TaxTMI 
TaxTMI 
2016 (5) TMI 711
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.... sake of convenience. 3. RATE OF TAX APPLICABLE TO THE BANK GROUND NO. 1 IN ASST YEAR 2005-06 GROUND NO. 1 IN ASST YEAR 2006-07 GROUND NO. 1 IN ASST YEAR 2007-08 GROUND NO. 1 IN ASST YEAR 2008-09 The facts in assessment year 2005-06 are stated herein and they remain the same for other assessment years also except change in figures and tax rates. The assesee bank is incorporated in Netherlands and is engaged in banking operations across the globe through various branches worldwide, including India. In India, the assessee (branches / permanent establishment) is registered as a Scheduled Bank in terms of Schedule II of the Reserve Bank of India Act, 1034. Article 7 of the Double Taxation Avoidance Agreement (DTAA) provides for taxation in India of a foreign enterprise in respect of profits attributable to its Permanent Establishment (PE) in India. Since the assessee (The Royal Bank of Scotland ) is having a PE in India, the assessee is liable to tax in respect of income attributed to the PE. The assessee charged tax at 36.5925% on its profits on the ground that in view of Article 24 of DTAA with Netherlands, the tax rate applicable to it is the rate applicable to domestic compa....
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....n in determining profits of the PE. It was further stated that this issue has been decided in favour of the assessee by this tribunal from Asst Years 1992-93 to 1996-97. The Learned CITA however found that this issue has been held against assessee for the Asst Years 1999-2000 to 2002-03 & 2004-05 and accordingly upheld the action of the Learned AO. Aggrieved, the assessee is in appeal before us. 4.1. Before us, the Learned AR stated that this issue is covered by the order of this tribunal in assessee's own case for Asst Year 2004-05 in ITA No. 1762/Kol/2008 dated 30.6.2010. We have gone through the said tribunal order, wherein it was held as under:- 6. Both the learned repesentatives of the parties agreed that identical issue has been decided by the ITAT , Kolkata Bench in assessee's own case in ITA No. 579/Kol/2006 dt 9.3.2007 and followed in ITA No. 315/Kol/2007 dt 10.7.2007 pertaining to the Assessment Years 2002-03 and 2003-04 respectively, wherein the ITAT by following earlier order of the Tribunal has allowed the claim of the assessee subject to verification whether the expenditure was included for the purposes of section 44C. In this view of the matter, by following the ea....
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....his, the Learned DR fairly conceded that the issue is covered by the decision of the Hon'ble Calcutta High Court in assessee's own case reported supra. 5.2. We have heard the rival submissions. We find that the issue is squarely covered by the decision of the Hon'ble Calcuta High Court (supra) wherein the facts and questions raised before the Hon'ble Calcutta High Court and the decision rendered thereon are as below:- Under article 5(2) of the Double Taxation Avoidance Agreement between India and the Netherlands, defining permanent establishment, a branch is to be taken as a permanent establishment and if it is further read with article 7, this permanent establishment or branch is to be treated as a separate unit. Article 7(2) specifically states that it is to be considered as a distinct and separate enterprise and its profits are to be so computed as profit properly attributable to such a permanent establishment. In the calculation of such profit by a banking enterprise interest paid can be taken as a deduction by virtue of article 7(3) read with article 11 (7). The assessee was a Netherlands company* and its principal branch office was in India. In the course of its banking a....
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....ustly enriched. The Learned DR stated that no tax has been deducted by the assessee and hence the question of granting refund of TDS does not arise. In response to this, the Learned AR argued that let the fact as to whether the assessee branch had indeed deducted the TDS and remitted the same could be verified by the Learned AO and on this count, he prayed for set aside to the file of the Learned AO. He also stated that this issue has been held in favour of the assessee by the Hon'ble DRP for the Asst Years 2009-10 to 2011-12 by allowing the relief for TDS claim. 6.1. We have heard the rival submissions. We find that the Hon'ble Calcutta High Court had held in asesssee's own case reported in 343 ITR 81 that no tax need to be deducted on interest payments made by the assessee (Indian Branch) to its Head Office and various branches outside India. We feel that the assessee had duly made out of a case for admission of its additional ground and hence the same are admitted herein for adjudication. However, in case the assessee had deducted taxes thereon and remitted to the account of Central Government, then the assessee is rightly entitled for refund of the same. However, as conceded b....
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.... that though this issue has been decided against the assessee in Asst Year 2004-05 by this tribunal, he argued that the same issue has been held in favour of the assessee by the following decisions:- Decision of Delhi Tribunal in the case of DCIT vs Global Trust Bank Limited in ITA No. 474/Del/2009 dated 20.4.2011 Decision of Hon'ble Bombay High Court in the case of CIT vs Saraswat Infotech Ltd in ITA NO. 1243 of 2012 dated 15.1.2013 Decision of Mumbai Tribunal in the case of Saraswat Infotech Ltd vs CIT in ITA No. 3606/Mum/2011 dated 14.3.2012 Hence he prayed that the decision of Bombay High Court be followed which is also binding on this tribunal. In response to this, the Learned DR argued that the issue before the Delhi Tribunal was totally different from the fact before us. He further argued that ATM is only an Electronic Telecommunication Device. It is not similar to computers. He also presented the pictorial representation of functioning of ATM and Computer. He stated that the ATM does not contain Mother Board. He stated that once the ATM card is inserted , on reading the magnetic code thereon, it gets verified from Back End Processing Centre , whereas, the....
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....mation processed by the computer in the ATM machine only, the mechanical functions of the dispensation of cash or deposit of cash is done. 8.2.1. We find that the issue is dealt with by the co-ordinate bench of Delhi Tribunal in the case of DCIT vs Global Trust Bank Ltd in ITA No. 474/Del/2009 dated 20.4.2011, wherein it was held that :- 7. ATM is the computerized telecommunication device that allows bank's customers to access the bank at places other than the normal bank without having to take the trouble to go to the bank in person and collect the cash as is done under the conventional method of withdrawing money from the bank. The ATM machines are computerized machines which not only allow the customers to withdraw money but they can check the account balance, pay bills, purchase goods and services, and therefore, unless it is computerized and linked with the main server, it is not possible to operate the ATM. 10. In this connection, a reference is also invited to the Information Technology Act, 2000 wherein section 2(i) defines the term "computers" which also includes "computer network". The term "computer network" means the interconnection of one or more computers through ....
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....eason to entertain question (i), (ii) and (iii) above. Accordingly, the appeal is dismissed with no order as to costs. 8.2.3. In respect of the case relied on by the Learned DR on the decision rendered by this tribunal in assessee's own case for Asst Year 2004-05, we find that this decision was rendered on 30.6.2010 and thereafter much water has flown on the impugned issue by the decisions of Delhi and Mumbai Tribunal and the decision of Bombay High Court. Respectfully following the aforesaid judicial precedents, we have no hesitation in directing the Learned AO to allow depreciation at the rate of 60% on ATMs. Accordingly, the ground no. 5 raised by the assessee for the Asst Years 2005- 06 and 2006-07 are allowed. 9. DISALLOWANCE OF LEASE RENTALS ON VEHICLES GROUND NO. 6 IN ASST YEAR 2005-06 GROUND NO. 6 IN ASST YEAR 2006-07 GROUND NO. 4 IN ASST YEAR 2007-08 GROUND NO. 2 IN ASST YEAR 2008-09 The facts in Asst Year 2005-06 are stated herein and they remain the same for other years also except change in figures. The assessee has obtained Vehicles on lease and paid lease rental amounting to Rs. 3,73,53,644/- during the subject assessment year. Out of total amount of lease ....
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....case before us. He further argued that the issue before the apex court was - who is the legal owner of the asset . According to him, the apex court did not render any judgement on whether lease rental is a capital or revenue expenditure. In Defence, the Learned AR argued that there is absolutely no difference whether the assessee is a banking company or a leasing company. He pleaded that the ratio decidendi of supreme court (supra) would be squarely applicable to the facts before us. He referred to the relevant clauses of the lease deed wherein the property reverts back to lessor in the event of default by the assessee (lessee) and also stated that the assessee herein does not get any chance to retain the ownership of the vehicles at the end of the lease period by paying a nominal value for the asset. He stated that the lease deed does not contain any clause to this effect. He prayed for allowance of lease rentals as a revenue expenditure. 9.2. We have heard the rival submissions and perused the materials available on record. At the outset, we find that this issue has been held against assessee in assessee's own case for Asst Year 2004-05 vide order of this tribunal dated 30.6.201....
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....n appreciating the said judgement of Hon'ble Apex Court had directed the Learned AO to delete the disallowance on this account for Asst Year 2009-10 . It is also not in dispute that the Learned AO himself had not made any disallowance on this issue from Asst Year 2010-11 onwards. 9.2.2. We find that the issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of I.C.D.S. Ltd vs CIT reported in (2013) 350 ITR 527 (SC) wherein it was held that :- "Held, affirming the decision of the Tribunal, (i) that the assessee was a leasing company which leased out the trucks that it purchased. Therefore, on a combined reading of section 2(13) and (24) of the Act the income derived from leasing of the trucks would be business income, or income derived in the course of business, and had been so assessed. Hence, it fulfilled the requirement of section 32 of the Act, that the asset must be used in the course of business. The assessee did use the vehicles in the course of its leasing business. The fact that the trucks themselves were not used by the assessee was irrelevant for the purpose of section. (ii) That a scrutiny of the material facts at hand raised a presumption....
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.... the lessee would be the owner of those trucks. However, the agreement dealt with the ownership of the trucks under the agreement. There was a clear provision that the said machinery shall at all times remain sole and exclusive property of the lessor and the lessee shall have no right, title or interest thereon. It further that irrecoverable undertaking of the lessee that at no time during the currency of the lease agreement, which shall be non-cancellable, would the lessee attempt to capitalise the leased assets in its balance-sheet. As per clause 8, it had been agreed that the ownership of the said assets during the tenure of the lease and inclusive of any renewal options that the lessor may concur indisputably rested with the lessor. So in clear terms, the agreement provided that during the lease period, only the lessor shall be treated as owner of the trucks and not the lessee. Moreover, the lessor had been allowed depreciation on the trucks. Therefore, considering the terms and conditions of the lease agreement and the fact that depreciation on these trucks had been allowed to the lessor, the lease rent was deductible as revenue expenditure"- In the aforesaid case, there was....