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2015 (5) TMI 356 - AT - Income TaxDemands raised by the A.O. u/s 201 (1) & 201 (1A) - CIT(A) deleted the addition as 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 - Held that - CIT (A) has followed the judgment of Hon ble Kerala High Court rendered in the case of Traco Cable Co. Ltd. vs. CIT, 1987 (2) TMI 36 - KERALA High Court and held that no order u/s 201 (1) could be made after 31.03.2013 in respect of Financial Years 2005 - 06 to 2009 - 10. In respect of Financial Year 2010 - 11, he held that an order u/s 201 (1) could be made in respect of last quarter for which statement has been filed in Financial Year 2011 - 12. Hence, as per the Proviso to section 201 (3) inserted by Finance Act 2009, for F.Y. 2007 - 08 and earlier years, the order u/s 201 (1) got time barred on 31.03.2011. For F.Y. 2008 - 09 to 3rd Quarter of F.Y. 2010 - 11 also, the order is time barred because of expiry of two years from end of the financial year in which the statement is filed because it is not in dispute that these statements were filed by the assessee. - Decided in favour of assessee. Recovery of interest u/s 201 (1A) - Held that - When recovery of tax u/s 201 (1) is time barred, recovery of interest u/s 201 (1A) is also time barred. We find no infirmity in the order of learned CIT (A) on this aspect also because in our considered opinion, interest u/s 201 (1A) is consequential to default u/s 201 (1) and therefore, when action u/s 201 (1) is time barred, action u/s 201 (1A) is also time barred as a consequence and for that , specific mention of section 201 (1A) in section 201 (3) is not essential. - Decided in favour of assessee. Taxability of interest on NCDs - as per CIT(A) no tax was deductible in respect of any NCD in the case of the assessee in these years i.e. financial years 2009-10 to 2012-13 - Held that - 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. 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 TDS under clause (vi) of the proviso to section 193 and therefore, no tax was deductible in respect of any NCD in the case of the assessee in these years i.e. financial years 2009-10 to 2012-13. These findings of CIT(A) also could not be controverted by Learned D.R. of the Revenue and since the interest on NCDs paid by the assessee were exempt from the requirement of TDS either on account of NCDs being listed and dematerialized or on account of held by LIC, TDS was not deductible and therefore, there is no reason to interfere in the order of CIT(A) on this issue also. - Decided in favour of the assessee. Taxability of interest on FCCBs - CIT(A) holding that the demand raised by the AO in respect of the notional gain arising from conversion of the FCCBs is contrary to the provisions of the Act as well as the ratified scheme of FCCBs - Held that - CIT(A) has noted down the contents of CBDT Circular No. 621 dated 19/12/1991 as per which, capital gain is not chargeable on conversion of debenture or bonds in shares in view of clause (x) of section 47 of the Act. Hence, it is seen that no capital gain arise on conversion of debenture into shares. Moreover, even if such capital gain on conversion of debenture into share is considered as income at the time of conversion, this cannot be considered as interest and the liability of TDS cannot be fastened on the assessee. The CIT(A) has also referred to the provisions of section 115AC read with section 196C and observed that as per the scheme of taxation in respect of FCCBs, it has been provided that TDS is required to be deducted from interest payments on bonds until the conversion option is exercised. This scheme exempts the taxation of capital gain arising from the transfer of bonds outside India among non residents. He has further noted that the scheme expressly forbids the taxation of any capital gain arising from the conversion of bonds into shares. Considering all these facts and in view of the above discussion, we are of the considered opinion that the Assessing Officer was not justified in fastening the liability of TDS on the assessee in respect of notional gain worked out by the Assessing Officer on conversion of FCCBs and therefore, on this issue also, no reason to interfere in the order of CIT(A) - Decided in favour of the assessee. Taxability of interest on FDRs - AO 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 give - Held that - CIT(A) noted 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 ₹ 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 opportunity has been given to the assessee as well as to the Assessing Officer during appellate proceedings and thereafter, he has given a finding that it is seen from the facts that there was no liability of the assessee for TDS on FDR interest. These specific findings of CIT(A) on this issue could not be controverted by Learned D.R. of the Revenue. When the FDR interest paid by the assessee is partly below ₹ 5,000/- per payee or partly the payee has given Form 15G/15H and as a consequence, no TDS was required to be deducted by the assessee, it was not proper for the Assessing Officer to raise this liability of TDS on such FDR interest. No infirmity in the order of CIT(A) on this issue - Decided in favour of assessee.
Issues Involved:
1. Validity of the CIT(A)'s order due to lack of statutory notice under section 250(1). 2. Limitation under section 201(3) for raising demands. 3. Taxability of interest on Non-Convertible Debentures (NCDs). 4. Taxability of interest on Foreign Currency Convertible Bonds (FCCBs). 5. Taxability of interest on Fixed Deposit Receipts (FDRs). Detailed Analysis: 1. Validity of the CIT(A)'s Order: The Revenue contended that the CIT(A)'s order was invalid due to the lack of statutory notice under section 250(1). However, this issue was not separately adjudicated as it was covered by the findings on other grounds. 2. Limitation under Section 201(3): The CIT(A) held that no order under section 201(1) could be made after 31.03.2013 for financial years 2005-06 to 2009-10. For financial year 2010-11, an order under section 201(1) could be made only for the last quarter for which the statement was filed in financial year 2011-12. The Tribunal found no infirmity in this decision, noting that the CIT(A) followed the judgment of the Hon'ble Kerala High Court in Traco Cable Co. Ltd. vs. CIT, 166 ITR 278. Additionally, the Tribunal agreed with the CIT(A) that when recovery of tax under section 201(1) is time-barred, recovery of interest under section 201(1A) is also time-barred. 3. Taxability of Interest on NCDs: The CIT(A) concluded that the exemption from TDS on listed and dematerialized securities came into force from 01/06/2008. It was found that the assessee had deducted TDS from interest on NCDs up to 30.09.2009. The CIT(A) also noted that all NCDs of the assessee were listed and dematerialized, and those held by LIC were exempt from TDS under clause (vi) of the proviso to section 193. The Tribunal upheld this finding, agreeing that TDS was not deductible on the interest on NCDs due to these exemptions. 4. Taxability of Interest on FCCBs: The CIT(A) noted that capital gains do not arise on the conversion of debentures into shares, as clarified by CBDT Circular No. 621 dated 19/12/1991 and section 47(x) of the Act. The CIT(A) further explained that the scheme of taxation for FCCBs under section 115AC and section 196C exempts the taxation of capital gains arising from the conversion of bonds into shares. The Tribunal agreed with the CIT(A) that the Assessing Officer was not justified in treating the notional gain on conversion of FCCBs as interest and fastening the liability of TDS on the assessee. 5. Taxability of Interest on FDRs: The CIT(A) found that the difference between total interest and tax-deductible interest was due to interest below Rs. 5,000 and Form 15G/15H cases, where tax was not deductible. The Tribunal noted that the CIT(A) had given sufficient opportunity to both sides and concluded that there was no liability for TDS on FDR interest. The Tribunal upheld this finding, agreeing that the Assessing Officer's treatment of non-tax deducted interest as tax-deductible was not justified. Conclusion: The Tribunal found no infirmity in the CIT(A)'s order on any of the issues and upheld the deletion of demands raised by the Assessing Officer under sections 201(1) and 201(1A). All eight appeals by the Revenue were dismissed.
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