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The Tax Publishers Assessee in default for non deduction of TDS on redemption premium read as Interest under Section 2(28A) on Foreign Currency Convertible Bonds (FCCB) parked overseas for Overseas Direct Investment (ODI) - For the purpose of earning income from a source outside India - Exclusion clause in Section 9(1)(v) *Facts:* Assessee had taken a FCCB for making investments outside India under FEMA regulations and had parked these amounts outside the country for meeting their ODI requirements. Redemption premium was paid overseas on these FCCB. Revenue declared the assessee to be in default for non-deduction of TDS on such redemption premium reading the same as interest as per the enhanced scoped definition of interest as per Section 2(28A). Assessee's plea was the payment of redemption premium will squarely fall in the income exclusion clause under Section 9(1)(v) where interest paid overseas for the purpose of a source of income/earning of income outside India will not be interest income arising/deemed to accrue/arise in India thus outside the scope of TDS as well. Assessee did not deny that the redemption premium is not be read as interest as per Section 2(28A) due to its enhanced scope. The case went in favour of assessee at first appellate level after remand to CIT(A) for non-hearing by ITAT. Aggrieved by the remanded order of CIT(A) in favour of the assessee, revenue went in higher appeal to ITAT - Held in favour of the assessee that the exclusion clause under Section 9(1)(v) covered assessee's case. There were no TDS obligations on the redemption premium though it was interest as it was for the purpose of an income earning source outside India. *Applied:* Adani Enterprises Ltd. [ITA No. 3072/Ahd/2009 & C.O. No. 291/Ahd/2009] : 2013 TaxPub(DT) 0772 (Ahd-Trib) *Referred:* GE India Technology Cen. (P.) Ltd. v. CIT, (2010) 327 ITR 456 (SC) : 2010 TaxPub(DT) 2241 (SC) Karnataka Power Transmission Corporation Ltd. v. DCIT, (2016) 383 ITR 59 (Karnataka) : 2016 TaxPub(DT) 1106 (Karn-HC) *Case:* DCIT v. Bharat Forge Ltd. 2023 TaxPub(DT) 154 (Pn-Trib)

The Tax Publishers

Assessee in default for non deduction of TDS on redemption premium read as Interest under Section 2(28A) on Foreign Currency Convertible Bonds (FCCB) parked overseas for Overseas Direct Investment (ODI) - For the purpose of earning income from a source outside India - Exclusion clause in Section 9(1)(v)

Facts:

Assessee had taken a FCCB for making investments outside India under FEMA regulations and had parked these amounts outside the country for meeting their ODI requirements. Redemption premium was paid overseas on these FCCB. Revenue declared the assessee to be in default for non-deduction of TDS on such redemption premium reading the same as interest as per the enhanced scoped definition of interest as per Section 2(28A). Assessee's plea was the payment of redemption premium will squarely fall in the income exclusion clause under Section 9(1)(v) where interest paid overseas for the purpose of a source of income/earning of income outside India will not be interest income arising/deemed to accrue/arise in India thus outside the scope of TDS as well. Assessee did not deny that the redemption premium is not be read as interest as per Section 2(28A) due to its enhanced scope. The case went in favour of assessee at first appellate level after remand to CIT(A) for non-hearing by ITAT. Aggrieved by the remanded order of CIT(A) in favour of the assessee, revenue went in higher appeal to ITAT -

Held in favour of the assessee that the exclusion clause under Section 9(1)(v) covered assessee's case. There were no TDS obligations on the redemption premium though it was interest as it was for the purpose of an income earning source outside India.

Applied:

Adani Enterprises Ltd. [ITA No. 3072/Ahd/2009 & C.O. No. 291/Ahd/2009] : 2013 TaxPub(DT) 0772 (Ahd-Trib)

Referred:

GE India Technology Cen. (P.) Ltd. v. CIT, (2010) 327 ITR 456 (SC) : 2010 TaxPub(DT) 2241 (SC)

Karnataka Power Transmission Corporation Ltd. v. DCIT, (2016) 383 ITR 59 (Karnataka) : 2016 TaxPub(DT) 1106 (Karn-HC)

Case: DCIT v. Bharat Forge Ltd. 2023 TaxPub(DT) 154 (Pn-Trib)