2015 (4) TMI 1041 - HC - Income Tax

Dismissal of Appeal on Income Tax Assessment for 1997-98: Section 115A Interpretation

The Bombay High Court dismissed the appeal challenging the order of the Income Tax Appellate Tribunal regarding two Income Tax Appeals for the assessment ... Deduction of expenses incurred at the head office directly in relation to Indian branches - expenses incurred for solicitation of deposits from NRI I.E. NRI marketing expenses - Non-resident banking company – assessee contended the same to be not covered by the provisions of section 44C – - Held that:- Held that:- Exclusive expenses incurred by the head office for Indian branch are outside the purview of sec. 44C and only common head office expenses are governed by this section. Once the amount is found to be incurred exclusively by H.O. towards the Indian branch, the same is required to be allowed in terms of section 37(1) without any reference to section 44C. See ADIT(I.T.) Vs. Bank of Bahrain & Kuwait (2011 (1) TMI 923 - ITAT, MUMBAI ), CIT v. Emirates Commercial Bank Limited (2003 (4) TMI 2 - SUPREME COURT) - Decided in favor of assessee Income chargeable at special rate under section 115A - to be allowed on gross basis OR on net basis - Held that:-we find that the income chargeable at special rate under section 115A ought to be on gross basis and not on net basis did not really arise from the assessment or the assessment order. In that regard we find that the Tribunal in its order particularly at page 102 onwards has found that the said question and pertaining to the allowability of expenditure incurred in respect of earning dividend and interest income liable to tax at special rate under section 115A was, in any event, covered and against the Revenue.It has found that the assessee in the instant case is carrying on composite business earning incomes which are either not at all chargeable to tax or chargeable to tax at lower rate or chargeable to tax at regular rate. Section 14A has been referred by the Tribunal in that regard. The judgment of the Hon'ble Supreme Court in the case of Rajasthan State Warehousing Corporation vs. Commissioner of Income Tax (2000 (2) TMI 5 - SUPREME Court ) has been followed by the Tribunal. We do not find that such a course can, therefore, raise any substantial question of law. - Decided against revenue Issues:1. Appeal challenging the order of the Income Tax Appellate Tribunal.2. Interpretation of income chargeable at special rate under section 115A on a gross or net basis.3. Allowability of expenditure incurred in earning dividend and interest income.4. Applicability of Section 14A in determining tax liability.5. Determination of substantial questions of law arising from the assessment.Analysis:1. The appeal before the Bombay High Court challenged the order of the Income Tax Appellate Tribunal concerning two Income Tax Appeals for the assessment year 1997-98, one by the Revenue and the other by the assessee.2. The first substantial question of law related to the interpretation of income chargeable at a special rate under section 115A. The Court noted that a similar question had been addressed in a previous case and was decided against the Revenue. Therefore, Question No.1 was held to be covered against the Revenue.3. The second substantial question of law pertained to the allowability of expenditure incurred in earning dividend and interest income. The Tribunal found that the issue was academic as the assessee was engaged in a composite business with incomes not entirely chargeable to tax. The Tribunal referred to Section 14A and followed a Supreme Court judgment, concluding that the question did not raise any substantial issue of law.4. The third question, as acknowledged by both parties, did not arise from the order of the Assessing Officer or the Commissioner of Income Tax (Appeals). Therefore, the Court determined that this question need not be addressed in the current circumstances but could be raised in a future case.5. Ultimately, the Court dismissed the appeal, emphasizing that no costs were to be awarded. The judgment highlighted the specific legal reasoning behind each decision, providing a detailed analysis of the issues raised and the applicable legal principles.