2021 (1) TMI 1296 - AT - Income Tax

Tribunal partially allows appeal on tax issues, ruling in favor of appellant on various matters. Adjustments ordered.

The tribunal partially allowed the appeal, dismissing the appellant's contentions regarding the applicability of domestic tax rates, levy of surcharge and ... Rate of tax applicable to domestic companies and/ or co-operative banks - provisions of Article 26 (Non-discrimination) of the India-France tax treaty - HELD THAT:- On a perusal of a recent order of the Tribunal passed in the assessee‟s own case for A.Y. 2013-14 [2019 (4) TMI 2099 - ITAT MUMBAI], we find, that the Tribunal by relying on its earlier order for A.Y. 1996-97 [2013 (8) TMI 1173 - ITAT MUMBAI] had therein concluded that the tax levied at a higher rate in the case of a foreign company is not to be regarded as a violation of the non-discrimination clause. Thus we respectfully follow the aforesaid order of the Tribunal. Accordingly, the Ground of appeal No. 1 is dismissed. Data processing fees paid by Indian branch offices of the Appellant to its Singapore branch - HELD THAT:- As the facts in context of the aforesaid issue under consideration remains the same as was there before the Tribunal in the assessee‟s own case for A.Y. 2013-14 [2019 (4) TMI 2099 - ITAT MUMBAI] therefore, we respectfully follow the view therein taken. Accordingly, we herein direct the A.O to delete the impugned addition. Income chargeable to tax - Interest payable/paid by the Indian branch offices of the Appellant to the head office and its other overseas branches - HELD THAT:- The issue as to whether or not interest payable/paid by the Indian branch offices of the assessee to its head office and its other overseas branches would be chargeable to tax had been looked into by the various benches of the Tribunal in the assessee‟s own case for the aforementioned years. On a perusal of the order passed by the Tribunal in the assessee‟s own case for A.Y. 2012-13 [2019 (7) TMI 1076 - ITAT MUMBAI] the Tribunal following the order in the case of Sumitomo Mitsui Banking Corporation [2012 (4) TMI 80 - ITAT MUMBAI] and the orders of the coordinate benches of the Tribunal in the assessee's own case for the preceding years, had concluded, that the interest income received by the assessee from its Indian branch being a payment made to self was thus not taxable in the hands of the assessee Accordingly, we herein hold that the interest income received by the assessee from its Indian branch office being a payment made to self would not be taxable in the hands of the assessee. Short credit of taxes deducted at source (TDS) - HELD THAT:- As the aforesaid issue would require verification of records, we, therefore, restore the matter to the file of the A.O with a direction to verify the aforesaid claim of the assessee. In case the claim of the assessee is found to be in order then credit for the deficit amount of tax deducted at source shall be allowed by the A.O as per the extant law. Needless to say, the A.O shall in the course of the “set aside” proceedings afford an opportunity of being heard to the assessee who shall remain at a liberty substantiate his aforesaid claim. The Ground of appeal No. 6 is allowed for statistical purposes. Levying interest u/s 234A - return of income was filed by the Appellant within the prescribed due date for filing the return of income - HELD THAT:- We find that it is a matter of fact borne from the record that the assessee company had e-filed its return of income for the year under consideration i.e A.Y. 2014-15 vide e-filing acknowledgment No. 429259941291114. In the backdrop of the claim of the ld. A.R that the assessee had filed its return of income well within the prescribed time limit, therefore, no interest u/s 234A was liable to be saddled upon it, we herein restore the issue to the file of the A.O for making necessary verification. In case, the assessee is found to have filed its return of income within the stipulated time period contemplated in sub-section (1) to Sec. 139 then, no interest u/s 234A of the Act shall be imposed on it. Ground of appeal is allowed for statistical purposes. Issues Involved:1. Applicability of domestic tax rates to the appellant under Article 26 of the India-France tax treaty.2. Taxability of data processing fees paid to the Singapore branch.3. Levy of surcharge and education cess on tax computed under Article 13 of the India-France tax treaty.4. Taxability of interest paid by Indian branch offices to the head office and other overseas branches.5. Levy of surcharge and education cess on tax computed under Article 12 of the India-France tax treaty.6. Short credit of taxes deducted at source (TDS).7. Levy of interest under section 234A of the Act.8. Initiation of penalty proceedings under section 271(1)(c) of the Act.Detailed Analysis:1. Applicability of Domestic Tax Rates:The appellant contended that the tax rate applicable to domestic companies should also apply to them under Article 26 (Non-discrimination) of the India-France tax treaty. The tribunal noted that this issue had been consistently decided against the assessee in previous years by various coordinate benches. The tribunal, relying on its earlier decisions, upheld that the higher tax rate for foreign companies does not violate the non-discrimination clause. Thus, the first ground of appeal was dismissed.2. Taxability of Data Processing Fees:The appellant challenged the tax imposed on data processing fees paid by its Indian branches to the Singapore branch. The tribunal referred to its earlier decisions in the appellant's own cases for previous assessment years, where it was held that such fees are not taxable under Article 13 of the India-France tax treaty. The tribunal directed the AO to delete the addition of Rs.40,78,10,733/-, allowing the second ground of appeal.3. Levy of Surcharge and Education Cess on Tax Computed under Article 13:The appellant argued against the levy of surcharge and education cess on the tax computed under Article 13. As the second ground of appeal was decided in favor of the appellant, the tribunal dismissed this ground as merely academic.4. Taxability of Interest Paid to Head Office and Other Overseas Branches:The appellant contested the taxability of interest paid by its Indian branches to the head office and other overseas branches. The tribunal, following its earlier decisions and the Special Bench decision in Sumitomo Mitsui Banking Corporation, held that such interest is not taxable as it is a payment to self. The tribunal directed the AO to vacate the addition of Rs.8,22,02,991/-, allowing the fourth ground of appeal.5. Levy of Surcharge and Education Cess on Tax Computed under Article 12:The appellant challenged the levy of surcharge and education cess under Article 12. As the fourth ground of appeal was allowed, this ground was dismissed as merely academic.6. Short Credit of TDS:The appellant claimed that the AO had granted short credit of TDS amounting to Rs.2,59,07,320/-. The tribunal restored the matter to the AO for verification. If the appellant's claim is found correct, the AO should allow the credit for the deficit amount of TDS. This ground was allowed for statistical purposes.7. Levy of Interest under Section 234A:The appellant argued that interest under section 234A was wrongly levied as the return of income was filed within the prescribed due date. The tribunal restored the issue to the AO for verification. If the return was indeed filed within the stipulated time, no interest under section 234A should be imposed. This ground was allowed for statistical purposes.8. Initiation of Penalty Proceedings under Section 271(1)(c):The appellant contested the initiation of penalty proceedings under section 271(1)(c). The tribunal deemed this grievance premature and refrained from adjudicating it. This ground was dismissed.Conclusion:The appeal was partly allowed, with specific grounds being upheld or dismissed based on the tribunal's detailed analysis and adherence to previous judgments and legal precedents. The tribunal directed necessary verifications and adjustments by the AO where required.