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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 ..... nancial year ended 31 March 2011. The word "payable" requires that a liability must accrue against the assessee during the year ended 31 March 2011 for the payment of the alleged interest and that a corresponding right / debt has to accrue to the bondholder. In this connection reliance is placed on the decision of the Supreme Court in the case of E. D. Sassoon & Company Ltd. and Others v/s. CIT (1954 (5) TMI 2 - SUPREME Court ). The decision in the case of Pfizer Ltd. [2012 (11) TMI 164 - ITAT MUMBAI] 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 boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 10 each at a conversion price of ₹ 92.2933 per share with a fixed rate of exchange on conversion of ₹ 39.27 to USD 1 or to redeem the same on or before 04 December 2012. The AO observed that in spite of the fact that the assessee had made provisions of TDS deduction in the ledger a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 FCCBs were convertible at the option of the bondholder into fully paid equity shares at any time between 14th January, 2008 and 23rd November, 2012. The FCCBs could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 attracted in the case of the assessee. We also found that during the financial year ended on 31st March 2011, there was no ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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, therefore, liable to deduct tax thereon. It is now settled position by several decisions of Hon ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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