SC dismisses IT’s plea for taxing RCom's FCCB proceeds

The Supreme Court on Monday dismissed the ‘Special Leave Petition’ filed by the Income-Tax Department against Reliance Communications (RCom) on taxing of the proceeds of Foreign Currency Convertible Bonds (FCCBs), treating it as ‘unexplained cash credit.’

“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,” the company said in a filing.    

The Supreme Court order has supressed contingent tax liability of RCom for nearly 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. 

During Financial Year 2006-07, Reliance Communications had issued FCCBs, as per the extant Guidelines of the Reserve Bank of India and applicable laws, aggregating US $1.5 billion (Rs 6,485 crore).

In India, income from loans is not taxed, however, Income-Tax department took the view to assess the FCCB proceeds as ‘unexplained cash credits’ and had raised tax demands on the amount.