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TMI Blog2016 (6) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... Technology Enabled Transaction Processing Services and has two wholly owned subsidiaries in the USA namely "First Source solution Ind."("FS-US") and First Ring Inc.("FR-US"). On 03/12/2007, the assessee issued Zero Coupon "Foreign Currency Convertible Bonds" ("FCCB") of USD 275 million (2,750 FCCBs of USD 1,00,000 each) with a tenure of 5 years redeemable on 04 December 2012. The FCCBs were to be redeemed at the rate of 139.37% of the principal amount. The terms of issue of FCCBs also provided for an option to the FCCB holders to get the bonds converted into equity shares with full voting rights with a par value of Rs. 10 each at a conversion price of Rs. 92.2933 per share with a fixed rate of exchange on conversion of Rs. 39.27 to USD 1 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the FCCB holder to get the bonds converted into equity shares or redeem the same. In case the same are not converted into equity shares during the period of FCCBs, they shall be redeemed on the date of maturity i.e. 04/12/2012. 6. The crucial question before us is as to whether the assessee can be treated as an „assessee in default‟ for not deducting tax at source u/s.196C of the IT Act in the assessment year 2011-2012 in respect of premium on the Zero percent Foreign Currency Convertible Bonds ("FCCB") issued by it. As per the terms of FCCB, the FCCBs were issued on 3rd December, 2007 redeemable on 4th December, 2012. The FCCBs were Zero Coupon Bonds, i.e. no interest was payable during the tenure of the bonds. The FCCB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 196C of the Act. The Section is analyzed below: IF: A. Any income by way of interest in respect of bonds B. Is payable C. To a non-resident D. TDS thereon has to be deducted: I. At the time of credit to the account of the payee; or II. At the time of payment thereof If ANY ONE of these conditions is not fulfilled, the assessee has no obligation to deduct tax. It is to be noted that section 196C does not have any Explanation on the lines of Sections 193, 194A, 194C, 194G, 194H, 1941, 194J, 194K, 195, and 196A of the Act which provide that credit to any account, whether called a "Suspense Account" or any other account also triggers the tax deduction provisions. 8. We found that none of the above conditions are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1667/M/10). The decision in the case of Pfizer Ltd. is of relevance because in that case the ITAT has held that there was no question of treating the assessee as an "assessee in default" in respect of non-deduction of TDS, even though the assessee had made a provision for expenses in its books of accounts. Reliance is also placed on the decision of the Chennai Bench of the ITAT in the case of Dishnet Wireless Limited (supra) where also the issue was regarding TDS on provisions made. Furthermore, the obligation to deduct TDS can arise only if the alleged interest on the FCCBs is liable to tax in India. 10. Now, coming to the observation made by lower authorities to the effect that assessee itself has made entry in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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