9911796707
TMI Blog2024 (10) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... Act had not been admitted/adjudicated by the Tribunal while disposing of the appeal vide order dated 12.06.2023. Taking note of the grievance of the assessee stated in MA and finding force in the same, this Tribunal vide order dated 26.02.2024 was pleased to allow the MA and recalled the original second appellate order dated 12.06.2023 to the limited extent for admission/adjudication of the ibid ground of appeal viz the additional ground (supra). Pursuant to the MA order dated 26.02.2024, this appeal has been listed for hearing for the limited purpose of admission/adjudication of additional ground filed by letter dated 06.03.2018 which reads as under: - "On the facts and in the circumstances of the case and in law, the learned AO be directed to allow deduction for proportionate premium paid on repayment of optionally convertible debentures amounting to Rs. 33,860,754/-" 3. Brief facts relating to this ground of appeal are that assessee had issued compulsorily convertible debentures (CCD) of Rs. 250 crores on 5th January 2010. And on 30th January 2014, the assessee changed the terms of CCD to optionally convertible debentures (OCD) of the same value of Rs 250 crores in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ITA. No.1549/Bag/2019 6. Further, according to the Ld. AR, the payment of premium on redemption of debentures is allowable as a revenue expenditure and relied on the following case laws: - i. Madras Industrial Investment Corporation Ltd Vs. CIT (225 ITR 802) (SC) ii. National Engg. Industries Ltd Vs. CIT (106 Taxman 443) (Cal HC) iii. CIT Vs. First Leasing Company of India Ltd (Tax Case Appeal No. 209 of 2006 & 1099 of 2004 (Madras HC) 7. According to Ld. AR, accounting treatment is not decisive of allowability of the claim made by assessee and relied on the following case laws: - i. Kedarnath Jute Manufacturing Co. Ltd Vs. CIT (82 ITR 363) (SC) ii. DCIT Vs. M/s. Bombay Dyeing & Mfg. Co Limited (ITA. No.5059/Mum/2003) iii. India Cements Ltd Vs. CIT (60 ITR 52) (SC) 8. In the light of the above submissions, he pleaded that the additional ground may be admitted and allowed in favour of the assessee. 9. Per contra, the Ld. DR opposes the admission of the additional ground and also relied on the decision of the Co-ordinate Bench of this Tribunal in assessee's own case (supra) for AY. 2011-12 to AY. 2013- 14 wherein the Tribunal had rejected similar claim made by asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,37,11,341/- for the proportionate premium paid on redemption of Debentures under Section 37(1) of the Act during the assessment proceedings for the Assessment Year 2011-12 which was rejected by the Assessing Officer vide Assessment Order, dated 07/05/2015, passed under Section 143(3) read with Section 144C(3) of the Act. The Assessing Officer rejected the aforesaid claim, inter alia, on the ground that the same was expenses claimed were capital in nature. 7.5. The CIT(A) also decline to grant any relief on this issue and did not allow the claim for deduction of INR 14,37,11,341/- pertaining to the proportionate premium paid on redemption of Debentures. 7.6. Being aggrieved, the Assessee has carried this issue in appeal before us. 7.7. We have heard the rival submissions and perused the material on record. 7.8. The contentions raised on behalf of the Assessee (including on the issue of nature of premium paid on redemption of debenture and the year of allowance of deduction) can be summarized as under: (a) The return for the relevant assessment year was filed on 28/11/2011, while the premium on OCD was paid on 24/03/2014. Accordingly, the claim became available to the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only for the relevant assessment year. (e) Premium or interest is indeed recompense for the use of funds. Commercially, when the terms of CCD were converted to OCDs and the OCDs were ultimately redeemed, such recompense was worked out commercially at the compounded rate of approx. 10% p.a. (approx.). This gave an overall premium of 52% on face value. If, however, the rate of return is calculated from the date of conversion to the date of redemption (i.e from 28/02/2014 to 24/03/2014), then the recompense works out to 624% p.a. If it is presumed that the premium runs from the date of conversion, then such presumption would be de-hors of commercial realities as a return of 624% p.a by the issuer company can, by no stretch of imagination, be regarded as a commercially acceptable recompense from the point of view of issuer. Based on the commercial realities, the premium paid should be considered as pertaining to the use of money for the entire period beginning from the date of issue of CCDs till the date of redemption and not just from the date of conversion. (f) In the present case, the premium on debentures was debited to securities premium account. This is as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. 7.10. We have given thoughtful consideration to the rival submission. It is admitted position that the Assessee had issued CCDs of INR 250 Crores to Barclays. Since the CCDs were freely transferable the same were eventually purchased by ABNL, the parent company of the Assessee, on 07/02/2014 from the then holders of CCDs namely L&T Fincorp Ltd., L&T Infrastructure Finance Co. Ltd. and Tata Capital Financial Services Ltd. On 28/02/2014, as per mutual agreement between ABNL and the Assessee, CCDs were converted from OCDs. Since, ABNL did not opt for conversion, the OCDs were redeemed on 26/03/2014 at a premium of 130 Crore. The issue raised for consideration before us is whether the Assessee is entitled to claim deduction for the proportionate premium amount during the relevant assessment year since according to the Assessee the deduction for premium is to be allowed over the term of the debentures. 7.11. We note that when the CCDs were initially issued the Assessee had no obligation to pay premium, interest, or charges in relation to the CCDs as the same were convertible into equity on expiry of 60 months as per the conversion formula which was to be mutually agreed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of equity shares. Therefore, deduction for premium on redemption claimed by the Assessee cannot be allowed. 7.15. It was submitted on behalf of the Assessee that premium, which is recompense for the use of funds, was worked out commercially at the compounded rate of approx. 10% p.a. giving an overall premium of 52% on face value. If, however, the rate of return is calculated from the date of conversion to the date of redemption (i.e from 28/02/2014 to 24/03/2014), then the recompense works out to 624% p.a. which would be de-hors of commercial realities. In our view that the commercial effect of financial arrangement between the parties cannot form the basis of allowance of claim made by the Assessee. It is admitted position that at the time of modification of terms the CCDs were held by ABNL which was ultimate holding company of the Assessee. It is not the case of the Assessee that the modification of terms on which debentures were issued was occasioned by the circumstances beyond the control of the Assessee. On conversion of CCDs into OCDs, the subscriber/holder diluted their obligation to subscribe for equity shares of the Assessee and got an option to seek redemption of de ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
