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TaxTMI 
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2014 (7) TMI 465
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....der. We first proceed to adjudicate the assessee's appeal being ITA no.4433/Mum./2009, for the assessment year 2004-05. 3. Ground no.1, relates to disallowance of expenditure under section 14A for a sum of Rs. 3,62,76,585, in relation to the earning of exempt income, after applying provisions of rule 8D. 4. The Assessing Officer noted that the assessee has earned interest of Rs. 4,54,00,000, on the investment made in NABARD / REC bonds, which have been claimed as exempt. The assessee, in response to the show cause notice, submitted that these investments are coming from the earlier years and no fresh investments have been made in this year for earning any tax free income. Further, the assessee is in possession of own funds which are interest free and in far excess of the amount invested in the instruments which have earned tax free income to the assessee. Besides that, the assessee has not incurred any expenditure for earning of exempt income because, the assessee is engaged in banking business which is composite and indivisible insofar as the income is concerned because it results into both taxable and tax free income. The Assessing Officer, after detail discussion, worked out ....
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....d to the head office / overseas branch should be allowed, when the Department is taxing the interest received on Nostro account and overseas placement. 11. Before us, it has been admitted by the either party that similar additional ground has been admitted and allowed by the Tribunal in the assessment year 2002-03 and 2003-04 in assessee's own case. More specifically, in M.A. no.02 and 03/Mum./2014, vide order dated 28th March 2014. Consistent with the view taken therein, we also admit the additional ground and decide the same in favour of the assessee i.e., the said claim of deduction is allowed. Thus, the additional ground raised by the assessee is treated as allowed. 12. In ground no.3, the assessee has challenged the claim for deduction of Rs. 2,97,50,453, in respect of deferred expenditure on mobilisation of Indian Millennium deposit scheme. 13. Before us, the learned Counsel for the assessee submitted that he is not pressing this ground, as the assessee has got full deduction of the entire expenditure in view of the order of the Tribunal for the assessment year 2001-02. Accordingly, this ground is dismissed as "not pressed". 14. Ground no.4, reads as under:- "4. The lear....
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....onsidering the relevant findings of the learned Commissioner (Appeals) as well as the Tribunal, we find that this issue has been decided by the Tribunal in assessee's own case being ITA no.1935/Mum./2007, etc., for the assessment year 2002-03, order dated 30th September 2013, which has also been followed in the assessment year 2003-04. The relevant observations on this issue by the Tribunal are as under:- "8.8 Having held that para 4 of the Protocol does not apply to the case of the assessee, now, the question arises as to whether the adjustment made by the authorities below is justified. For making the adjustment, the authorities below have taken into consideration, the income towards interest as well as the fee charged by the foreign branch from the clients. It is pertinent to note that when the loan is provided by the syndicate and the assessee has not contributed to the loan amount then as regards the income of interest, the same cannot be attributed to the assessee for providing the services of the financial analysis of the borrowers, market condition and regulatory environment in India. Since the assessee has provided certain services for that arms length charges can be dete....
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....at the business income of the assessee should be charged @ 41%, which was the rate applicable to the foreign company in this year. Thus, the ground no.10, raised by the assessee is treated as dismissed. 26. In the result, assessee's appeal for the assessment year 2004-05 is partly allowed. We now take up Revenue's appeal being ITA no.4581/Mum./ 2009, for the assessment year 2004-05. 27. The only ground raised by the Revenue is that the learned Commissioner (Appeals) has erred in law and on facts in holding that the claim of loss in valuation of unmatured contracts is an allowable deduction without appreciating that such a loss is notional in nature. 28. The Assessing Officer disallowed the claim of loss on re-valuation of outstanding foreign exchange contracts of Rs. 1,13,95,291. 29. The learned Commissioner (Appeals), following the decision of the Tribunal in Deutsche Bank, ITA no.5299/Mum./2001 and also the decision of the Hon'ble Supreme Court in Woodward Governor India Pvt. Ltd., allowed the assessee's claim. 30. Before us, both the parties admitted that this issue had come up for consideration before the Tribunal in assessee's own case for the assessment year 2002-03 ....
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....al exempt income in relation to the administrative expenditure following the earlier year's order of the Tribunal. Thus, ground no.1(a) and (b), are treated as partly allowed. 38. Ground no.2, reads as under:- "The learned CIT(A) erred in confirming the action of the Dy. DDIT(E) in bringing to tax the interest of Rs. 4,98,528 received on Nostro Account and overseas placements with the appellant's branches outside India." 39. The learned Counsel for the assessee submitted before us that he did not wish to press this ground. Accordingly, this ground is dismissed as "not pressed". 40. The additional ground raised by the assessee, reads as under:- "The Assessing Officer erred in not allowing deduction of Rs. 2,49,329 being interest paid to Head Office / overseas branches consistent with the Department's stand of taxing the interest received on Nostro account and overseas placements." 41. This ground is similar to the additional ground raised by the assessee in its appeal for the assessment year 2004-05 which is allowed in favour of the assessee. Therefore, consistent with the view taken therein, the said ground is treated as allowed. 42. Ground no.3, 4 and 5 are as under:- "3. ....
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.... read as under:- "7. The learned CIT(A) erred in confirming the addition of Rs. 493 on account of interest received on call placement with its head office / overseas branches. 8. The learned CIT(A) erred in confirming the addition of Rs. 3,579 on account of interest paid by the appellants on call borrowings from its Head Office / Overseas branches. 47. The learned Counsel for the assessee submitted before us that he did not wish to press these grounds. Accordingly, these grounds are treated as dismissed. 48. Ground no.9, reads as under:- "9. The learned CIT(A) erred in confirming the action of the A.O. in charging the business income @ 41.82% being the rate applicable to foreign companies for the year under appeal." 49. After hearing both the parties, we find that this ground is similar to ground no.10, raised in assessee's appeal for the assessment year 2004-05 and in view of the directions given therein, this ground is treated as dismissed. 51. In the result, assessee's appeal for the assessment year 2005-06 is partly allowed. We now take up Revenue's appeal being ITA no.2578/Mum./ 2011, for the assessment year 2005-06. 51. Ground no.1, reads as under:- "1. On the facts ....