TaxTMI 
TaxTMI 
2014 (2) TMI 743
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....of head office personnel to India and Certificate fee paid to Auditors. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance of transaction charges of Rs.16,56,533/- made on NOSTRO account u/s. 409a)(i) of the I.T. Act. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing to allow the claim for bad debts of Rs.21,75,000/-. 5. The appellant prays that the order of the ld. CIT(A), Mumbai on the above ground(s) be set aside and the order of AO be restored." 1.3 Vide letter dated 26.02.2013 the department has filed additional ground of appeal on the ground that the taxability of interest income received from head office could not have been taken up earlier, as lower authorities have held that the amount of income received from head office is taxable and the decision of Sumitomo Mitsui Banking Corpn. vs. Dy.DIT(IT), Mumbai (136 ITD 66)(Mum)(SB) was rendered by the Special bench only on 30th March, 2012. In view of the above the additional ground may be admitted for consideration. The additional ground reads as under :- "Whether provisions of section 14A of the I.T. ....
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....sallowances. The Assessee filed appeal before the first appellate authority. The ld. CIT(A) by the impugned order allowed appeal of the Assessee in part. Hence, these appeals by the Department as well as by assessee. 1.6 Ground No.1 taken by the department is connected with ground No.1 taken by assessee. 1.7 The Assessee bank in the computation of income filed along with return of income, has reduced a sum of Rs.64,60,038/- as interest received from Head Office not taxable since received from self. The AO stated that similar issue was involved in previous years. That the Assessee is a branch of foreign bank and has its Head Office abroad. That foreign company is taxed in India on income arising or accruing through any business connection or source or asset in India. That a nonresident company is taxable on income accrued or deemed to accrue in India as per provisions of section.5 of the Income tax Act, 1961 (the Act). The income for tax in India would thus be limited to income of the branch, which has permanent establishment of the Assessee company in India. That the branch is considered as an independent company in order to estimate the income that has been earned by it duri....
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....iew that although interest paid to the head office of the assessee-bank by its Indian branch which constitutes its permanent establishment in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to the permanent establishment which is taxable in India as per the provisions of article 7(2) and (3) of the Indo-Japanese treaty read with paragraph 8 of the protocol which are more beneficial to the assessee. The said interest, however, cannot be taxed in India in the hands of the assesseebank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law. Even otherwise, there is no express provision contained in the relevant tax treaty which is contrary to the domestic law in India on this issue. This position applicable in the case of interest paid by Indian branch of a foreign bank to its head office equally holds good for the payment of interest made by the Indian branch of a foreign bank to its branch offices abroad as the same stands on the same footing as the payment of interest made to the head office. At the time of hear....
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....see's own case for assessment year 1996-97 and the Tribunal had held vide its order dated 29.06.2012 in ITA No.1981/Mum/2001 that the travelling expenses incurred by the Head Office on travelling of its own staff and directly in connection with India branches is allowable u/s. 37(1) of the Act and section 44C is not applicable to it. We observe on perusal of the said order of ITAT dated 29th June, 2012 that the Tribunal while deciding the said issue considered the decision of the Hon'ble Jurisdictional High Court in the case of Emirates Commercial Bank Ltd.(supra), and also the decision of ITAT dated 28th February, 2007 in the case of American Bank Limited. Vs. DCIT in ITA No.2770 and 2439/Mum/1996 . The ld. DR at the time of hearing could not controvert the fact that the above issue is covered in favour of the Assessee by the aforesaid decision(supra), save and except relying on the order of AO. We, respectfully following the earlier order of the Tribunal in Assessee's own case (supra), confirm the order of the ld. CIT(A) and reject ground no.3 taken by the department. 2.3 In respect of Ground no.3 of the appeal the relevant facts are that AO disallowed transaction charges of R....