the Foreign Currency Exchangeable Bond Scheme, 2008, and the distinction between this scheme and the earlier scheme of Foreign Exchange Convertible Bonds from 1993. The Court concluded that the bonds in question aligned with the 1993 scheme rather than the 2008 Scheme, emphasizing the importance of this distinction. It upheld the reasoning of the Bombay High Court, dismissing the special leave petitions based on this interpretation.Conclusion:The Court, after considering the submissions and relevant judgments, upheld the interpretation of Section 47 (xa) in relation to the date of acquisition of bonds and underlying shares. It emphasized the distinction between the two schemes and affirmed the decision of the Bombay High Court. The special leave petitions were consequently dismissed, and any pending applications were disposed of.