FCCB issue expenses included as part of FCCB Premium Expenses allowable as Deduction: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has recently held that Foreign Currency Convertible Bond (FCCB) issue expenses included as part of  Foreign Currency Convertible Bond (FCCB) premium expenses  are allowable as deduction.

Assessee-Strides Arcolab Limitedis engaged in the business of manufacturing pharmaceutical formulations. For the assessment year 2010-11, the assessee filed the return of income declaring a loss of Rs.203,83,86,890/-. The case was selected for scrutiny and statutory notices were duly served on the assessee.

Since the assessee had international transactions with its Associated Enterprises (AEs),reference was made to the Transfer Pricing Officer for determination of arm‟s length price (ALP) of the international transactions.

The Assessing Officer passed a draft assessment order incorporating transfer pricing adjustments and disallowed premium on FCCB. The DRP gave partial relief to the assessee.

Aggrieved by the order, assesee filed an objection before the DRP and upheld the disallowance of FCCB issue expenses which is included as part of FCCB premium expenses.

Thereafter, the assessee filed an appeal before the Tribunal against the final order of assessment passed by the Assessing Officer pursuant to the directions of the DRP.

Nitesh Joshi, counsel for the assessee submitted that the assessing officer has erroneously disallowed the issue expenses also while disallowing the FCCB premium amount.

Thus, DRP upheld the disallowance by stating that expenditure towards issue expenses had not been incurred during the assessment year 2010-11 and accordingly could not  be allowed.

Further counsel submitted that the above issue was covered in favour of the assessee by the decision of the co-ordinate bench in assessee‟s own case for assessment year  2008-09.

After considering the facts and circumstances the tribunal observed that issue of disallowance of FCCB issue expenses have also been considered by the co-ordinate bench in assessee’s own case for assessment year 2008-09 and the relevant part of the decision have been extracted in the earlier part of this order.

Therefore the two member bench of Amit Shukla (Judicial Member) and Padmavathy S (Accountant Member) allowed the appeal filed by the assessee.

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