TaxTMI 
TaxTMI 
2014 (12) TMI 558
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....e (HO)/overseas branches. The appellant submits that the interest received represents a receipt from 'self' and therefore ought to be ignored in computing its taxable income. The appellant prays that the AO be directed accordingly. 2. Having held that the interest received by the HOI overseas branches is liable to tax in India, the CIT(A) erred in not directing the AO to allow a deduction for the interest of Rs. 24,98,898 paid by the India Branch to the HOI overseas branches on the basis that the provisions of section 40(a)(i) of the Income-tax Act, 1961 (the Act) are applicable. The appellant submits that the provisions of section 40(a)(i) are not attracted as the interest payment to the HOI overseas branches amounts to a payment to 'self'. The appellant prays that the AO be directed to allow a deduction for the interest payment of Rs. 24,98,898. 3. The CIT(A) erred in confirming the AO's action of charging to tax, profit of Rs. 2,86,44,359, arising on revaluation of unmatured forward forex contracts. The appellant submits that based on his stand in the earlier assessment years that a loss on revaluation of forex contracts being a notional los....
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....rdingly. 11. The AO erred in holding that the appellant's income is liable to tax at the rate as applicable to a non-resident company. 2. Ground no. 1 is regarding taxability of interest received by the Indian Branches from HO/overseas branches. 2.1 We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The Ld. Authorized Representative of the assessee has staed that the assessee does not want to press this ground and he is ready to pay the tax from interest received from HO/overseas branches. He has thus pleaded that this ground may be dismissed as not pressed. Ld. DR raised no objection if the ground no. 1 of the assessee's appeal is dismissed as not pressed. Accordingly, ground no. of the assessee's appeal is dismissed being not pressed. 3. Ground No. 2 is regarding deductability of interest/commission paid to HO/overseas branches by invoking the provisions of section 40(a)(i). 3.1 We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. At the outset we note that this issue has been considered by the Tribunal in assessee's own case for A.Y. 2002-03 vide order dated 21.3.2014 in ITA no. 4471....
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....t the loss on revaluation of unmatured forward forex contracts has been allowed by this tribunal in the earlier years i.e. 1998-99 then the natural corollary would be that the profit arising on revaluation of the unmatured forward forex contract is liable to be taxed as income. Accordingly, we dismiss this ground of the assessee." 4.2 Following the earlier order of this Tribunal in assessee's own case, we decide this issue against the assessee and consequently the profit arising on revaluation of unmatured forward forex contract is liable to be taxed as income. 5. Ground no. 4 is regarding disallowance u/s 14A on account of the interest as expenditure paid on FCNR(B) in relation to the exempt income on balance of Nostro Accounts. 5.1 We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The disallowance of interest u/s 14A arose due to the claim of the assessee regarding non taxability of the interest received from Headoffice/overseas branches. Since the assessee has already conceded to the taxability of the interest received from HO/overseas branches, in ground no. 1 of this appeal, therefore, once the income is offered to tax, the pro....
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....assessee, has agreed to have the interest income chargeable to tax, the issue of computing the disallowance under section 14A comes to a naught." 5.2 Since the assessee has already offered the corresponding income to tax, therefore, no disallowance can be made u/s 14A. 6. Ground no. 5 is regarding disallowance of provisions for non performing assets (NPA) u/s 37(1). 6.1 We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. At the outset, we note that an identical issue has been considered by the Tribunal in assessee's own case for A.Y. 2003-04 vide order dated 21.03.2014 in para 51 as under:- "51. We note that the AO has disallowed the claim of the assessee because it was found as a provision for NPA. As far as the allowbility of the claim for the provision for NPA is concern, it is settle proposition that the same cannot be allowed. The ld. AR has relied upon the decision of Hon'ble Supreme Court in case of Vijaya Bank (supra) however, when the provision in question is for NPA and not for Bad debts then in view of the decision of Hon'ble Supreme Court in case of Southern Technology Ltd. Vs. JCIT 320 ITR 577, provision for NPA is not....
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....assessee and assessed the interest received u/s 244A as income from other sources 11.2 Before us, the Ld. Authorized Representative of the assessee has submitted that though the interest received u/s 244A is the income of the assessee under the head "income from other sources" however, the netting is permissible when the assessee has also paid the interest to the department which was higher than the interest received. In support of his contention he has relied upon the decision of Hon'ble Jurisdictional High Court in the casse of DIT (International Tax.) Vs. Bank of America in ITA No. 177/2012 dated 3.7.2014. He has also relid upon the following decisions:- (i) R.N. Agarwal (0 SOT 361)(Del)(Trib) (ii) Grasim Industries Ltd. (ITA No. 8221/Bom/1989). (iii) Cyanamid India Limited ( ITA no. 4561/Bom/1982) (iv) TATA Share Registery Ltd. Vs. JCIT ( ITA No. 1668/Mum/2001) 11.3 On the other hand, the Ld. DR has vehemently opposed the netting of the interest and submitted that the interest received by the assessee is income of the assessee whereas the interest paid under the provisions of act is not an allowable expenditure, therefore, the income assessable to tax cann....
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....e similar exercise in the case of very assessee on the prior occasion as well. In such circumstances we are of the opinion that the second question also does not raise any substantial question of law. " 11.5 Following the decision of Hon'ble Jurisdictional High Court, we decided this issue in favour of the assessee. 12. The assessee has also raised an additional grounds as under:- "Without prejudice, the CIT(A) ought to have directed the Assessing Officer (AO) to tax the interest granted to the appellant under section 244A of the Income Tax Act 1961 under Article 12 of the Double Taxation Avoidance Agreement between India and France. The Ld. Commissioner of Income Tax (Appeals) has erred in making an ad-hoc disallowance under section 14A of the Income Tax Act, 1961. No addition ought to be made as the provisions of section 14A are not applicable in respect on tax-free securities received by the assessee." The Ld. Commissioner of Income Tax (Appeals) erred in not deciding the issue of applicability of section 115JB of the Income Tax Act, 1961, in favour of the appellant. 13.1 Additional ground no. 1 is only an additional plea in respect of ground no. 10. 13.....
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.... ground is common to the ground no.4 of the assessee's appeal for assessment year 2002-03. In view of our findings for assessment year 2002-03, we restrict disallowance u/s.14A to 2% of the exempt income." 15.2 Since Rule 8D is not applicable for the A.Y. under consideration, therefore, to maintain the consistency, we restrict the disallowance u/s 14A to 2% of the exempt income. 16 The revenue in ITA no. 1135/Mum/2011 has raised following grounds:- ""1. 0n the facts and in the circumstances of the case and in law, whether the ld. CIT(A) was justified in restricting the additional disallowanace made u/s.14A of the Act to Rs. 1,00,000/-instead of Rs. 37,51, 500/- determined by the Assessing Officer. 2. On the facts and in the circumstances of the case and in law, whether the ld. CIT(A) was justified in holding that expenses related to credit risk assistance and EDP assistance cost incurred by the HO on behalf of the India Branch are not covered u/s.44C of the IT Act. 3. On the facts and in the circumstances of the case and in law, whether the ld. CIT(A) was justified in holding that the assessee's claim of Rs. 41 lakhs in respect of the write back of the country ri....
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....tfully following the order in the assessee's own case, we sustain the order of the CIT(A). 32. Following the earlier orders of this tribunal, we decide this issue against the revenue and in favour of the assessee. 18.2 Following the earlier order of this Tribunal, this issue is decided against the revenue and in favour of the assessee. 19. Ground no. 3 is regarding write back of country risk provision added by the Assessing Officer and deleted by the CIT(A). 19.1 We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. 19.2 The Ld. Authorized Representative of the assessee has pointed out that the disallowance on this account has already been confirmed by this Tribunal for the A.Y. 2003-04. Accordingly, no disallowance can be made for the A.Y. under consideration. We note that for A.Y. 2003-04, an identical issue was considered by this Tribunal in assessee's own case in para 44 and 45 as under:- "44. Gound No.4 regarding disallowance of provision toward country risk. The assessee made a provision of Rs. 41,00,000 towards country risk management as per RBI guidelines vide its Circular No.DBOD.BP.71/21.04.103/2002-03 dated 19thFebru....
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.... a deduction in the computation of income filed with the return of income. The HO expenses of Rs. 20,391,525/- was subject matter of consideration under section 44C. The assessee contended before the TPO that Head Office had also certain expenditure which is directly attributable to Indian branch, over and above the normal HO expenses/allocation. Therefore, expenses have not been considered for arriving at the limits allowable u/s44C. The TPO held that the details filed by the assessee indicate that these amounts of Rs. 80,99,091/- are not being debited to the profit and loss account are being claim of the computation of income, as separate expenses. The amounts are also not being paid when Head Office had already charged. The assessee expenses towards cost of credit risk services to the tune of Rs. 20,391,525/-. The TPO held that these expenses appear to be a duplication of services which are being performed by the Indian Branches. Even if vetting is required by the Paris Branch to reduce the risk of a wrong business decision, there cannot be two allocations for the same services. Accordingly, the TPO held that these expenses for the same activity are being claimed twice one as pa....
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....ecessary disallowance be made u/s 14A of the I.T. Act." 23. The ground raised in Cross Objection is connected with the ground no. 1 of the assessee's appeal. Since the assessee has admitted the interest received from HO/overseas branches as taxable income, therefore, the ground raised in the Cross Objection of the revenue becomes infructuous. Hence dismissed. 24. There is a delay of 313 days in filing the Cross Objection by the revenue. Having considered the rival submissions and facts and circumstances of the case, we condone the delay in filing the Cross Objection. 25. In ITA no. 4116/Mum/2014 the assessee has challenged the levy of penalty u/s 271(1)(c) and raised the following grounds:- "1. The learned Commissioner of Income-tax (Appeals) - 10, Mumbai ["CIT (A)"] erred in upholding the Assessing Officer's action of levying a penalty of Rs. 69,63,693 under section 271 (1)( c) of the Income-tax Act, 1961 ["the Act"]. He erred in observing that the appellant has wilfully concealed its particulars of income while filing the return of income. The appellant submits that the CIT (A) failed to appreciate that the provisions of section 271(1)(c) are not attracted in t....