TaxTMI 
TaxTMI 
2015 (5) TMI 356
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.... this ground itself. 2. That the Ld. CIT (A) has erred in law and on the facts and in the circumstances of the case by holding that the entire impugned demand inter - alia of relevant F.Y. 2005-06 is barred by limitation as per the provisions of section 201(3) of the I.T. Act. 3. That the Ld. CIT (A) has erred in law and on the facts and in the circumstances of the case in allowing relief to the appellant in respect of interest of Rs. 24,27,27,009/- (after AO's order u/s 154 of the IT Act dated 26.05.2014) charged u/s 201 (1A) of the IT Act, inter - alia for the relevant F.Y. which does not get time barred under section 201 (3) of the I.T. Act. 4. That the Ld. CIT (A) has erred in law and on the facts and in the circumstances of the case in holding that limitation u/s 201 (3) of the Act is applicable to both the situation i.e. in a case where whole of tax has been deducted or any part of tax has been deducted. 5. That the Ld. CIT (A) has erred in law and on the facts and in the circumstances of the case in accepting assessee's proposition that if the recovery of tax is time barred u/s 201 (1) then interest will also be time barred u/s 201 (1A). 6. That the Ld....
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....der of Learned CIT (A). 5. We have considered the rival submissions. We find that the learned CIT (A) on page no. 77 of his order has stated that the assessee has raised 5 issues i.e. (1) General, (2) Limitation, (3) Taxability of Interest on NCDs, (4) Taxability of Interest on FCCBs and (5) Taxability of Interest on FDRs. He decided all these appeals on issue basis and both sides agreed that we can also decide these appeals on issue basis. We proceed accordingly. 6. First we reproduce the findings of learned CIT (A) from pages 77 to 90 of his order. The same are as under:- "In all these appeals for different year the appellant has raised various common issues in the different grounds of appeal, these issues can be divided : (1) General (2) Limitation (3) Taxability of interest on NCDs (4) Taxability of interest on FCCBs (5) Taxability of interest on FDRs. My findings issue wise are given in subsequent paras. Finding for Ground Nos. 1 to 3 and 27 to 37 together (General) All these are general grounds of the appeal of the assessee are covered by my findings in other grounds of appeal in subsequent paras of this appeal order and they do not require any separate adjudicati....
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....pugned demand in respect of financial years 2005-06, 2006-07, 2007-08, 2008- 09 & 2009-10 and substantial pan of the demand in respect of financial year 2010-11 is barred by limitation as well. Regarding F.Yr. 2011-12 and F.Yr. 2012-13 the demand has been deleted by me on the merits of the case issue wise and is also allowed on facts. Finding for Ground Nos. 11 to 17 together (NCD) I have perused the facts in the order u/s 201(1) and 201(1A) as well as facts stated in statement of facts and assessee's submission as well as the Remand report of Assessing Officer dated 20/06/2014 and 25/07/2014 and the assessee's rejoinder/submission dated 30/06/2014 and 30/07/2014 and 08/08/2014, which are in the body of this Appellate Order (verbatim). The issue regarding the regular interest paid in respect of NCDs was never raised during the proceedings by the Assessing Officer and the details thereof were never called for from the assessee as evident from the Assessing Officer letter in the Index of the Paper Book (sent to the Assessing Officer along with written submission for comments). Index is at pages 57 to 64 along with Certificate and is also a part of the body of order. As ....
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....the BSE, they have to be necessarily in the demateriaiized form. Therefore, once the Assessing Officer was satisfied that the NCDs in question were listed NCDs, she should have under law concluded that they were also demateriaiized. The documentary evidence of dematerialization could not be filed by the assessee because she indicated this requirement for the first time in her letter dated 25.3.2014 (as evident from the letter mentioned in the paper book ) and also seen from the Index which is a pan of paper book and made the impugned order after six days on 31.3.2014. The said information was to be filed by 28.3.2014, latest by 12:00 pm. Thus, the assessee did not have sufficient opportunity to file the requisite evidence. Later on the evidence was filed in the statement of facts and also with written submission dated 30/07/2014 which was sent to the Assessing Officer for comments. The exemption from TDS of listed and dematerialized securities came into force from 1/6/2008. The assessee had earlier deducted TDS from interest in respect of NCDs prior to that date and in fact up to 30.9.2009. Details of interest in respect of NCDs and TDS deducted there from during the financia....
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....of facts under respective heads of NCDs, FCCBs and FDs for respective years. Some additional comments on these issues are as follows :- I. With regard to the arguments raised on the issue of NCDs. the reliance is placed on the discussion made from Para 5 to 5.6 of the Order dt. 30.03,2014 r.w. relevant portion of discussion on the same issue in comments dt. 20.06.2014. The amount of NCDs ore taken from the Annual Reports of the company only which are found on record. The year wise interest calculation on NCDs is given in Para 5.4 of the order and the undersigned relies on the same... With regard to Remand Report dated 20/06/2014 the Assessing Officer stated that SEBI Circulars are in the nature of additional evidence, in this regard, I am of the view that these are available in the Public domain and this was informed to the Assessing Officer by the Certificate filed by the appellant with the written submission dated 30/06/2014 and Paper book with Index which was sent to her for her comments. Further the Assessing Officer did not issue any notice for these years F.Yrs. 2005-06 and 2006-07.1n view of all the above stated facts there is no liability of interest on NCD thus th....
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....nt past as to whether capital gain arises at the time of conversion of convertible debentures into shares. With a view to reiterating the legislative intention, a new clause (x) has been inserted in section 47 of the Income-tax Act to provide that any transfer by way of conversion of debentures, debenture-stock, or deposits certificate in any form, of a company into shares or debentures of that company will not be regarded as a transfer giving rise to any taxable gain. Further, a new sub-section (2A) has been inserted in section 49 of the Income-tax Act to provide that on sale of shares or debentures received on such conversion, the capital gain shall be computed by faking the cost of acquisition as that part of the cost of debentures, debentures-stock or deposits certificate which has been appropriated towards the shares or debentures " (Emphasis supplied). Subsequent to the clarificatory amendment aforesaid, two new sections, namely 115AC and 196C were introduced in the Act with effect from 1.4.1993 and 1.6.1992 respectively by the Finance Act, 1992. The section 115AC did not provide for the taxation of gain arising on conversion. If the legislature intended, it could have ....
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....to provide for a special scheme of taxation for FCCBs. A section which is intended to offer clarity (if not also an incentive) to nonresident bond-holders in the matter of taxation, would not leave the taxation of such a key event as conversion to interpretation. If the legislature wanted to recognize conversion gain for the purposes of taxation, it would have done so expressly for of the nonresident investors, it incorporated express provisions delimiting the taxation of FCCBs and used the mandatory expression 'shall' in every sub-section of section 8 thereof. The Scheme provides for deduction of tax at source from interest payments on bonds until the conversion option is exercised. It also deals with the tax exemption on the conversion of bonds into shares. It provides for deduction of tax at source from dividend on the convened portion of the bonds. It also exempts the taxation of capital gain arising from the transfer of bonds outside India amongst non residents. However, the Scheme expressly forbids the taxation of any capital gain arising from the conversion of bonds into shares. Had it been the intention to include such gain in the interest under sub-section (1....
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....le on the website of the Bombay Stock Exchange. The said Memorandum is placed on record. In this Information Memorandum, it is clearly mentioned that on 10.10.2008, 10,000,000 shares were issued against conversion of a tranche of FCCB-11. Further, assessee's claim that the issue of these shares on 10.10.2008 is not on account of conversion of FCCBs but these are preferential allotment to promoters: is not supported by any evidence. Such unsubstantiated claim is liable to be outrightly rejected. 6.4 With regard to the issue raised by the assessee regarding allotment of shares on amalgamation on 25.08,2006 and 14.06.2009, this is submitted that as evident from the Information Memorandum, the process of conversion of FCCBs and allotment of shares on amalgamation is going on simultaneously: and also the consideration for issue of shares on amalgamation is not given. It is understood that the conversion of FCCBs is also involved in the allotment of these shares on 25.08.2006 and 14.06.2009, and the entries on these two dates are in substance and effect the same as other entries in the list. The assessee has also not produced any evidence to prove its claim that allotment of share....
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....I have perused the facts stated in the order u/s 201(1)/201(1A) as well as facts stated in the assessee's submission as well as the Remand report of Assessing Officer dated 20-06-2014 and 25-07-2014 and the assessee's rejoinder/submission dated 30.06-2014 and 30-07-2014 and 08-08-2014. The Assessing Officer in her remand report dated 25-07-2014 has stated that the digitized details of the Fixed Deposits are in nature of additional evidence which may be admitted only when they fulfilled one of the four conditions given in the Rule 46A of IT Rules. Regarding this it is slated that this is not an additional evidence as all the details regarding "Fixed Deposit were emailed to the Assessing Officer on 21/3/2014 and then again on 29-03-2014 in excel file as evident from the Index of the paper book. This paper book along with the index and certificate along with written submission dated 30-06-2014 were sent to the Assessing Officer for comments. The Assessing Officer did not contradict regarding the assessee's version regarding the details which were sent to her by email by the assessee on these dates i.e. 21/03/2014 and 29/03/2014. CD was also supplied with Paper book. In a way s....
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....s well as the interest against Forms 15G/15H with documentary evidence. (Pl. refer page 20 of the paper book) (vi) That the assessee vide its letter dated 21.03.2014 made a detailed submissions on forms 15G/15H and emailed the details of interest below Rs. 5.000/- for the A.Y. 2009- 2010, 2010-2011 and 2011-2012 to the DCIT, TDS on 21/3/2014 itself (Pl. refer page 22-24 of the paper book) (vii) That the Ld. A.O. vide her letter dated 25.03.2014 alleged that no documentary evidence were filed in respect of interest below Rs. 5,000/- as well as the interest accrued in respect of Forms 15G/15H for the A.Y. 2009-2010, 2010- 2011 and 2011-2012. (Pl. refer page 25-28 of the paper book) (viii) That the assessee vide its letter dated 27.03.2014 again made a detailed submissions in respect of interest below Rs. 5000/- as well as the interest in respect of Forms 15G/15H. Further below Rs. 5,000/- as well as copies of Forms 15G/15H were again submitted before the Ld. A.O. by enclosing the same with the Submissions. (Pl. refer page 29-51 of the paper book (ix) That the Ld. A.O. vide her letter dated 28.03.2014 again asked the assessee to furnish the details of non tax deducted FD c....
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..... A.O. are placed at pages 172 to 191 of the paper book. The assessee vide its letter dated 13.3.2014 explained that the difference between the total interest and the taxdeductible interest was due to below Rs. 5000 (interest) cases as well as Form 15G/15H cases in both of which tax was not deductible. The details of total interest, tax-deductible interest and non-tax-deductible interest in respect of financial years 2007-08, 2008-09 & 2012-13 were also furnished. These were as under: FY Total accrued interest Tax deductible interest Tax deducted Interest in 15G/15H cases Interest below Rs. 5000 cases 2007-08 82084540 45728514 4728586 16713628 19642398 2008-09 1 16952999 65747730 6797997 27184955 24020315 2012-13 1053632159 58I1060S1 58160355 363089164 109436913 14. Further, vide its letter dated 21.3.2014, the assessee furnished the details of below Rs. 5000 cases for FY 2009- 10, 2010-11 & 2011-12 in excel file, giving the name, Investor Code No. and interest earned in each case. The excel file was emailed to DCIT-TDS on 21.3.2014. Again, details of below Rs. 5000 cases for FY 2007-08, 2008-09 & 2012-13 were also furnished in excel file giv....
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....facts stated above that there was no liability of the assessee for the TDS on FD interest. In view of the facts stated above, the entire impugned demand raised by the Assessing Officer in respect of the fixed deposit is against the facts and is therefore deleted on merits of the case. Furthermore the entire demand in respect of financial years 2007-08, 2008-09 & 2009-10 and substantial part of the demand in respect of financial year 2010-11 is also barred by limitation. Hence assessee has a strong case on merits as well as on law and these grounds of appeal are allowed. In view of my findings above on different issues which are common in all the appeal for F.Yrs. i.e.2005-06 2006- 07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13 and consolidated appeal for F.Yrs. 2005-06 to 2012-13, I have disposed off all the appeals for all the years by this common order. 12. In the result, the appeals are allowed." 7. Regarding the first issue i.e. "General", no separate adjudication is called for. 7.1 In respect of the second issue i.e. Limitation, we find that learned CIT (A) has followed the judgment of Hon'ble Kerala High Court rendered in the case of Traco Cable Co....
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....pecific mention of section 201 (1A) in section 201 (3) is not essential. 10. As per above discussion, we do not find any infirmity in the order of learned CIT (A) on second issue and hence, we decline to interfere in his order on this issue. 11. In respect of the third issue i.e. regarding taxability of interest on NCDs, the decision of CIT(A) is on the basis that the exemption from TDS from listed and dematerialized securities came into force from 01/06/2008. He has given a clear finding that the assessee had earlier deducted TDS from interest in respect of NCDs prior to this date and in fact up to 30/09/2009. He has also noted that the details of interest in respect of TDS deducted during financial year 2007-08 to 2009-10 and challan for deposit of tax are available on pages 129 to 140 of the paper book. This finding of CIT(A) could not be controverted by Learned D.R. of the Revenue and hence, this has to be accepted that till 30.09.2009, TDS deduction was made by the assessee from interest on NCDs. 12. The CIT(A) has given further finding that all the NCD of the assessee were listed and dematerialized. He has also given a finding that NCDs held by LIC were exempt from T....
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.... 88 of his order that the assessee vide his letter dated 13/03/2004 explained that the difference between the total interest and tax deductible interest was due to below Rs. 5,000/- interest cases as well as Form 15G/15H cases and in both of these cases, tax was not deductible. He has reproduced the details of total interest, tax deductible interest and non deductible tax interest in respect of financial years 2007-08, 2008-09 and 2012-13. Thereafter, a clear finding is given by CIT(A) that in spite of all these details and evidence furnished by the assessee, the Assessing Officer in her impugned order has treated the entire non tax deducted interest as tax deductible interest on the ground that the assessee only gave the names of deposit holders and the amount of interest earned but their address, PAN, amount of deposit, rate of interest and period were not given. He has further noted that the Assessing Officer has rejected Forms 15G/15H cases on the ground that names and amounts of interest involved in 15G/15H forms could not be ascertained from the copies of receipts for the delivery of these forms in the office of the CIT(A). Thereafter, a clear finding is given that sufficient....