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.’

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“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.