TaxTMI 
TaxTMI 
2019 (9) TMI 731
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.... is general in nature and needs no separate adjudication. 3. Vide Ground No. 2, the assessee has challenged the addition on account of interest received on External Commercial Borrowings [ECB], extended to Indian borrowers. 4. At the very outset, the ld. counsel for the assessee stated that on identical set of facts, this issue was considered by the Tribunal in Assessment Year 2011-12 in ITA No. 306/DEL/2016 vide Ground No. 2 of that appeal and vide adjudicating the issue in favour of the assessee, the Tribunal relied on the decision of the co-ordinate bench for Assessment Year 2010-11 in ITA No. 1174/DEL/2015. 5. The ld. counsel for the assessee further pointed out that this issue came up for adjudication again in Assessment Year ....
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.... Indian borrowers. 21. The facts in brief are that the head office / other overseas branches of the assessee are in receipt of interest earned from the external commercial borrowings (ECB) given to the Indian borrowers parties. Indian branches of assessee help its Indian customers in arranging funds through its overseas branches and the dealer in India cannot lend in foreign currency except for providing export credit to its concern as per the extant Reserve Bank of India Regulations. Indian branches of the assessee but on the request of the customers pass on the lead to the overseas branches along with the credit evaluation report, terms and conditions of approval and details of security documents to be entered into. Indi....
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..... 23. In support of the ground the Id. AR made following submissions :- (i) At the outset, we wish to submit that due to lack of the details/information, the Tribunal in the order passed for Assessment Years 2007-08 and 2008-09 had remanded back the issue of taxability of ECB interest to the file of the Assessing Officer for de novo consideration. However, as noted by the DRP, since all the requisite details have been filed by the assessee for AY 2010-11 and the issue has been decided accordingly, it is submitted that the matter is not required to be restored back to the Assessing Officer for Assessment Year 2010-11 and the same be decided by the Tribunal on merits. (ii) ECBs given to the Indian customers are effe....
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.... not attributable to the Indian branches of the assessee and only the fee is taxable in the hands of the Indian branches of the assessee for the role played by it in arranging the ECBs. (v) Without prejudice to the claim of non-taxability of ECB interest income, the AO has erred in not allowing the credit for tax deducted at source on ECB interest. Sample copies of TDS certificates were also furnished to the AO. Further, that the taxes have been deducted is an admitted position since the AO has himself grossed up the entire amount of ECB interest by the amount of tax borne by the borrowers. Once this is so, in view of section 208 of the Act, the necessary credit has to be given to the assessee. i) Tax at source has been de....
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....is born by the payer of the income, income is grossed up by the amount of tax born by the payer and such grossed up interest is taxed in the hands of the payee. Any taxes with-held by the payer is allowable as credit to the payee of income against the income taxed in the hands of the payee. He submitted that CBDT vide its Circular No. 785 dated 24.11.1999 has also clarified that where the payment is made of taxes i.e. tax is borne by the payer of the income, the payer is under obligation to issue TDS certificate to the payee, since such grossed up income is taxable in the hands of the payee and the payee is eligible to claim credit of such taxes with held against the income taxed in the hands of the payee. 26. After having gone thr....
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..... 9. Ground No. 3 relates to the deduction u/s 44C of the Act. 10. This Ground is taken without prejudice to Ground No. 2 above. Since Ground No. 2 stands decided in favour of the assessee, Ground no. 3 becomes otiose. 11. Ground No. 4 relates to the levy of interest u/s 234D of the Act. 12. Before us, the ld. counsel for the assessee furnished an intimation u/s 143(1) of the Act and pointed out that refund was adjusted against the demand on 31.10.2012. This shows that refund was never granted to the assessee but was adjusted against the demand. The ld. counsel for the assessee also furnished Income tax computation form and pointed out that interest has been levied u/s 234D of the Act for the period 10.07.2009 to July 2016. T....