Suzlon Energy Ltd., Ahmedabad V. The ADIT, Intl.Taxn., Ahmedabad

CO 63/AHD/2014

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2740 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 25-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 29-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T P HEMANI
• Assessee Lawyers: O P SHARMA
• Keywords: Deemed to accrue or arise in india; Permanent establishment
• Section: 5(2); 201(1)

Judgement Text

ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM] ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 ASSESSMENT YEAR: 2011-12 DY. DIT (INTERNATIONAL TAXATION) -I ......... ....APPELLANT AHMEDABAD VS. SUZLON ENERGY LTD., .......................RESPONDENT & SUZLON, 5, SHRIMALI SOCIETY, CROSS-OBJECTOR NR. SHRI KRISHNA COMPLEX, NAVRANGPURA, AHMEDABAD [PAN : AADCS 0472 N] APPEARANCES BY: OP SHARMA FOR THE APPELLANT TP HEMANI FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JANUARY 25, 201 7 DATE OF PRONOUNCING THE ORDER : MARCH 29, 2017 O R D E R PER PRAMOD KUMAR AM: ITA NO. 2750/AHD/2013 BY REVENUE 1. THIS APPEAL FILED BY THE ASSESSING OFFICER CHALL ENGES CORRECTNESS OF THE ORDER DATED 27.09.2013 PASSED BY THE CIT(A) IN THE MATTER OF TAX WITHHOLDING DEMANDS RAISED UNDER SECTION 201 R.W.S. 196C AND 115AC OF T HE INCOME-TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2011-12. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S: I) THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 196C R.W.S. 115AC ON THE INTEREST PAYABLE ON FCCBS. II) THE ID CIT(A) HAS ERRED ON FACTS AND LAW IN NOT CONSIDERING THE ISSUE THAT ASSESSEE HAS TAKEN LIABILITY OF ISSUING FCCBS FROM INDIA AFTER TAKING APPROVAL OF RBI (LNDIAN AUTHORITY) AS PER RU LES AND GUIDELINES OF RBI AND HAS REMITTED INTEREST FROM INDIA AS ITS LIABILITY DULY RECOGNIZED IN HIS BOOKS OF ACCOUNT PREPARED FOR IND IAN REGULATORY ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 2 OF 12 AUTHORITIES, RESULTING INTO INCOME ACCRUING AND ARI SING TO THE NON- RESIDENT U/S 5(2) OF THE ACT FOR WHICH THE DEEMING PROVISIONS OF SECTION 9(1) ARE NOT APPLICABLE. III) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HO LDING THAT BOTH SECTIONS 5(2) AND 9(1)(V) OF THE ACT ARE APPLICABLE TO DETERMINE THE SITUS OF INTEREST INCOME IN CASE OF NON-RESIDENT. IV) THE ID. CIT(A) ERRED IN LAW AND ON FACTS IN HOL DING THAT THE INTEREST PAID BY THE ASSESSEE ON ITS FCCBS IS COVERED BY EXC EPTION TO SEC. 9(1)(V)(B) OF THE ACT AND CONSEQUENTLY IT FALLS OUT SIDE THE AMBIT OF DEEMED INCOME ARISING AND ACCRUING IN INDIA AND AS A RESULT OUT OF SEC. 5 ALSO. V) THE ID. CIT(A) ERRED IN LAW AND ON FACTS IN HOLD ING THAT THERE IS AMBIGUITY IN DETERMINING WHETHER INCOME HAS BEEN RE CEIVED OR ARISEN IN INDIA AND THUS THERE IS A NEED TO TRAVEL FROM SEC. 5(2) TO SEC. 9(1) OF THE ACT. VI) THE ID. CIT(A) HAS ERRED IN LAW BY CONTRADICTIN G HIS OWN OBSERVATION THAT SEC. 115AC IS A CODE ITSELF AND THEN TRAVELLIN G TO ANOTHER CHARGING SECTION OF THE ACT FOR DECIDING THE TAXABI LITY OF INTEREST INCOME. VII) THEREFORE THE ORDER OF THE LD. CIT(A) DESERVES TO BE DELETED AND THAT OF THE AO RESTORED. VIII)ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE HAD TWO SERIES OF FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB) IN FINANCIAL YEAR 2007-08. THE FCCBS SO ISSUED, AMOUNTING TO US $ 300 MILLIONS, WE RE TO MATURE IN JUNE 2012, AND FCCBS OF US $ 200 MILLIONS WERE TO MATURE IN OCTOBE R 2012. THESE FCCBS WERE RESTRUCTURED IN MAY 2009 AND, ACCORDINGLY, ZERO COU PON FCCB AMOUNTING TO USD $ 9,40,04,000 WERE REPLACED WITH 7.50% INTEREST BEARI NG FCCB AMOUNTING TO US $ 5,63,88,000. 4. AS A PART OF THIS RESTRUCTURING EXERCISE, THE AS SESSEE GAVE CONSENT INCENTIVE TO THE BOND HOLDERS CONSENTING FOR CHANGE OF FCCB T ERMS, AMOUNTING TO RS.27,10,21,199/-, THROUGH DEUTSHE BANK AG LONDON. IT IS TAX WITHHOLDING REQUIREMENT FROM THESE PAYMENTS WHICH IS SUBJECT MA TTER OF DISPUTE BEFORE US. ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 3 OF 12 5. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE A MOUNT SO PAID BY THE ASSESSEE, AS CONSENT INCENTIVE, WAS TAXABLE, UNDER SECTION 5(B), IN INDIA AS INTEREST, AND, ACCORDINGLY, TAX SHOULD HAVE BEEN WITHHELD UNDER SECTION 195. LEARNED CIT(A), HOWEVER, RELYING UPON A DECISION OF THIS TRIBUNAL IN THE CASE OF ACIT VS. ADANI ENTERPRISE LTD [(2013) 141 ITD 206 ( AHD)], REVERSED THE ACTION OF THE ASSESSING OFFICER AND OBSERVED AS FOLLOWS:- 3.3 THE HON'BLE TRIBUNAL IN ADANI (SUPRA) AFTER CO NSIDERING ALL THE ASPECTS HAS HELD THAT (A) INTEREST PAYMENT BY THE ASSESSEE TO NON-RESIDENT INVESTORS CANNOT BE SAID TO HAVE ACCRUED OR ARISEN IN INDIA A ND IT ALSO CANNOT BE SAID THAT THIS INTEREST INCOME CAN BE DEEMED TO HAVE ACC RUED OR ARISEN IN INDIA; AND THEREFORE (B) NO TDS IS TO BE DEDUCTED BY THE A SSESSEE FROM THIS PAYMENT IN QUESTION. SINCE THE ENTIRE ISSUE IS SQUA RELY COVERED BY JURISDICTIONAL AHMEDABAD TRIBUNAL'S ORDER IN ADANI (SUPRA), I RESPECTFULLY FOLLOW THE SAME; ADOPT THE FINDINGS GIVEN THEREIN. 3.4 THEREFORE, ON BOTH THE COUNTS, FOLLOWING THE OR DER OF MY PREDECESSOR IN THE IMMEDIATE A.Y.2010-11 IN APPELLANT'S OWN CASE A ND THE JURISDICTIONAL TRIBUNAL'S ORDER IN THE CASE OF ADANI (SUPRA), I HO LD THAT (A) THE CONSENT INCENTIVE WHICH ARE IN THE NATURE OF INTEREST AS HE LD BY AO AND INTEREST PAID BY THE APPELLANT ON ITS FCCB IS NOT ACCRUING AND ARISI NG IN INDIA AND THEREFORE NOT HIT BY FIRST LIMB OF SECTION 5(2) OF THE IT. AC T AND ALSO NOT DEEMED TO ACCRUE OR ARISE IN INDIA SINCE IT IS COVERED BY EXC EPTIONS TO SECTION 9(L)(V)(B) AND CONSEQUENTLY IT IS IN NO WAY CHARGEABLE TO TAX IN INDIA UNDER ANY OF THE PROVISION OF I.T. ACT IN THE HANDS OF THE NON-RESID ENT FCCB BOND HOLDERS; (B) THE APPELLANT COMPANY WAS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 196C R.W.S. 115AC, ON THE CONSENT INCENTIVE AND INTEREST ON SUB JECT FCCBS ISSUED BY APPELLANT AND (C) SINCE THERE IS NO LIABILITY TO DE DUCT TAX AT SOURCE, AS A CONSEQUENCE, THEREFORE, THERE WAS NO FAILURE U/S 20 1 AND THE APPELLANT- COMPANY CANNOT BE TREATED AS THE ASSESSEE IN DEFAUL T U/S 201(1) AND 201(1A) OF THE ACT. 6. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 7. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE IS NOW COVERED, BY A DECISIO N OF THE CO-ORDINATE BENCH, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 WHEREIN TAX WITHHOLDING LIABILITY FROM SIMILAR PAYMENTS CAME UP FOR EXAMINA TION. IN THE PRESENT CASE, THE CIT(A) HAS SIMPLY FOLLOWED HIS PREDECESSORS ORDER FOR THE ASSESSMENT YEAR 2010-11 BUT THAT DECISION BY THE CIT(A) HAS NOW BEEN CONFIR MED BY THE TRIBUNAL IN A ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 4 OF 12 JUDGMENT REPORTED AS SUZLON ENERGY LTD VS. ACIT AND VICE VERSA [(2015) 64 TAXMAN.COM 114 (AHD)] WHEREIN THE CO-ORDINATE BENCH HAS, INTER ALIA , OBSERVED AS FOLLOWS:- NOW, WE TAKE ITA NO. 3475/AHD/2010 FOR A.Y. 2010-1 1. REVENUE HAS FILED THIS APPEAL ON THE FOLLOWING GROUNDS: '1. THE LD. CIT (A), GANDHINAGAR HAS ERRED IN LAW AND O N FACTS IN HOLDING THAT THE APPELLANT COMPANY WAS NOT LI ABLE TO DEDUCT TAX AT SOURCE U/S.196C R.W.S. 115AC ON THE INTEREST PAYABLE ON FC CBS (I.E. CONSENT INCENTIVE). 2. LD. CIT (A) HAS ERRED ON FACTS AND LAW IN NOT CONSI DERING THE ISSUE THAT AN INDIAN COMPANY (ASSESSEE) HAS TAKEN LIABILITY OF ISSUING FCCBS F ROM INDIA AFTER TAKING APPROVAL OF RESERVE BANK OF INDIA (INDIAN AUTHORITY), AS PER RULES AND GUIDELINES OF RBI AND HAS REMITTED INTEREST FROM INDIA AS ITS LIABILITY DULY RECOGNIZED IN HIS BOOKS OF ACCOUNT PREPARED FOR INDIAN REGULATORY AUTHORITIES, RESULT ING INTO INCOME ACCRUING AND ARISING TO THE NON- RESIDENT UNDER SECTION 5(2) OF THE ACT FOR WHICH THE DEEMING PROVISIONS OF SECTION 9(1) AR E NOT APPLICABLE. 3. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN HOLDIN G THAT BOTH SECTIONS 5(2) AND 9(1) (V) OF T HE ACT, ARE APPLICABLE TO DETERMINE THE SITUS OF INTEREST INCOME IN CASE OF NON RESIDENT. 4. THE LD. CIT(A) ALSO ERRED IN LAW AND ON FACTS IN HO LDING THAT THE INTEREST PAID BY THE APPELLANT ON ITS FCCBS IS COVE RED BY EXCEPTION TO SECTION 9(1)(V)(B) OF T HE ACT AND CONSEQUENTLY IT FALLS OUTSIDE THE AMBIT OF DEEMED INCOME ARISING AND ACCRUING IN INDIA AND AS A RESULT OUT OF SECTION 5 ALSO. 5. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THERE IS AMBIGUITY IN DETERMINING WHETHER INCOME HAS BEE N RECEIVED OR ARISEN IN INDIA AND THUS THERE IS A NEED TO TRAVEL FROM SE CTION 5(2) TO SECTION 9(1) OF THE ACT. 6. THE LD. CIT (A) HAS ERRED IN LAW BY CONTRADICTING H IS OWN OBSERVATION THAT SECTION 115AC IS A CODE ITSELF AND THEN TRAVEL ING TO ANOTHER CHA RGING SECTION OF THE ACT FOR DECIDING THE TAXABILIT Y OF INTEREST INCOME. 7. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS PRAYED THAT THE ORDER OF LD. CIT (A) GANDHINAGAR BE CANCELLED AND T HAT OF A O RESTORED TO THE ABOVE EXTENT.' 13.1 C.O. NO.61/AHD/2014 FILED BY ASSESSEE ON FOLLO WING GROUND: '1. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRE CIATE THAT NO SURCHARGE IS TO BE ADDED WHILE DETERMINING WITHHOLD ING TAX ON REMITTANCE BEING MADE TO THE NON- RESIDENT, AND THE REFORE, SURCHARGE ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 5 OF 12 OUGHT NOT HAVE BEEN INCLUDED WHILE DETERMINING LIAB ILITY OF TDS U/S.201(1) OF THE ACT.' 13.2 SIMILAR ISSUES AROSE IN ITA NO.3476/AHD/2010 F OR SAME YEAR AND SIMILAR C.O. NO.62/AHD/2014 WAS FILED ON BEHALF OF ASSESSEE . 13.3 LEARNED COUNSEL FOR ASSESSEE WAS FAIR ENOUGH N OT TO PRESS BOTH CROSS OBJECTIONS. SO, SAME ARE DISMISSED AS NOT PRESSED. 14. IN ITA NO.3475/AHD/2010, ASSESSING OFFICER OBSE RVED THAT CONSEQUENT TO REMITTANCE BY ASSESSEE AMOUNTING TO RS.68,70,18,465 /- FOR CONSENT INCENTIVE (INTEREST) IN THE MONTH OF JUNE 2009 AND RS.10,63,5 0,697/- FOR INTEREST DURING YEAR ENDED MARCH 31, 2010 TO DEUTSCHE BANK AG, LOND ON BRANCH PAYABLE ON FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBS), ISSU ED BY ASSESSEE I.E. SUZLON ENERGY LIMITED. NO TAX HAS BEEN DEDUCTE D AT THE TIME OF REMITTANCE. ASSESSING OFFICER ISSUED A SHOW CAUSE N OTICE TO ASSESSEE AS TO WHY PROCEEDINGS U/S.201(1) & 201(1A) R.W.S. 196C BE NOT INITIATED FOR THE ABOVE FAULT. ASSESSING OFFICER HELD THAT CONSENT IN CENTIVE IS IN NATURE OF INTEREST IN TERMS OF DEFINITION CONTAINED IN SECTIO N 2(28)A OF THE ACT. NOT AGREEING WITH THE EXPLANATION GIVEN BY ASSESSEE IN RESPONSE TO THIS SHOW CAUSE NOTICE THROUGH VARIOUS WRITTEN SUBMISSIONS MA DE FROM TIME TO TIME ALONG WITH DOCUMENTARY EVIDENCES AND DETAILED EXPLA NATIONS, ASSESSING OFFICER BROUGHT ON RECORD THAT BONDS HAVE BEEN ISSU ED BY AN INDIAN COMPANY AND THE CONSENT INCENTIVE AND INTEREST HAS BEEN PAI D BY AN INDIAN COMPANY FROM INDIA ONLY AND FURTHER THE OBLIGATION TO PAY T HE CONSENT INCENTIVE AND INTEREST RESTED WITH ASSESSEE ONLY. THEREFORE, ACCO RDING TO HIM THE CONSENT INCENTIVE AND INTEREST HAS ACCRUED OR ARISEN IN THE HANDS OF NON-RESIDENT BONDHOLDERS IN INDIA AS SOON AS THE INTEREST BECAME DUE TO THE BONDHOLDERS. ACCORDING TO HIM, THE INTEREST ON FCCBS IS CHARGEAB LE TO TAX U/S 5(2) ITSELF AND ASSESSEE'S ASSERTION THAT SAME IS COVERED BY SE CTION 9 WAS FOUND INCORRECT BY ASSESSING OFFICER. ACCORDING TO HIM, W HEN INCOME IS ACTUALLY RECEIVED OR ACCRUED IN INDIA, THE PROVISIONS CONTAI NED IN SECTION 5(2) IS SUFFICIENT TO CREATE A CHARGE IN RESPECT OF A NON-R ESIDENT'S INCOME AND RESORT TO DEEMING PROVISIONS OF SECTION 9(1)(V) WAS NOT WA RRANTED, COMMENTING ON THE ASSESSEE'S REFERENCE TO THE WORDS 'SUBJECT TO P ROVISIONS OF THIS ACT', IN SECTION 5. ASSESSING OFFICER STATED THAT THIS DOES NOT LEAD TO THE CONCLUSION THAT CHARGING PROVISIONS OF SECTION 5(2) IS CONTROL LED BY ANOTHER CHARGING PROVISION IN SECTION 9(1). AT THE STRENGTH OF ABOVE LEGAL PORTION, ASSESSING OFFICER CAME TO THE CONCLUSION THAT INCOME DERIVED FROM NON- RESIDENT BONDHOLDERS IS CHARGEABLE U/S. 5(2] AS INCOME ACCRU ED IN INDIA AND ONCE IT IS COVERED U/S. 5(2) SECTION 9(L)(V)(B) IS NOT APPLICA BLE. ASSESSING OFFICER ALSO STATED THAT CIRCULAR OF CBDT (SUPRA) CITED BY THE A SSESSEE IS NOT APPLICABLE TO THE PRESENT CASE AS THE SAME HAS BEEN ISSUED WITH R EGARD TO SECTION 9(L)(I) AND 9(L)(V) OF THE ACT, BUT IN PRESENT CASE, THE PR OVISIONS OF SECTION 5(2) ARE APPLICABLE AND ONE NEED NOT TRAVEL TO THE PROVISION S OF SECTION 9 OF THE ACT. 14.1 ASSESSING OFFICER, IN PARA 7.2 OF THE ASSESSME NT ORDER, WENT FURTHER TO ESTABLISH THAT EVEN IF WE TAKE THE PROVISIONS OF SE CTION 9(L)(V)(B), ASSESSEE'S ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 6 OF 12 CASE IS NOT COVERED BY THE EXCLUSIONS STATED THEREI N. THE REASONS ADVANCED BY THE ASSESSING OFFICER FOR THE EXCLUSIONS BEING N OT APPLICABLE ARE AS UNDER: '7.2 A CLOSE READING OF THE ABOVE SUBSECTION MAKES IT DEAR THAT INTEREST PAID BY A RESIDENT IS CHARGEABLE TO INCOME TAX EXCE PT WHEN THE INTEREST IS PAYABLE IN RESPECT OF ANY DEBT INCURRED FOR THE PURPOSES OF A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OU TSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM A NY SOURCE OUTSIDE INDIA. THIS EXCLUSION COVERS, THE CASES WHERE THE A SSESSEE THROUGH A 'BRANCH OFFICE' OR THROUGH A 'PERMANENT ESTABLISHME NT' CARRIES OUT ITS BUSINESS OUTSIDE INDIA OR MAKES OR EARNS INCOME OUT SIDE INDIA. BUT IN THE PRESENT CASE THERE IS NO SUCH BRANCH OFFICE OR PERMANENT ESTABLISHMENT OF THE ASSESSES THROUGH -WHICH THE BU SINESS OF THE ASSESSES IS CARRIED OUT OR THROUGH WHICH IT CAN SOU RCE INCOME. IN VIEW OF THE ABOVE, THE EXEMPTION AVAILABLE AS PER SUB CL AUSE (B) OF CLAUSE (V) OF SUB-SECTION (2) OF SECTION 9 OF THE ACT, IS NOT APPLICABLE IN PRESENT CASE AND THUS SAME IS CHARGEABLE TO TAX IN INDIA.' ASSESSING OFFICER ANALYSED THE ISSUE IN CONTEXT OF ISSUE OF FCCB WHICH IS GOVERNED BY 'ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITARY RECEIPT (MECHANISM) SCHEME, 199 3' NOTIFIED BY DEPARTMENT OF ECONOMIC AFFAIRS NO.GSR 700(E), DATED 12 NOVEMBER, 1993 AND FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITORY RECEIPT MECHANISM) SCHEME IS THE NOTIFIE D SCHEME FOR THE PURPOSE OF SECTION 115AG(L)(A) IN RESPECT OF ASSESS MENT YEAR 2002-2003 AND SUBSEQUENT ASSESSMENT YEARS VIDE CBDT NOTIFICATION NO.SO 987 (E) DATED 10/09/2002 ALONG WITH THE NOTIFICATION OF DEPARTMEN T OF ECONOMIC AFFAIRS VIDE G.S.R. 89(E) DATED FEBRUARY 15, 2008, TO THE POINT THAT IRRESPECTIVE OF THE END USE OF THE PROCEEDS, ONCE THE SCHEME IS PART OF THE SECTION 115 AC OF THE ACT DEDUCTION OF TAX AT SOURCE @ 10% IS MANDATED UNTIL SUCH TIME THE CONVERSION OPTION IS EXERCISED. HE ALSO REFERRED TO THE PROSPE CTUS ISSUED BY ASSESSEE AT THE TIME OF ISSUE OF FCCBS WHEREIN IT WAS MENTIONED THAT PAYMENT OF INTEREST SHALL BE SUBJECTED TO PROVISIONS OF SECTION 115AC. THEREFORE, ACCORDING TO ASSESSING OFFICER, CONSIDERING ALL THE FACTS, ASSES SEE HAS TO BE TREATED AS AN ASSESSEE IN DEFAULT AS PER PROVISIONS OF SECTION 20 1(1), SINCE THE ENTIRE CONSENT INCENTIVE AND INTEREST PAYABLE STANDS REMIT TED WITHOUT DEDUCTION OF TAX. 14.2 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE INCLU DING SYNOPSIS OF ARGUMENT AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELI EF TO ASSESSEE. SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE INTER ALIA SU BMITTED THAT CIT(A) ERRED IN LAW AND FACTS IN HOLDING THAT ASSESSEE COMPANY W AS NOT LIABLE TO DEDUCT TAX AT SOURCE 196C R.W.S. 115AC ON THE INTEREST PAYABLE ON FCCBS (I.E. CONSENT INCENTIVE). CIT(A) ERRED ON FACTS AND LAW IN NOT CO NSIDERING THE ISSUE THAT AN INDIAN COMPANY HAS TAKEN LIABILITY OF ISSUING FCCBS FROM INDIA AFTER TAKING APPROVAL OF RESERVE BANK OF INDIA (INDIAN AUTHORITY ) AS PER RULES AND GUIDELINES OF RBI AND HAS REMITTED INTEREST FROM IN DIA AS LIABILITY DULY RECOGNIZED IN HIS BOOKS OF ACCOUNT PREPARED FOR IND IAN REGULATORY AUTHORITIES, ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 7 OF 12 RESULTING INTO INCOME ACCRUING AND ARISING TO NON-R ESIDENT U/S.5(2) OF THE ACT FOR WHICH DEEMING PROVISIONS OF SECTION 9(1) ARE NO T APPLICABLE. CIT(A) ERRED IN HOLDING THAT BOTH SECTIONS 5(2) AND 9(1)(V) OF T HE ACT, ARE APPLICABLE TO DETERMINE THE STATUS OF INTEREST INCOME IN CASE OF NON RESIDENT. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT INTEREST PAID BY ASSE SSEE ON ITS FCCBS IS COVERED BY EXCEPTION TO SECTION9(1)(V)(B) OF THE ACT AND CO NSEQUENTLY IT FALLS OUTSIDE THE AMBIT OF DEEMED INCOME ARISING AND ACCRUING IN INDIA AND AS A RESULT OUT OF SECTION 5 ALSO. CIT(A) ERRED IN HOLDING THAT THE RE IS AMBIGUITY IN DETERMINING WHETHER INCOME HAS BEEN RECEIVED OR ARI SEN IN INDIA AND THUS, THERE IS A NEED TO TRAVEL FROM SECTION 5(2) TO SECT ION 9(1) OF THE ACT. CIT(A) ERRED IN LAW BY CONTRADICTING ITS OWN OBSERVATION T HAT SECTION 115AC IS A CODE ITSELF AND THEN TRAVELLING TO ANOTHER CHARGING SECT ION OF THE ACT FOR DECIDING THE TAXABILITY OF INTEREST INCOME. IN VIEW OF ABOVE , LEARNED DEPARTMENTAL REPRESENTATIVE REQUESTED TO SET ASIDE THE ORDER OF CIT(A) AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARN ED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A) AND ST ATED THAT ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN HOLDING THAT A SSESSEE COMPANY WAS LIABLE TO DEDUCT TAX AT SOURCE U/S.196C R.W.S. 115AC OF TH E INCOME TAX ACT ON REMITTANCE TO DEUTSCHE BANK AG, LONDON BRANCH FOR M AKING PAYMENT OF CONSENT INCENTIVE ON IS BEHALF OF FOREIGN CURRENCY CONVERTIBLE BOND HOLDERS. ASSESSING OFFICER ERRED IN NOT APPRECIATING THE INC OME OF RECIPIENT NON- RESIDENT IS NOT AT ALL CHARGEABLE TO TAX IN INDIA A ND THEREFORE, THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE AND THEREFORE NO QUESTION OF INVOKING PROVISIONS OF SECTION 201(1) OF THE ACT. ASSESSING OFFICER ERRED IN NOT APPRECIATING THAT BY VIRTUE OF PROVISIONS OF SECTIO N 9(1)(V)(B) OF THE ACT, INTEREST INCOME CANNOT BE SAID TO HAVE ACCRUED OR A RISEN AS THE SAID INTEREST IS PAID FOR EARNING INCOME FROM SOURCE OUTSIDE INDI A. ONCE INCOME IS NOT ACCRUED OR ARISEN, NO QUESTION OF TAX DEDUCTION AT SOURCE WOULD ARISE. ASSESSING OFFICER ERRED IN APPLYING PROVISIONS OF S ECTION 5(2)(B) OF THE ACT WHEN THE SAID PROVISIONS HAVE NO APPLICATION WHATSO EVER IN THE FACTS OF THE CASE. ASSESSING OFFICER ERRED IN TREATING ASSESSEE COMPANY TO BE AN ASSESSEE IN DEFAULT U/S.201(1) OF ACT IN RESPECT OF TAX ALLEGEDLY DEDUCTIBLE AT SOURCE ON SUBJECT REMITTANCE TO DEUTSCHE BANK AG, L ONDON BRANCH FOR MAKING PAYMENT OF CONSENT INCENTIVE ON ITS BEHALF T O FOREIGN CURRENCY CONVERTIBLE BOND (FCCB) HOLDERS. ASSESSING OFFICER ERRED IN APPLYING THE PROVISIONS OF SECTION 195A OF THE ACT WHEREAS THE S AID SECTION IS NOT APPLICABLE TO ANY INCOME REFERRED TO IN SECTION 196 C OF THE ACT. IN VIEW OF THIS, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED T HE ORDER OF CIT(A). 14.3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATE RIAL ON RECORD, WE FIND THAT ASSESSEE HAD ISSUED TWO SERIES OF FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB) IN F.Y. 2007-08, NAMELY, FCCB FOR US $ 300 M ILLIONS MATURING IN JUNE 2012 AND ANOTHER FCCB FOR US$ 200 MILLIONS MAT URING IN OCTOBER 2012. THE PROCEEDS OF SUBJECT FCCB WERE USED FOR ACQUISIT ION OF SHARES IN OVERSEAS SUBSIDIARY WHICH IS CARRYING ON BUSINESS O UTSIDE INDIA RESULTING IN SOURCE OF INCOME OUTSIDE INDIA. THE BONDS HAVE BEEN ISSUED UNDER THE PERMISSION OF RESERVE BANK OF INDIA UNDER EXTERNAL COMMERCIAL BORROWING (ECB) GUIDELINES. ASSESSEE CARRIED OUT RESTRUCTURIN G OF SUBJECT FCCB IN MAY 2009 WITH PERMISSION OF RESERVE BANK OF INDIA AND A S A PART OF IT AND AS A ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 8 OF 12 PART OF IT ASSESSEE REPLACED ZERO COUPON FCCB AMOUN TING TO US$ 9,40,04,000/- WITH 7.50% INTEREST BEARING FCCB AMOU NTING TO US$ 5,63,88,000/-. AS A PART OF RESTRUCTURING ASSESSEE COMPANY HAS MADE PAYMENT TO NON- RESIDENT BOND HOLDERS ON ACCOUNT OF CONSENT INCENTIVE FOR CHANGE IN FINANCIAL COVENANTS OF FCCB AMOUNTING TO RS.68,70,18,465/- THROUGH DEUTSCHE BANK AG LONDON BRANCH. ASSESSEE CO MPANY HAS ALSO REMITTED INTEREST ON THE SAID FCCB'S AMOUNTING TO R S.10,63,50,697/- TO NON- RESIDENT BOND-HOLDERS THROUGH DUTSCHE BANK AG LONDO N BRANCH. HOWEVER, ASSESSING OFFICER PASSED THE ORDER INVOKING PROVISI ONS OF SECTION 201(1)/(1A) OF ACT AFTER HOLDING THAT ASSESSEE WAS LIABLE TO DE DUCT TAX AT SOURCE U/S.196C R.W.S. 115AC OF THE ACT ON REMITTANCE MADE BY ASSES SEE. ASSESSING OFFICER GAVE FOLLOWING REASONING WHILE PASSING ORDER: (A) ASSESSING OFFICER WAS OF THE VIEW THAT THE BONDS WE RE ISSUED BY AN INDIAN COMPANY AND INTEREST HAS BEEN PAID BY AN IND IAN COMPANY FROM INDIA ONLY A ND FURTHER THE OBLIGATION TO PAY THE INTEREST RESTE D WITH ASSESSEE ONLY AND ACCORDINGLY CHARGEABLE U/S.5 (2) OF THE ACT; (B) FOR THE SAID CONTENTION, ASSESSING OFFICER RELIED UPON THE SUPREME COURT DECISION IN THE CASE OF PERFORMING RIGHTS SOCIETY LTD. V. CIT [1977] 106 ITR 11 AND ALLAHABAD HIGH COURT DECISION IN THE CASE OF HIRA MILLS LTD. V. ITO [1946] 14 ITR 41 7; (C) ASSESSING OFFICER WAS FURTHER OF THE VIEW THAT ONCE THE INCOME IS COVERED U/S.5(2), SECTION 9(1)(V)(B) IS NOT APPLICA BLE; (D) ASSESSING OFFICER WAS FURTHER OF THE VIEW THAT THE ISSUE OF F CCB IS GOVERNED BY 'ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITARY RECEIPT MECHANI SM) SCHEME, 1992' AND THE SAID SCHEME IS NOTIFIED SCHEME FOR TH E PURPOSE OF SECTION 115AC(I)(A) OF THE ACT AND THEREFORE, IRRES PECTIVE OF THE END USE OF THE PROCEEDS, ONCE THE SCHEME IS PART OF THE SECTION 115AC, DEDUCTION OF TAX AT SOURCE @ 10% IS MANDATE UNTIL S UCH TIME THE CONVERSION OPTION IS EXERCISED; (E) ASSESSING OFFICER FURTHER WENT TO ESTABLISH THAT EV EN IF THE PROVISIONS OF SE CTION 9(1)(V)(B) IS APPLICABLE, THE ASSESSEE'S CASE WILL NOT BE COVERED BY THE EXCLUSIONS STATED THEREIN. IN THIS BACKGROUND, LEARNED AUTHORIZED REPRESENTATI VE SUBMITTED THAT ISSUE IS COVERED BY CO-ORDINATE BENCH DECISION IN C ASE OF ADDL. DIT (INTT. TAXATION) V. ADANI ENTERPRISES LTD. [2013] 141 ITD 206/29 TAXMANN.COM 99 (AHD. - TRIB.) WHEREIN ITAT AFTER CONSIDERING THE CONTENTIONS OF ASSESSING OFFICER AN D CASE LAWS RELIED UPON BY HIM, HELD THAT INTEREST PAID BY ASSESSEE TO NON- RESIDENT INVESTOR IS SPECIFICALLY EXCLUDED FROM THE DEEMING PROVISIONS A S PER SECTION 9(1)(V)(B), AND THEREFORE, SUCH INTEREST PAYMENT CA NNOT BE COVERED IN THE DEFINITION OF INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. IT IS FURTHER HELD THAT SINCE INCOME IN QUESTION IS FALLING WITHI N THE AMBIT OF THIS EXCLUSION CLAUSE OF INCOME DEEMED TO ACCRUE OR ARIS E IN INDIA AS PER ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 9 OF 12 SECTION 9(1)(V)(B), IT CANNOT FALL WITHIN THE AMBIT OF INCOME ACCR UED AND ARISEN IN INDIA, AND HENCE, THE SAME CANNOT BE SAID TO BE COVERED U/S.5(2) OF THE ACT. THEREFORE, THERE WAS N O NEED TO DEDUCT TAX AT SOURCE ON SUCH REMITTANCE. 14.4 IN THE PRESENT APPELLATE PROCEEDINGS ,THE APPE LLANT SUBMITTED A PAPER BOOK ON 10-09-2010 CONTAINING THE COPY OF ALL THE D OCUMENTS; AND SUBMISSIONS MADE TO AO FROM TIME TO TIME AS WELL AS WRITTEN SUBMISSIONS ONCE AGAIN COMPILING THE ARGUMENT ADVANCED BEFORE A O ALONG WITH EXPLANATION ON THE FINDING OF AO. IT WAS ARGUED THA T THE QUESTION OF APPLYING PROVISIONS OF SECTION 196C R.W.S 115AC ARISES ONLY WHEN THE INCOME IS CHARGEABLE TO TAX IN L:IDIA AND IN PRESENT CASE NON E OF THE REMITTANCES ARE NOT AT ALL CHARGEABLE TO TAX IN INDIA IN HANDS OF FCCB BONDHOLDERS AND HENCE THERE WAS NO OBLIGATION ON APPELLANT TO DEDUCT TAX AT SOURCE AND THUS APPELLANT CAN NOT BE FASTENED WITH THE DEFAULT U/S. 201(L) AND 201(1A) OF THE ACT. 14.5 FROM DETAILED SUBMISSION IN THIS REGARD, WE FI ND THAT ASSESSEE HAS ISSUED TWO SERIES OF FOREIGN CURRENCY CONVERTIBLE B ONDS ('FCCB') IN F.Y: 2007-08 NAMELY; FCCB FOR US$ 300 MILLIONS MATURING IN JUNE 2012 AND ANOTHER FCCB FOR US$ 200 MILLIONS MATURING IN OCTOB ER 2012. WE FIND THAT PROCEEDS OF SUBJECT FCCB WERE USED TO BE USED AND A S A MATTER OF FACT USED, FOR ACQUISITION OF SHARES IN OVERSEAS SUBSIDIARY WH ICH WAS CARRYING ON BUSINESS OUTSIDE INDIA RESULTING IN SOURCE OF INCOM E OUTSIDE INDIA. WE ALSO FIND THAT THE BONDS HAVE BEEN ISSUED UNDER THE PERM ISSION OF RESERVE BANK OF INDIA UNDER EXTERNAL COMMERCIAL BORROWING ('ECB' ) GUIDELINES. HOWEVER, DUE TO FINANCIAL CONSTRAINT, ASSESSEE CARRIED OUT R ESTRUCTURING OF SUBJECT FCCB IN MAY 2009 WITH THE PERMISSION OF RESERVE BANK OF INDIA AND PURSUANT TO THE SAME, ASSESSEE REPLACED ZERO COUPON FCCB AMOUNTING TO US$ 9,40,04,000/- WITH 7.50% INTEREST BEARING FCCB AMOU NTING TO US$ 5,63,88,000/-. AS A PART OF RESTRUCTURING OF ASSESS EE COMPANY HAS MADE PAYMENT TO NON-RESIDENT BOND HOLDERS ON ACCOUNT OF 'CONSENT INCENTIVE' FOR CHANGES IN THE FINANCIAL COVENANTS OF THE FOREIGN C URRENCY CONVERTIBLE BONDS AMOUNTING TO RS.68,70,18,465/- THROUGH DEUTSCHE BAN K AG LONDON BRANCH. ASSESSEE COMPANY HAD ALSO REMITTED INTEREST ON SAID FCCB'S AMOUNTING TO RS.10,63,50,697/- TO THE NON- RESIDENT BOND-HOLDERS THROUGH DEUTSCHE BANK AG LONDON BRANCH. NOW, THE QUESTION IS WHETHER THES E PAYMENTS ARE SUBJECT TO TAX IN THE HANDS OF THE RECIPIENT NON-RESIDENTS? IF THE ANSWER IS IN AFFIRMATIVE, THE ASSESSEE IS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE AND IF THE ANSWER IN NEGATIVE, THE ASSESSEE CANNOT BE HELD LIABLE TO DEDUCT TAX AND CONSEQUENTLY, THE ORDERS U/S 201(1)/(1A) HAS TO BE QUASHED. AS STATED EARLIER, THE ENTIRE ISSUE IS SQUARELY COV ERED BY THE ORDER OF CO- ORDINATE BENCH OF AHMEDABAD IN CASE OF ADANI ENTERP RISES LTD. (SUPRA). WE FIND THAT THE FACTS OF PRESENT CASE ARE IDENTICAL T O ADANI ENTERPRISES LTD'S CASE (SUPRA) WHICH CAN BE SUMMARIZED AND COMPARED IN THE FOLLOWING TABULAR CHART: ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 10 OF 12 FACTS IN THE CASE OF ADANI ENTERPRISE LTD. FACTS IN THE PRESENT CASE (A)ADANI ENTERPRISE HAD ISSUED FCCB IN NEW YORK AND THE PROCEEDS FROM FCCB WERE USED FOR MAKING OVERSEAS DIRECT INVESTMENT IN ITS SINGAPORE SUBSIDIARY SUCH AS ADANI SHIPPING PTE LTD., ADANI GLOBAL PTE LTD. ETC.; (A) THE ASSESSEE HAS ISSUED FCCB IN LONDON AND THE PROCEEDS OF SUCH FCCBS WERE UTILIZED FOR THE PURPOSE OF INVESTMENTS AND ACQUISITION OF FOREIGN SUBSIDIARIES OUTSIDE INDIA THROUGH FOREIGN SUBSIDIARIES; (B) ADANI REMITTED INTEREST TO THE BANK OF NEW YORK, MELLON TOWARDS THE INTEREST PAYABLE ON FCCBS ISSUED BY ADANI. (B)THE ASSESSEE REMITTED THE AMOUNT DUE ON ACCOUNT INTEREST AND CONSENT INCENTIVES TO DEUTSCHE BANK AG, LONDON BRANCH AS ITS AGENT TO DISTRIBUTE THE INTEREST AND CONSENT INCENTIVE AMOUNT; WHICH IN TURN GAVE TO DEUTSCHE TRUSTEES CO LIMITED LONDON WHO STOOD NOMINATED AS THE TRUSTEE OF THE BOND HOLDERS AND THE SAID TRUSTEE MADE THE PAYMENT IN FOREIGN CURRENCY TO THE CLEARING SYSTEM WHERE INDIVIDUAL BOND HOLDERS ARE HAVING ACCOUNTS. (C) TRIBUNAL IN ITS ORDER ON PG. NO. 14 VIDE PARA 11 HAS REPRODUCED THE PARA 4.7 OF AO'S ORDER, WHICH SHOWS THAT AO WAS OF THE VIEW THAT THE BONDS WERE ISSUED BY AN INDIAN COMPANY AND INTEREST HAS BEEN PAID BY AN INDIAN COMPANY FROM INDIA ONLY AND FURTHER THE OBLIGATION TO PAY THE INTEREST RESTED WITH THE ASSESSEE ONLY AND ACCORDINGLY CHARGEABLE U/S 5(2) OF THE ACT; (C) IN THE PRESENT CASE ALSO THE AO ON PG. NO.9 VIDE PARA 6.1.4 HAS PASSED THE SAME OBSERVATIONS AS NOTED IN PARA 4.7 OF ADANI ENTERPRISE LTD. ORDER. IN THE PRESENT CASE ALSO, AO WAS OF THE VIEW THAT THE BONDS WERE ISSUED BY AN INDIAN COMPANY AND INTEREST HAS BEEN PAID BY AN INDIAN COMPANY FROM INDIA ONLY AND FURTHER THE OBLIGATION TO PAY THE INTEREST RESTED WITH THE ASSESSEE ONLY AND ACCORDINGLY CHARGEABLE U/S 5(2) OF THE ACT; (D)FOR THE SAID CONTENTION, AO RELIED UPON THE SUPREME COURT DECISION IN THE CASE OF PERFORMING RIGHTS SOCIETY LTD. CASE (SUPRA) AND ALLAHABAD HIGH COYRT DECISION IN THE CASE OF HIRA MILLS LTD. (SUPRA) (REFER PG. NO. 12 OF THE ORDER); (D)IN THIS CASE ALSO, FOR THE ABOVE CONTENTION AO HAS RELIED UPON THE SUPREME COURT DECISION IN THE CASE OF PERFORMING RIGHTS SOCIETY LTD.'S (SUPRA) AND ALLAHABAD HIGH COURT DECISION IN THE CASE OF HIRA MILLS LTD. (SUPRA); (PG. NOS.6-8 VIDE PARA 6.1.3 OF AO ORDER) (E) AO WAS FURTHER OF THE VIEW THAT ONCE THE INCOME IS COVERED U/S 5(2), S.9(L)(V)(B) IS NOT APPLICABLE; (E)IN THE PRESENT CASE ALSO, AO WAS FURTHER OF THE VIEW THAT ONCE THE INCOME IS COVERED U/S 5(2), S.9(L)(V)(B) IS NOT APPLICABLE. (PG. NO.9 VIDE PARA 6.1.4 OF AO ORDER) ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 11 OF 12 (F) AO WAS FURTHER OF THE VIEW THAT THE ISSUE OF FCCB IS GOVERNED BY 'ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITARY RECEIPT MECHANISM) SCHEME, 1993' AND THE SAID SCHEME IS NOTIFIED SCHEME FOR THE PURPOSE OF S.115AC(I)(A)OF THE ACT, AND THEREFORE, IRRESPECTIVE OF THE END USE OF THE PROCEEDS, ONCE THE SCHEME IS PART OF THE SECTION 115AC, DEDUCTION OF TAX AT SOURCE @ 10% IS MANDATE UNTIL SUCH TIME THE CONVERSION OPTION IS EXERCISED; (F) IN THE PRESENT CASE ALSO, AO WAS FURTHER OF THE VIEW THAT THE ISSUE OF FCCB IS GOVERNED BY 'ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITARY RECEIPT MECHANISM) SCHEME, 1993' AND THE SAID SCHEME IS NOTIFIED SCHEME FOR THE PURPOSE OF S.115AC(I)(A)OF THE ACT, AND THEREFORE, IRRESPECTIVE OF THE END USE OF THE PROCEEDS, ONCE THE SCHEME IS PART OF THE SECTION 115AC, DEDUCTION OF TAX AT SOURCE @ 10% IS MANDATE UNTIL SUCH TIME THE CONVERSION OPTION IS EXERCISED.(PG.NOS.L0-14 VIDE PARAS 6.2 TO 6.6) (G)AO FURTHER WENT TO ESTABLISH THAT EVEN IF THE PROVISIONS OF S.9(L)(V)(B) IS APPLICABLE, THE ASSESSEE'S CASE WILL NOT BE COVERED BY THE EXCLUSIONS STATED THEREIN. (G)IN THE PRESENT CASE ALSO, AO FURTHER WENT TO ESTABLISH THAT EVEN IF THE PROVISIONS OF S.9(L)(V)(B) IS APPLICABLE, THE ASSESSEE'S CASE WILL NOT BE COVERED BY THE EXCLUSIONS STATED THEREIN; (PG. NOS.14-15 VIDE PARAS 7 TO 7.3) THEREFORE, TRIBUNAL IN ADANI ENTERPRISES LTD.'S (SU PRA) AFTER CONSIDERING THE RIVAL CONTENTIONS, HELD THAT INTEREST PAID BY ASSES SEE TO NON-RESIDENT INVESTOR IS SPECIFICALLY EXCLUDED FROM THE DEEMING PROVISION S AS PER S.9(L)(V)(B), AND THEREFORE, SUCH INTEREST PAYMENT CANNOT BE COVERED IN DEFINITION OF INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. IT WAS THUS HEL D THAT SINCE THE INCOME IN QUESTION IS FALLING WITHIN THE AMBIT OF THIS EXCLUS ION CLAUSE OF INCOME DEEMED TO ACCRUE OR ARISE IN INDIA AS PER S.9(L)(V)(B), IT CANNOT FALL WITHIN THE AMBIT OF INCOME ACCRUED AND ARISEN IN INDIA, AND HENCE, SAME CANNOT BE SAID TO BE COVERED U/S 5(2) OF THE ACT. THEREFORE, THERE WAS N O OCCASION TO DEDUCT TAX AT SOURCE ON SUCH REMITTANCE. RESPECTFULLY FOLLOWING T HE DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE A DANI (SUPRA), WHICH IS IDENTICAL BOTH IN TERMS OF THE FACTS AND LAWS RELIE D UPON BY THE ASSESSING OFFICER, WE HOLD THAT SINCE INCOME IN QUESTION IS S QUARELY FALLING UNDER THE EXCLUSION CLAUSE OF INCOME DEEMED TO ACCRUE OR ARIS E IN INDIA U/S 9(L)(V)(B) OF THE ACT, IT CANNOT FALL WITHIN THE AMBIT OF INCOME ACCRUED AND ARISEN IN INDIA, AND HENCE, THE SAME CANNOT BE SAID TO BE COVERED U/ S 5(2) OF THE ACT. SINCE THE RECIPIENT NON-RESIDENT ARE NOT TAXABLE ON THIS INCOME IN INDIA, THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE ON SUCH REMIT TANCE. HENCE, ASSESSEE CANNOT BE HELD LIABLE U/S. 201(1)/(1A) OF THE ACT. IN VIEW OF THIS LEGAL DISCUSSION, THIS GROUND OF REVENUE IS DISMISSED. CO NSEQUENTLY REVENUE'S APPEAL IN ITA NO.3476/AHD/10 IS ALSO DISMISSED. 8. IN VIEW OF THE ABOVE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE ORDER OF THE CIT(A) AND DECLINE TO INTE RFERE IN THE MATTER. 9. IN THE RESULT, THE APPEAL IS DISMISSED. ITA NO. 2750/AHD/2013 & CO NO.63/AHD/2014 DDIT (INTL TAX) VS. SUZLON ENERGY LTD ASSESSMENT YEAR : 2011-12 PAGE 12 OF 12 CO NO.63/AHD/2014 : BY ASSESSEE 10. LEARNED REPRESENTATIVES FAIRLY AGREE THAT IN TH E EVENT OF APPEAL BEING DISMISSED, CO WILL BE RENDERED INFRUCTUOUS AND NEED NOT BE ADJUDICATED UPON. 11. IN THE RESULT, THE CO IS DISMISSED AS INFRUCTUO US. PRONOUNCED IN THE OPEN COURT ON TODAY ON THE 29 TH DAY OF MARCH, 2017. - SD/- SD/- S S GODARA PRA MOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 29 TH DAY OF MARCH, 2017 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ........28.03.2017 FOUR PA GES MANUSCRIPT OF HONBLE AM ATTACHED............... ...... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ....28.03.2017.......... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S.: ...... 29.03.2017............... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: ............ 29.03.2017............... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ..... 29.03.2017.................... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: .. 8. DATE OF DESPATCH OF THE ORDER: ......