Ok Play India Ltd. Vs JCIT (ITAT Delhi)
The issue under consideration is whether the funds raised from buy back of FCCB at discounting rate is considered as business income and tax u/s 28 of the Income Tax Act?
ITAT states that The assessee raised FCCB in the earlier year and during the year repaid with discount of ₹ 9,46,73,015/-received. According to the assessee, the discount received is in the nature of capital receipt but according to the Revenue the discount is in the nature of trading receipt. The Assessing Officer has alleged the activity of raising FCCB as an adventure in the nature of trade. This finding of the Assessing officer is without any basis. The assessee is not engaged in raising the FCCB with motive of any trading and discounting and thereby earning profit on the same. The allegation by the Assessing Officer of motive and intent of earning profit by the assessee are unsubstantiated with any evidences. On the contrary, the assessee has substantiated that it raised the FCCB for funding its acquisition of assets. Further, the Ld. CIT(A) has relied on the decision of the Hon’ble Delhi High Court in the case of Logitrinics (P) Ltd (supra). Before ITAT, the assessee has demonstrated how the FCCB amount has been utilized towards capital expenditure. The assessee submitted entire list of capital asset acquired through the funds of FCCB, which is available on page 235 to 241 of the paper book. The assessee has shown capital expenditure of more than Rs.21 Crores upto March, 2008. The Ld. DR could not controvert this factual aspect of utilization of the FCCB toward capital expenditure. In instant case, once it is undisputed that FCCB amount has been utilized toward capital expenditure, in view of the decision of the Hon’ble Delhi High Court in the case of Logotronics (P) Ltd (supra), the discount on FCCB falls in the nature of capital receipt not exigible to tax. The Ld. CIT(A) has given his finding on wrong assumption of the fact that FCCB funds were utilized for trading or revenue expenditure, without verifying the books of account of the assessee. On a plain reading of Section 28 (iv) of the IT Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. In the instant case, the benefit has been received in the shape of the money and thus, the said benefit cannot be held as taxable even under section 28(iv) of the Act. Therefore, in view of the discussion above, ITAT set aside the finding of the Ld. CIT(A) on the issue in dispute and hold that the discount received on FCCB is not taxable in the hands of the assessee. Hence, the appeal of the assessee is accordingly allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against order dated 31/03/2016 passed by the ld. Commissioner of Income-tax (Appeals)-1, Gurgaon [in short ‘the ld. CIT(A)’] for assessment year 2011-12 raising following grounds:
