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Case Law Details

Case Name : ACIT Vs Hikal Ltd (ITAT Mumbai)
Appeal Number : ITA No. 2320/MUM/2016
Date of Judgement/Order : 28/12/2022
Related Assessment Year : 2011-12
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ACIT Vs Hikal Ltd (ITAT Mumbai)

ITAT Mumbai held that when company issues Foreign Currency Convertible Bonds (FCCB) they incurs a liability to pay a larger amount than what is borrowed and such liability to pay the additional amount is revenue expenditure.

Facts- The assessee company had issued Foreign Currency Convertible Bonds in F.Y. 2005-06. These bonds were convertible at the option of the bondholder on or after 01.11.2005 but prior to close of business on 10.10.2010 at a fixed exchange rate.

As the bond holders had not converted any bonds till 31.03.2010 and the possibility of their exercising the option to convert @Rs. 745/- per share was remote, the assessee was certain that it would have to redeem the bonds at a premium.

In the books of account, the said premium was adjusted against the Securities Premium Account, however, the same was claimed as revenue expenditure in the computing the total income. In the assessment completed, the Assessing Officer disallowed the said premium mainly for the reason that it has not been crystallised in the year under consideration and is just a provision and that even the TDS thereon has not been deducted.

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