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TMI Blog2017 (4) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... d on fully convertible debentures and fees for technical services - Held that:- Both parties are in agreement that this issue of the assessee’s claim for grant of TDS credit on interest earned on fully convertible debenture and fees for technical services requires to be restored to the file of the AO for verification thereof in accordance with law; with which suggestion we are also in agreement. We, therefore, restore this issue to the file of the AO with the direction to verify the assessee’s claim in accordance with law and before granting credit for the impugned TDS to the assessee, fully satisfy himself that the amount of TDS has been deposited into the Government’s account; that the assessee is the lawful deductee; that the gross amount of interest has been considered as the assessee’s income and that no other person has or will claim credit of the very same taxes. Interest earned in respect of investments made in FCCBs issued by Dolphin Offshore Enterprises (India) Ltd. - Held that:- The assessee’s contention is that the AO erred in considering and taxing the entire interest amount of ₹ 20,97,204/- received by the assessee’s group companies from Dolphin Offshore Ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee relief of ₹ 5,40,777/- on account of interest on FCCBs received from Suzlon Energy Ltd. as per the directions of the DRP. 3. Aggrieved by the order of assessment dated 30.12.2014 passed under section 143(3) r.w.s. 144C(13) of the Act for y 2010-11, the assessee has preferred this appeal raising the following grounds: - 1. Ground of Objection No. 1 On the facts and circumstances of the case, the learned AO erred in not granting the credit for taxes deducted at source (TDS) in respect of income earned by the Appellant despite furnishing extensive details to the learned AO evidencing the deduction of tax at source. 2. Ground of Objection No. 2 On the facts and circumstances of the case, the learned AO erred in taxing the amount of ₹ 2,097,704 (USD 39,005) as the income of the Appellant against ₹ 1,056,603 (USD 21,943), being interest earned in respect of investments made n FCCBs issued by Dolphin Offshore Enterprises (India) Limited. Apart from oral submissions, written submissions were also filed by both the learned A.R. of the assessee and the learned D.R. for Revenue. 4. Ground No. 1(a) Non grant of credit of TDS on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in the Scheme 6. The interest payments on the FCCBs are subject to tax deduction at source (TDS) at the rate of 10% (plus applicable surcharge and education cess) as per section 115AC of the Income- tax Act, 1961 (Act) as also provided in clause 8 of the Scheme and under the offering circular provided by the issuer of FCCBs. 7. Clause 10(1) of the Scheme inter alia provides that during the period of fiduciary ownership of shares in the hands of the Overseas Depository Bank, the provisions of avoidance of double taxation agreement entered into by the Government of India with a country of residence of the Overseas Depository Bank will be applicable in the matter of taxation of interest on FCCBs. This provision is made to address the problems faced by the issuer in issuing a TDS certificate in the name of the subscriber in the aforesaid circumstances. 8. Given the above mechanism, as the identity of the FCCB holder may not be known to the Domestic Custodian Bank, the issuing company withholds taxes at the rate of 10% prior to remitting the interest payments and even though in fiduciary capacity, the Overseas Depository Bank's name is generally indicated as the deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 4.1.2 The learned A.R. prayed that in view of the above mentioned facts and circumstances of the case, this issue be restored to the file of the AO who may be directed to call for information under section 133(6) of the Act from the issuers of FCCBs about details of TDS on the interest paid on FCCBs and/or get the requisite information from the concerned Assessing Officers of issuer companies and to grant TDS credit to assessee if it is found that the issuers have appropriately deducted tax at source and deposited the same with the Central Government treasury. 4.2 The learned D.R. for Revenue submitted that the fact is that the 26AS statement of the assessee does not reflect credit of taxes deducted by Indian companies on interest paid to the assessee which means the assessee is not a deductee as per records of the deductor, whereas it has been contended by the assessee that the overseas depository bank has been shown as the deductee by the deductors. It is contended by the learned D.R. that unless it is established by the assessee that the actual deductee in respect of the amounts of interest income shown by the assessee is the assessee itself and that no other entity ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected in 26AS and/or based on TDS certificates furnished. 5.2 The learned D.R. submitted that this issue be restored to the file of the AO for verification in accordance with law, reiterating the same arguments and requirements put forth by him herein above at para 4.2 of this order (supra). 5.3 We have heard the rival contentions and perused and carefully considered the material on record. Both parties are in agreement that this issue of the assessee s claim for grant of TDS credit on interest earned on fully convertible debenture and fees for technical services requires to be restored to the file of the AO for verification thereof in accordance with law; with which suggestion we are also in agreement. We, therefore, restore this issue to the file of the AO with the direction to verify the assessee s claim in accordance with law and before granting credit for the impugned TDS to the assessee, fully satisfy himself that the amount of TDS has been deposited into the Government s account; that the assessee is the lawful deductee; that the gross amount of interest has been considered as the assessee s income and that no other person has or will claim credit of the very same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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