TaxTMI 
TaxTMI 
2013 (5) TMI 639
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....l against the assessee in earlier years. Respectfully following the orders so passed by the Tribunal, we dismiss this ground of appeal. 3. Ground no.2 of the assessee's appeal is against the confirmation of action of the A.O. for bringing to tax interest of Rs. 10,14,90,408 received on Nostro Account and overseas placements with branches outside India. Ground no.3 of the appeal is against not allowing deduction of Rs. 87,212 being interest paid to HO / overseas branches. 4. Having heard the rival submissions on this point and perused the relevant material on record, it is noticed that albeit in the earlier years the ground of chargeability of interest income was decided in favour of the assessee, but in the current year the assessee chose not to press this ground because of an additional ground which was initially sought to be raised by the Revenue for the consequential disallowance u/s 14A of Income-tax Act, 1961 (hereinafter also called as `the Act') but subsequently abandoned because of the assessee not pressing of this ground. In view of the fact that the learned AR has accepted the taxability of this amount of interest earned from Head office / overseas branches, ground ....
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.....52 lakh in its account for the current year. The Assessing Officer charged such amount to tax against the assessee's contention of non-taxability. The learned CIT(A) noticed in para 8.2 of the impugned order that in the earlier years, the loss arising on revaluation of investment was held to be an allowable deduction and as such : "the above claim of the appellant that the A.O. ought to have excluded the write back does not survive for consideration". From the above extracted part of the impugned order, it is discernible that the learned CIT(A) has decided this issue against the assessee and resultantly there was no occasion for the Revenue to challenge the same. Be that as it may, it is simple and plain that when deduction has been allowed on account of loss arising on revaluation of investments in earlier years, the subsequent write back of the same amount cannot escape taxation. We, therefore, hold that the amount is chargeable to tax. However, the A.O. is directed to ensure that the same amount is not taxed twice in the assessment for the current year. 8. Ground no.3 of the Revenue's appeal is against the direction of the learned CIT(A) that the benefit of Rs. 1,38,48,130 o....
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.... was amortized over a period of 60 months in the books of account. Accordingly, a sum of 99.16 lakh for a period of four months (from December 2000 to March 2001) was debited to the Profit and loss account for the current year. However, the entire amount of Rs. 14.87 crore was claimed as deduction in the computation of income. It was submitted that this amount of Rs. Rs. 14.87 crore was deductible in the year because it was incurred for its business purpose. The assessee further clarified that it was in its business interest to garner more and more IMDs as SBI agreed to lend 50% of such deposits as long term deposits for a period of 5 years. The assessee explained that it mobilized deposits worth Rs. 1235.8 crore and SBI accordingly provided it a long term deposit of Rs. 617.9 crore for a period of 5 years. The Assessing Officer noticed that a sum of Rs. 26.75 crore, out of total amount of Rs. 37.07 crore paid to the sub-arrangers by way of sub-arranger fees and commission, was paid in US$ to non-residents. As the assessee failed to deduct tax at source before making such payments, the A.O. held that the provisions of section 40(a)(i) read with section 195 were applicable and hence....
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....was not for the assessee's business purpose. In this regard, he noticed that the purpose of incurring the said expenditure was to obtain deposits of a magnitude of Rs. 617.9 crore for a period of 5 years. As the deposits facilitated the assessee to carry on its business in a more effective and proper manner, he held that and the expenditure so incurred was deductible on the ground of business expediency. He, however, did not agree with the assessee's contention for allowing deduction of the entire amount of Rs. Rs. 14.87 crore in the year in question. Relying on the judgment of the Hon'ble Apex Court in Madras Industrial Investment Corporation Limited (supra), he held that only a sum of Rs. 99.16 lakh, being the amount amortized for a period of 4 months of the current year, was deductible. Both the sides are in appeal on their respective stands. The Revenue is aggrieved against the direction of the learned CIT(A) that : "the expenditure of 26,75,92,141 has been incurred by way of commission for the purpose of business and on the grounds of business expediency and therefore, do not constitute fees for technical services and is not chargeable to tax in India and thus are permissible ....
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....his issue in favour of the assessee by holding it as a receipt in the nature of commission to the non-residents. The Revenue has assailed the decision of the ld. first appellate authority by contending that it should be held as `Fees for technical services'. 12. The first thing which we need to adjudicate upon is whether the sum of Rs. 26.75 crore in the hands of the non-residents sub- arrangers can be described as a receipt in the nature of "Fees for technical services". Any income by way of fees for technical services payable by a person who is a non-resident, where it is payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India, as per clause (c) of section 9(1)(vii), is deemed to accrue or arise in India. Explanation (2) to this provision defines the expression `fees for technical services' as under: - "For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or oth....
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....r USD, GBP and Euro applications. * Sending the first and second copy of DRS along with cheques / drafts to SBI New York / SBI London / SBI Frankfurt for USD, GBP and EURO applications respectively. * Sending the third copy along with the original applications forms and supporting documents to MCS Limited (the Registrars) at Mumbai. * Sending the DRSs along with the cheques / drafts should be done within a day or else the interest for the delayed period will be debited to the collecting banker. * Recording the returned instruments in co-ordination with the agents, SBI NRI branch and entering the same in the next day's DRS. * At the end of the campaign sending a consolidated statement to SBI, New York, London / Frankfurt with a copy to the Registrars." 14. Above description of the scope of work or responsibilities of the arranger or sub-arrangers of IMD indicates that the ultimate object of the entire exercise was to explain and convince the NRIs for subscribing to such deposits. On successfully inducing the NRIs, the sub-arrangers were required to assist them in filling the requisite application forms and forwarding the same to the collecting banker. The primary d....
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....e, therefore, countenance the view taken by the ld. CIT(A) in this regard. 16. The last ingredient for consideration is "managerial services". The learned Departmental Representative vehemently argued that, in the alternative, the amount paid to the sub-arrangers should be treated as a consideration for rendering `managerial services'. He stated that the sub-arrangers were, in a sense, managing a part of the overall IMD issue. In the name of a precedent, he relied on the order of the Special Bench of the Tribunal in the case of Mahindra & Mahindra Limited v. DCIT [(2009) 122 TTJ 577 (Mum.) (SB)]. Per contra, the ld. AR supported the impugned order on this issue. His submissions were reiteration of the reasoning adopted by the ld. CIT(A) in holding that there were no managerial services involved in it. 17. `Manager' in common parlance is a person who supervises and provides directions in the manner in which the activities are to be carried out. The Hon'ble Supreme Court in R. Dalmia vs. CIT [1977] 106 ITR 895 (SC) has pointed out that "management" includes `the act of managing by direction, or regulation or superintendence'. Thus, managerial service essentially involves contro....
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.... and Lead arranger. The services rendered by the arrangers or sub-arrangers were only a small part of the management of the IMD issue. It is further significant to note that the assessee was only one of the several banks soliciting subscribers to SBI's IMD. Even within the same territory, there were several banks competing with each other to find out customers. To be more precise, in India alone there were several banks including the assessee, contesting with each other to reach the potential subscribers. Another factor which is of prime importance is that SBI reserved right to reject any application forwarded by the assessee without assigning any reason, as is evident from the brochure of IMD scheme, a copy of which is available on pages 35 to 38 of the paper book. The relevant clause empowering SBI to reject any application forwarded by the assessee or any other bank reads as under:- "(i) SBI reserves the right to accept or reject any application without assigning any reason. If any application is not accepted within sixty days of receipt thereof, the whole of the amount received with such application will be refunded to the applicant without any interim interest." 19. In v....
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....nt sub-arrangers under the provisions of the Act, there remains no need to examine the taxability or otherwise of this amount in their hands under the respective Double taxation avoidance agreements. In that view of the matter, we are of the considered opinion that the learned CIT(A) was justified in reversing the AO's order insofar as the applicability of section 40(a)(i) is concerned. Consequently, the ground raised by the Revenue fails. 22. Now we take up the ground taken by the assessee, as per which the unamortized part of the net expenditure also ought to have been held as deductible. Here it is relevant to mention that the Assessing Officer did not accept the deductibility of excess expenditure of Rs. Rs. 14.87 crore on the ground that there was no business expediency. The learned CIT(A) reversed this finding of the Assessing Officer and held the expenditure was incurred by the assessee for the purpose of its business. The Revenue has not challenged the decision of the learned CIT(A) on the otherwise deductibility of the entire sum of Rs. 14.87 crore on account of commercial expediency over the life of deposit. The assessee wants deduction in respect of the unamortized pa....
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.... debentures or premium on redemption of debentures. If a debenture with face value of Rs. 100 is issued for Rs. 95, the difference of Rs. 5 is discount on issue of debentures. It is the debenture-holder who is benefitted with the amount of discount inasmuch as by paying Rs. 95, he becomes entitled to the refund of Rs. 100 on the redemption of debentures. There may be another case in which instead of issuing debentures on discount, the company may undertake to pay premium on redemption of debentures. If a debenture of the face value of Rs. 100, on payment of Rs. 100 by a debenture-holder is undertaken to be redeemed at Rs. 105, it is this benefit of Rs. 5 to which the debenture-holder becomes entitled to. There is no qualitative difference between discount on debentures and premium on redemption of debentures. Third is the amount of interest paid on debentures at the agreed rate over the period of debentures. The Hon'ble Supreme Court in Madras Industrial (supra) considered the second item of expenditure, being the discount on issue of debentures going to the coffers of the debenture-holders. It is this expenditure which was held to be deferred revenue expenditure deductible proport....