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TMI Blog2023 (1) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not disputed that FCCBs were utilized for the purpose of making investments in share of overseas subsidiaries or on the loans given to overseas subsidiaries. No doubt, the redemption premium partakes interest as defined u/s 2(28A) of the Act, however, by virtue of exclusive clause of the provisions of section 9(1)(v), the interest income in the hands of recipient cannot be said to have accrued or arisen in India. When the income has not arisen in India in the hands of recipient/non-resident, there is no obligation on the part of the respondent-assessee to deduct tax at source on payment of interest as held by GE India Technology Cen. (P.) Ltd [ 2010 (9) TMI 7 - SUPREME COURT] followed by Karnataka Power Transmission Corporation Ltd [ 2016 (2) TMI 412 - KARNATAKA HIGH COURT] We find that the order of the ld. CIT(A) is in consonance with the legal position discussed above. Therefore, the order of the ld. CIT(A) is just, proper and reasoned order. Thus, we do not find any reason to interfere with order of the ld. CIT(A). Penalty u/s 271C - failure on the part of the assessee to deduct tax at source on the redemption premium - HELD THAT:- As Tribunal sustained the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er charging section 5(2) of the Act for deciding the taxability of interest income. 6. On the facts and in circumstances of the case the Ld. CIT(A), ought to have upheld the order of the Assessing Officer. 7. Appellant craves leave to add, amend and alter any other grounds of appeal. 5. Briefly, the facts of the case are as under :- The respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing and selling of automotive components. During the course of scrutiny of e-TDS returns filed by the respondent-assessee for the financial year 2013-14, the Dy. Commissioner of the Income Tax (International Taxation)-I, Pune (hereinafter called as TDS Officer ) observed that the respondent assessee had remitted USD 70,60,125 as Foreign Currency Convertible Bonds ( FCCBs ) redemption premium without deduction of tax at source. Accordingly, the TDS Officer had called upon the respondent-assessee to show cause as to why it should not be treated as an assessee in default u/s 201(1) of the Income Tax Act, 1961 ( the Act ) vide show-cause notice dated 24.06.2013. 6. In response to the said show-cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is provided in the scheme of taxation of FCCBs in respect of ends use of proceeds from the FCCBs. Accordingly, the TDS Officer held that the respondent-assessee is an assessee in default for non-deduction of tax at source on redemption premium of USD 70,60,125. Accordingly, the TDS Officer called upon the respondent-assessee to deduct tax at source of Rs. 4,50,12,763/- along with interest u/s 201(1A) of Rs. 99,02,807/-. 8. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A) who originally vide order dated 29.09.2017 had dismissed the appeal in limine without condoning of delay of 921 days. However, on appeal before the Income Tax Appellate Tribunal (ITAT), the matter was remanded to CIT(A) vide order dated 17.05.2019 to decide the issue in appeal on merits by condoning the delay. Pursuant to the order of remand by the Tribunal, the ld. CIT(A) vide order dated 30.03.2021 had allowed the appeal of the respondent-assessee by holding that no interest income had accrued to the non-recipient in terms of provisions of section 5(2) r.w.s. 9(1)(v) of the Act placing reliance on the decision of the Co-ordinate Bench of the Tribunal in the case of Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 5(2) defines total income of any previous year of a person who is non-resident to include income which is received or deemed to have received in India during such year or accrued or deemed to have accrued to him during the previous year. The provisions of section 9 indicate as to what type of income to have accrued, arisen in India. The provisions of section 9 spells out the instance of the income as non-resident would be liable to tax in India. The provisions of section 9(1)(v) spells out when the interest income is deemed to have accrued arisen in India, received or interest income received or deemed to have received in India which reads as under :- 9(1) ......... (v) income by way of interest payable by (a) the Government ; or (b) a person who is a resident, except where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the interest is payable in respect of any debt incurred, or moneys borrowed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to replace the aforesaid provision by a simple and comprehensive source rule. Under the amended provision, interest income of the following types will be deemed to accrue or arise in India : (a) Interest payable by the Central Government or any State Government. (b) Interest payable by a resident except in the following cases:- (i) interest payable by a resident in respect of any debt incurred, or any moneys borrowed and used, for the purposes of a business or profession carried on by him outside India ; and (ii) interest payable by a resident in respect of any debt incurred, or any moneys borrowed and used, for the purposes of making or earning any income from any source outside India. It may be noted that where moneys borrowed by a resident for the purposes of a business or profession carried on by him outside India are actually used for any other purpose, interest payable thereon will be deemed to accrue or arise in India. Similarly, interest payable on moneys borrowed by a resident for the purposes of making or earning any income from any source outside India will be deemed to accrue or arise in India if the moneys are actually used for any purpose in India. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka). We find that the order of the ld. CIT(A) is in consonance with the legal position discussed above. Therefore, the order of the ld. CIT(A) is just, proper and reasoned order. Thus, we do not find any reason to interfere with order of the ld. CIT(A). 15. In the result, the appeal filed by the Revenue in ITA No.341/PUN/2021 for A.Y. 2014-15 stands dismissed. ITA No.461/PUN/20121 : 16. This is an appeal filed by the Revenue directed against the order of the ld. CIT(A)-13, Pune dated 20.07.2021 levying the penalty of Rs. 4,50,12,760/- u/s 271C of the Act for failure on the part of the assessee to deduct tax at source on the redemption premium. 17. The Brief facts of the issue in the present appeal is as under : The penalty u/s 271C was levied by the Joint Commissioner of Income Tax (International Taxation), Pune vide order dated 30.09.2015 on the basis of order passed by the TDS Officer on 24.02.2015 u/s 201(1) 201(1A) of the Act. This order was quashed by the ld. CIT(A) and on further appeal before the Tribunal, the Tribunal also sustained the findings of the ld. CIT(A) in quashing of the order u/s 201(1) of the Act. Since the basis on which the penalty was le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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