TaxTMI 
TaxTMI 
2023 (3) TMI 193
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....ed 8 April 2021 (copy of the order received vide e-mail dated 12 April 2021), under section 143(3) read with section 144C(13) of the Act, pursuant to the directions of the Hon'ble Dispute Resolution Panel-1 (DRP), Mumbai, BNP Paribas (the Appellant') respectfully submits that the learned AO has erred in passing the order on the following grounds: 1. The learned AO has erred in not accepting the claim that the rate of tax applicable to domestic companies and/ or co-operative banks for AY 2017-18 is also applicable to the Appellant, in accordance with the provisions of Article 26 (Non-discrimination) of the India France tax treaty. 2. The learned AO has erred in subjecting to tax, the data processing fees paid by Indian branch offices of the Appellant to its Singapore branch amounting to Rs 40,70,47,265, as income of the Appellant. 3. Without prejudice to Ground 2 above, the learned AO has erred in levying surcharge of 5 percent and education cess of 3 percent on the tax computed at the rate of 10% under Article 13 of the India-France tax treaty. 4. The learned AO has erred in holding that interest payable/ paid by the Indian branch offices....
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....n the directions issued by the learned DRP and orders passed by the coordinate bench of the Tribunal in assessee's own case in preceding assessment years rejected the claim of the assessee that the tax rate applicable to Indian companies carrying on similar business should be applied to its case. The learned DRP vide its directions dated 25/02/2021, issued under section 144C(5) of the Act rejected the objections filed by the assessee on this issue following its directions rendered in assessee's own case for the assessment year 2014-15. In conformity, the AO, inter-alia, passed the impugned final assessment order on this issue. Being aggrieved, the assessee is in appeal before us. 5. During the hearing, the learned counsel appearing for the assessee, at the outset, fairly submitted that this issue has been decided against the assessee by the decisions of the coordinate bench of the Tribunal in the preceding assessment years. The learned counsel also submitted that assessee's appeal on this issue has been admitted by the Hon'ble jurisdictional High Court and a decision on the same is awaited. 6. On the other hand, the learned Departmental Representative ('learned DR') placed re....
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.... which there should not be any discrimination between the domestic and the non-resident company. The Tribunal, however, referred to the Explanation in the Section 90, inserted in the IT Act with retrospective effect from 01-04- 1962 as per which the higher tax rate in case of foreign company, should not be regarded as violation of non-discrimination clause. The Tribunal also referred to the judgment of the Hon'ble Supreme Court in the case of ACIT Vs. J.K. Synthetics The Tribunal accordingly, rejected the ground raised by the assessee. The facts in the present appeal are identical and, therefore, respectfully following the decision of the Tribunal in the case of M/s BNP Paribas(supra), we dismiss this ground raised by the assessee." Following the same, we uphold the order of the Ld. CIT(A) and dismiss the 1 ground of appeal. As the facts and the issue in the present appeal of the assessee remains the same, therefore, we respectfully follow the aforesaid order of the Tribunal. Accordingly, the Ground of appeal No. 1 is dismissed." 8. Thus, from the above, it is evident that this issue is recurring in nature and has been decided against the assessee by the co....
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....-15. In conformity, the AO, inter-alia, passed the impugned final assessment order on this issue. Being aggrieved, the assessee is in appeal before us. 11. During the hearing, the learned counsel submitted that this issue has been decided in favour of the assessee by the Hon'ble jurisdictional High Court and the coordinate bench of the Tribunal in assessee's own case. On the contrary, the learned DR vehemently relied upon the orders passed by the lower authorities. 12. We have considered the rival submissions and perused the material available on record. We find that the coordinate Bench of the Tribunal in assessee's own case cited supra, for the assessment year 2014-15, decided a similar issue in favour of the assessee, by observing as under: "14. We have deliberated at length on the contentions advanced by the authorised representatives for both the parties in the backdrop of the orders of the lower authorities and have also perused the material available on record. On a perusal of the aforesaid ground, we find, that the issue herein involved is about taxability of data processing fees paid by the Indian branch offices of the assessee to its Singapore branch (servi....
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....ee's Head office/overseas branches chargeable to tax in India. This decision of the A.O. was challenged by the assessee in the appeal filed before the Ld CIT(A) and the contention raised before the Ld. CIT (A) in this regard was that the Head office of the assessee bank as well as all its branches being the same person and one taxable entity as per the Indian Income tax Act, interest paid by Indian Braches head office and other overseas Branches was payment to se which did not give rise to any income as per the income-tax Act. In support of this contention, reliance was placed on behalf of the assessee on the decision of Hon'ble Supreme Court in the case of Sir Kikabhai Premchand CIT (Central) 24 (TR 506 as well as the decision of Kolkata Special Bench of the ITAT in the case of ABN Amro Bank NV vs. Asst. Director of Income-tax 98 TTJ 295. The contention of the assessee, however, was not accepted by the Ld CIT (A) and relying on the decision of Mumbai Bench of the ITAT in the case of Dresdner Bank AG vs Add1. CIT 108 ITD 375, he held that the interest paid by the Indian branches of the assessee bank to its head office and overseas branches was chargeable to tax in India. Ac....
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....e 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 hearing before us, the learned representatives of both the sides have also not made any separate submissions on this aspect of the matter specifically. Having held that the interest paid by the Indian branch of the assessee bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of s. 195 would not be attracted and there being no failure to deduct tax at source from the said payment of interest made by the PE. the question of disallowance of the said interest by invoking the provisions of s 40 (a)(i) does not arise. Accordingly we answer question No. 1 referred to this Special Bench in the negative ie in favour of the assessee and question No. 2 in affirmative Le again in favour of the assessee." As the facts and circumstances of the case during the year under consideration are perimateria, where payme....
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.... by the Revenue against the order passed by the coordinate bench of the Tribunal in assessee's own case for the assessment year 2009-10 on a similar issue. The relevant findings of the Hon'ble jurisdictional High Court in CIT vs BNP Paribas SA, in ITAs No.825 and 826 of 2017, vide order dated 27/08/2019, in this regard, are as under:- "4. The Tribunal placed reliance upon the orders of its Coordinate Bench for the Assessment Year 2006-07 in respect of the same Assessee raising the same issue while allowing the appeal of the Assessee. We are informed that from the order of the Co-ordinate bench of the Tribunal for Assessment Year 2006-07, Revenue filed an appeal to this Court being Tax Appeal No.1192 of 2015 raising this very issue. This Court's order did not entertain this question as proposed therein on the grounds that the same in the facts of the case was academic in nature. This for the reason what was being paid by the Indian entity to its Singapore branch was only in the nature of reimbursement of expenses. This finding of fact was not challenged in the Revenue's appeal for Assessment Year 2006-07 or in these appeals for Assessment Year 2008-09 and 2009-10. T....
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....ranches constitutes a 'payment of self' and hence such payment is not taxable in India by placing reliance upon the decision of the Special Bench of the Tribunal in Sumitomo Mitsui Banking Corporation (supra). The assessee also placed reliance upon the decisions of the coordinate bench of the Tribunal in assessee's own case for the assessment years 2002-03 to 2005-06. The AO vide draft assessment order did not agree with the submissions of the assessee and held that under the Act there cannot be income from self and neither could there be payment to self as an allowable business expenditure. Thus, under the Act, the assessee bank could not debit interest payments to the head office and other branches and claimed the same as an expense, nor could it show interest received from its head office and other branches as interest income while determining the business income attributable to activities carried out in India. By referring to the provisions of India-France DTAA, the AO held that the Permanent Establishment ('PE') is considered as a separate entity then the enterprise of which it is a PE while dealing with the said enterprise. The AO further held that once the assessee has opted....
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....ubmissions in line with the findings of the AO in the draft assessment order and vehemently relied upon the orders passed by the lower authority. 21. We have considered the rival submissions and perused the material available on record. During the year, the Indian branch office paid interest to its head office and other overseas branches on debt and overdrafts. In the present case, it is undisputed that the various branches of the assessee in India constitute the PE of the assessee under the provisions of the India-France DTAA. Further, it can also not be disputed that in terms of section 90(2), the provisions of the Act or the DTAA, whichever is more beneficial to the assessee shall be applicable. Thus, being an entity covered under the provisions of the India-France DTAA, the payment of interest to the head office and other overseas branches was claimed as a deduction by the Indian branch office under the provisions of Article 7(3) of the DTAA. The Revenue, in the present case, has not disputed the deduction claimed by the Indian branch office. However, as per the Revenue, the interest received by the head office/overseas branches is taxable under the provisions of section 9(1....
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.... reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices." 23. Thus, in the case of a banking enterprise, any payment by the PE to the head office of the enterprise by way of interest on money lent to the PE shall be allowed as ....
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....f the GE is the income attributable to the PE. As regards its being treated as interest income of the assessee, arising in the source jurisdiction, i.e. India, can only be taxed under Article 12 but then as provided in article 12 (5), the charging provisions of Article 12(1) and (2), which deal with taxability of interest in the source state, will not apply "if the beneficial owner of the interest of the interest, being a resident of a contract state, carries on business in the other contracting state in which the interest arises, through a permanent establishment situated therein" and that in such a case the provisions of Article 7, which deal with taxability of profits of the permanent establishment alone will apply. In plain words, when interest income arises to a GE even if that be so, the taxability under article 12 will not apply, and it will remain restricted to taxability of profits attributable to the permanent establishment under article 7. The profits attributable to the PE have anyway been offered to tax. As regards the theory, as advanced by learned Assessing Officer in considerable detail, that for taxing the GE, the taxability has to be in respect of (i) income attri....
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....ted by the learned counsel that in case ground no.4, raised in assessee's appeal, is decided in assessee's favour, then ground no.5 would be rendered academic in nature. As we have decided ground no.4 in favour of the assessee, therefore, in view of the submission of the learned counsel, ground no.5 is dismissed as having been rendered academic. 27. Ground no.6, raised in assessee's appeal is pertaining to short grant of credit of TDS. This issue is restored to the file of the AO with the direction to grant TDS credit, in accordance with the law, after conducting the necessary verification. As a result, ground no.6 raised in assessee's appeal is allowed for statistical purposes. 28. Grounds no.7 to 9, raised in assessee's appeal, is pertaining to the levy of interest under sections 234B, 234C and 234D of the Act, which is consequential in nature. Therefore, grounds no.7 to 9 are allowed for statistical purposes. 29. Ground no.10 is pertaining to the initiation of penalty proceedings, which is premature in nature and therefore is dismissed. 30. In the result, the appeal by the assessee is partly allowed for statistical purposes. ITA no.1670/Mum./2022 Assessee's App....
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....ble the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law." 32. The issue arising in ground no.1, raised in assessee's appeal, is pertaining to the rate of tax applicable to the assessee. Since a similar issue has been decided in assessee's appeal for the assessment year 2017-18, the decision rendered therein shall apply mutatis mutandis. As a result, ground No. 1 raised in assessee's appeal is dismissed. 33. The issue arising in ground no.2, raised in assessee's appeal, is pertaining to the taxability of data processing fees paid by the Indian branch offices of the assessee to its Singapore branch. Since a similar issue has been decided in assessee's appeal for the assessment year 2017-18, the decision rendered therein shall apply mutatis mutandis. As a result, ground no.2 raised in assessee's appeal is allowed. 34. During the hearing, it was, inter-alia, submitted by the learned counsel that in case ground no.2, raised in assessee's appeal, is decided in assessee's favour, then ground no.3 would be rendered academic in nature. As we have decided ground no.2 in favour of the assessee, therefore, in view of the submission of the learned couns....