Heidelberg Cement AG, Germany V. ACIT, Int. Tax., Gurgaon

ITA 531/DEL/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2941 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Appeal Filed On: 28-03-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 143(3); 244A; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘D’ : NEW DELHI) SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.531/Del./2022 (ASSESSMENT YEAR : 2017-18) Heidelberg Cement AG, vs. ACIT, International Taxation, Berliner Strasse 6, Heidelberg, Gurgaon. Germany – 69120. (PAN : AACCH5735J) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Harpreet S. Ajmani, Advocate Ms. Pratishtha Singh, Advocate Shri Nitin Narang, CA REVENUE BY : Ms. Rashmita Jha, CIT DR Date of Hearing : 21.09.2022 Date of Order : 26.09.2022 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal by the assessee is directed against the order of Assessing Officer dated 29.01.2022 passed under section 143(3) read with section 144C (13) of the Income-tax Act, 1961 (for short ‘the Act’) pursuant to the directions of the Dispute Resolution Panel (DRP). 2. The grounds of appeal raised by the assessee read as under :- ITA No.531/Del./2022 2 “General Grounds 1. That on the facts and circumstances of the case and in law, the order of assessment framed by the Assistant Commissioner of Income Tax, International Tax, Gurgaon (hereinafter referred to as "Ld. AO") pursuant to the directions passed by the Hon'ble Dispute Resolution Panel (hereinafter referred to as "Hon'ble DRP") under Section 144C(5) of the Act, is a vitiated order having been passed in violation of principles of natural justice and is otherwise arbitrary and is thus bad in law and void-ab-initio. 2. That the Hon'ble DRP directions are bad in law to the extent the same are prejudicial to the Appellant. 3. Ground on applicability 0/ Section 194LD 0/ the Act 3.1. The Ld. AO/ Hon'ble DRP has erred in law and on facts of the case by assuming that bonds and non-convertible debentures are different in nature and cannot be treated as same for the application of Section 194LD of the Act. 3.2. The Ld. AO/ Hon'ble DRP has erred in law and on facts of the case by rejecting the claim of the Appellant for taxing the interest income from non-convertible debentures at 5 percent as per Section 194LD of the Act and thereby proposing to apply India-Germany Double Tax Avoidance Agreement and taxing the same at 10 percent. 3.3. The Ld. AO/ Hon'ble DRP has erred in law and on facts of the case by considering the rupee denominated bonds ("RDBs") as masala bonds issued by Zuari Cement Limited ("ZCL") in the nature of non-convertible debentures and thereby taxing the interest income in the similar manner at 10 percent as per India-Germany Double Tax Avoidance Agreement, instead of 5 percent as per Section 194LD of the Act. 4. Other Grounds 4.1. Based on the facts and circumstances of the case and in law, the Ld. AO has erred in proposing to initiate penalty ITA No.531/Del./2022 3 proceedings under section 270A of the Act, against the Appellant. 4.2. Based on the facts and circumstances of the case an in law, the Ld. AO has erred in proposing to levy interest under Section 234B, Section 234D and Section 244A of the Act.” 3. Brief facts of the case are that that the assessee has invested in rupee denominated non-convertible debentures ('NCDs') of Indian companies (namely Zuari Cement Limited and Heidelberg Cement India Limited) from which interest income of Rs.47,69,72,539 accrued to the assessee during the subject year. The same was offered to tax by the assessee @ 5% in accordance with section 194LD r.w.s. 115A(1)(a)(iiab) of the Income Tax Act, 1961 ('the Act'). The Assessing Officer(AO) took a view that Section 194LD is applicable only in case of interest' from rupee denominated bonds ('RDBs') of Indian company or a Government security whereas the assessee has earned interest from NCD and therefore, a concessional rate of 5% as mentioned in section 194LD was not available thereon. 4. Before the ld. DRP, assessee placed reliance on a letter issued by the Hon’ble PCCIT, International Tax, New Delhi to CCIT/CIT of various International Tax jurisdiction (including CIT having jurisdiction over the assessee), stating that in the absence of specific definition of bonds in the Act, the term 'bonds' used in section 194LD should be considered as including NCDs and accordingly the concessional rate of ITA No.531/Del./2022 4 5% should be allowed provided other conditions mentioned in section 194LD of the Act are satisfied. However, DRP was not convinced and confirmed the AO’s order. 5. Against this order, assessee is in appeal before us. We have heard both the parties and perused the record. We note that the solitary issue before us is whether debenture should be considered as Bond in absence of any definition of this term in Income-tax Act. 6. Having heard both the counsels and perused the record, we find that the issue is covered in favour of the assessee by Hon’ble jurisdictional High Court decision in the case of DIT Vs. Shree Visheshwar Nath Memorial Public Ch. Trust (2010) 194 taxman 280 (Delhi). In this case, on the issue of meaning of debenture in Income-tax Act purposes, Hon’ble jurisdictional High Court has expounded as under:- “ (Head Notes only) The word 'debenture' is nowhere defined under the Act. However, the Companies Act, 1956 specifically defines this term and as per the definition provided in section 2(12) of the said statute, 'bond' is covered under the expression 'debenture'. [Para 3] The Kerala High Court in CIT v. Cochin Refineries Ltd. [1983] 142 ITR 441/ [1982] 11 Taxman 135 held that in the absence of any definition of 'debenture' in the Act, reliance could be placed upon the definition given in section 2(12) and also the common parlance in which this term is understood. [Para 4] Thus, it would be appropriate to rely upon the definition of 'debenture' as contained in section 2(12) and, therefore, it could not be held that the assessee contravened the provisions of section I3(I)(d). [Para 5] ITA No.531/Del./2022 5 However, the revenue submitted that for the limited purpose, i.e., in the context of section 11 (5) the meaning to be assigned to the expression 'debenture' has to be restricted, viz., exclude 'bond'. In support of this submission, he referred to sub-section (5) of section II which specifically deals with the investment in certain specific kinds of bonds. He, thus, argued that only those forms and modes of investments, as are prescribed under sub-section (5) of section II, would be entitled to exemption for the purposes of section II and the investment in other forms of bonds, by necessary implication of inference, had to be excluded from the exemption list. Sub-section (5) of section II deals with the investment in bonds of a financial corporation, the State Government or the Central Government. No doubt, specific provision is made in respect of investment in these particular kinds of bonds; however, that would not mean that while dealing with the investment in 'debenture', which also qualifies for exemption, restrictive meaning would be given to the term 'debenture', more particularly when this term is not defined under the Act. It is a trite principle of interpretation that in the absence of any definition given to a particular term in a statute, the meaning which is to be given to the said term is the meaning which is understood in common parlance. Even as per new Gem dictionary, the term 'debenture' includes bond of a company or a corporation. [Para 6]” 7. When ld. DR for the Revenue was asked whose exposition on the meaning of word debenture should prevail. She fairly agreed that it is Hon’ble jurisdictional High Court order which is to be followed. Accordingly, respectfully following the precedent, we set aside the orders of the Revenue authorities and decide the issue in favour of the assessee. 8. In the result, the appeal of the assessee stands allowed. Order pronounced in the open court on this 26 th day of September, 2022. Sd/- sd/- (KUL BHARAT) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 26 th day of September, 2022 TS ITA No.531/Del./2022 6 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.DRP 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.