Are foreign currency convertible bonds considered a part of capital employed for deduction u/s 35D?

Last updated: 01 December 2021

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This High Court of Karnataka judgement addresses whether foreign currency convertible bonds (FCCBs) can be considered part of 'capital employed' for the purpose of claiming deductions under Section 35D of the Income Tax Act. The case involves an appeal by the Principal Commissioner of Income Tax against M/s Subex Ltd. concerning the assessment year 2008-09. The court's decision clarifies the treatment of such financial instruments in tax calculations.

Court :
High Court Of Karnataka

Brief :
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 19.06.2015

Citation :
I.T.A.No.624/2015

IN THE HIGH COURT OF KARNATAKA AT BENG ALURU DATED THIS THE 1ST DAY OF OCTOBER, 2021 PRESENT THE HON'BLE MRS.JUSTICE S.SUJATHA AND THE HON'BLE MR. JUSTICE RAVI V. HOSMANI I.T.A.No.624/2015
BETWEEN : PR. COMMISTONER OF INCOME TAX-VI, CENTRAL REVENUE BUILDINGS, QUEENS ROAD, BANGALORE-560 001.
APPELLANT
(BY SRI JEEVAN J. NEERALGI, ADV. A/W SRI T.N.C.SRIDHAR, ADV. FOR SRI E.I.SANMATHI, ADV.)
AND : M/s SUBEX LTD., RMZ ECOWORLD, DEVARABISANAHALLI, OUTER RING ROAD, BANGALORE-560 037. PAN: AABCS 9255R.
(BY SRI CHYTHANYA K.K., ADV.)
RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 19.06.2015 PASSED IN ITA NO.689/BANG/2014, FOR THE ASSESSMENT YEAR 2008-2009. PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT & SET ASIDE THE APPELLATE ORDERS DATED 19.06.2015 THE ITAT, 'C' BENCH, BENGALURU IN ITA NO.689/BANG/2014 FOR ASSESSMENT YEAR 2008-09.

Please find attached the enclosed file for the full judgement.

FAQ :

The main question is whether foreign currency convertible bonds are considered part of 'capital employed' for claiming deductions under Section 35D of the Income Tax Act.

The parties are the Principal Commissioner of Income Tax-VI (appellant) and M/s Subex Ltd. (respondent).

This judgement relates to the assessment year 2008-09.

The judgement was passed by the High Court of Karnataka at Bengaluru.

The judgement discusses Section 35D of the Income Tax Act, 1961.