The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) grants relief to Tata Steel Limited by allowing deduction of interest on Perpetual Non-Convertible Debentures ( PNCD ) in the computation of book profit under Section 115JB of the Income Tax Act, 1961.
Mr. Nishant Thakkar representing the assessee submitted that admittedly the assessee had not claimed deduction of interest on PNCD in computation of Book Profits under Section 115JB of the Income Tax Act. The claim was made for the first time in assessment proceedings before the AO
Further the assessee has assailed disallowance of interest paid on Perpetual Non-Convertible Debentures ( PNCD ). The assessee has claimed interest paid amounting to Rs.266,17,02,198/- under Section 36(1) (iii) of the Income Tax Act.
The AO rejected the assessee’s claim on the ground that the said expenditure claimed is not in the nature of interest. The assessee is not under obligation to repay Perpetual Debentures and hence, returns of such debentures cannot be classified as interest per se under the definition of interest under the provisions of the Act
The bench found that in AY 2011-12 and 2012-13, the PCIT had invoked revisional jurisdiction on the same issue. It is not disputed by the Department that the PNCD on which the assessee has paid interest are the same that were subject matter of dispute in AY 2011-12 and 2012-13 in proceedings under Section 263 of the Income Tax Act.
Thus, in the light of the decision of Co-ordinate Bench on same issue in assessee’s own case in preceding assessment year, we hold that the interest expenditure in respect of Perpetual Non-Convertible Debentures is an allowable expenditure under Section 36(1)(iii) of the Income Tax Act.
The assessee has assailed computation of Book Profits under Section 115JB after considering disallowance u/s 14A of the Act. The Special Bench of the Tribunal in the case of Asst. CIT Vs. Vireet Investments Pvt. Ltd. has held that the computation under clause (f) of Explanation 1 to section 115JB is to be made without resorting to the computation as contemplated under Section 14A r.w.r. 8D of the Income Tax Act. The assessee has assailed rejection of assessee’s claim for deduction of interest on PNCD in computation of Book Profit under Section 115JB of the Income Tax Act.
The two member bench of the tribunal comprising M.Balaganesh (Accountant member) and Vikas Aswathy (Judicial member) allowed deduction of Interest on Perpetual Non-Convertible Debentures ( PNCD ). In computation Book Profit under Section 115 JB of Income Tax Act.
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