Dismissing a special leave petition (SLP) filed by the Income Tax department to tax the proceeds accrued from FCCB (foreign currency convertible bonds) issued by Reliance Communication in 2006-07, the Supreme court on Monday quashed the contingent tax liability of Rs 4,800 crore.
"The Supreme Court order has quashed contingent tax liability of R-Com for about Rs 4,800 crore. A Supreme Court bench of Hon'ble Mr Justice Kurian Joseph and Hon'ble Mr Justice Rohinton Fali Nariman passed the order dismissing the I-T Department's Special Leave Petition, in relation to taxing of the FCCB proceeds, interest and derivatives income / loss thereon," R-Com, India's fourth-largest telco said in a statement according to LiveMint.
"The Supreme Court order has quashed contingent tax liability of RCOM for about Rs 4,800 crore. Earlier, the Income-Tax Appellate Tribunal and the Bombay High Court had also upheld RCOM's appeal against the order of the Income-Tax department," it added.
FCCB is a convertible corporate bond issued by a company to raise money in foreign markets and is an equity-debt instrument.
In 2006-07, R-Com raised around $1.5 billion (approx Rs 6,585 crore) in accordance with Reserve Bank of India guidelines. But Income tax department questioned the the FCCB proceeds as unexplained cash credits.
Though proceeds from loans are not taxed, income tax officials raised a demand as it considered the transaction as taxable. In response, the company won after it appealed to the Income Tax Appellate Tribunal and the Bombay High Court.