TaxTMI 
TaxTMI 
2023 (7) TMI 1518
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....gainst the order, dated 31/03/2021, passed under Section 201(1)/201(1A) read with Section 195 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 3. The Revenue has raised following grounds of appeal: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was erred in treating the assessee not in default for not making TDS u/s 195 of the Income Tax Act, 1961 with respect to payment of Rs. 2,78,35,307/- made by assessee to various bank of HSBC Group during F.Y. 2013-14 as Nostro account maintenance charges, therefore, reduced the demand of Rs. 3,68,84,547/- raised by assessing officer in its order passed u/s 201(1) and 201(1A) of the Income-tax Act, 1961 to Nil. 2. The Appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored." 4. During the year under consideration the Assessee, a non-resident banking organization incorporated/registered in Hong Kong, was engaged in the business of banking in India through its branch in India in accordance with the Banking Regulation Act, 1949 and Reserve Bank of India Guidelines. 5. The Assessing Officer r....
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....owing submissions (as reproduced in paragraph 3 of the order impugned): "3. Submissions of the Appellant: The Assessee has filed following submissions: Nostro account maintenance charges are not in the nature of interest. As per section 2(28A) of the Act, "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. As mentioned above, the Appellant maintains nostro accounts with overseas banks outside India. The charges levied by the said banks to the Appellant are with respect to the account maintenance support provided by said banks. The Appellant has not borrowed money/debt incurred from such overseas banks. Accordingly, in the absence of money borrowed/debt incurred, payment of nostro account maintenance charges would not be classified as interest' under section 2(28A) of the Act. Nostro account maintenance charges do not accrue or arise in India At the outset, the App....
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....d the nostro account maintenance charges paid to overseas banks under section 40(a)(i) of the Act for non- deduction of tax in AY 2006-07 to AY 2015-16 in the hands of Appellant. The CIT(A) deleted the disallowance in AY 2006-07 to AY 2015-16 and held that the Appellant is not required to deduct tax on nostro account maintenance charges paid to overseas banks since the said charges are not taxable in India. The relevant extract of the order of CIT(A) for AY 2006-07 (enclosed as Annexure 2) is as under: I have considered the AO's order as well as appellant's submission as extracted above. On the basis of the submissions made by the Appellant, I find that the amount of payment made by the appellant in the nature of nostro maintenance account is not taxable in India, and accordingly if the same is not taxable in India then the question of withholding tax on the same doesn't arise. Considering the facts in the instant case, the AO should have allowed nostro account maintenance charges as claimed by the Appellant. Hence, the addition made by the AO of Rs. 1,44,21,997 on account of nostro maintenance charges is deleted. The relevant extract of recent CIT(A) ....
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....here is no question of TDS u/s 195. The Appellant has placed reliance on decision of the Hon'ble Mumbai Tribunal in the case of Oman International Bank SAOG vs DDIT(IT) [ITA No. 6800/Mum/2010] as well as various orders of the CIT(A) deleting the disallowance made u/s 40(a)(i) for AY 2006-07 to 2015-16. 4.1.1 I have considered the submission. I find that the Appellant has raised ground disputing disallowance of the nostro account maintenance charges of Rs. 2,78,35,306/- under section 40(a)(i) of the Act on the ground that tax has not been deducted thereon under section 195 of the Act in its appeal against assessment order u/s 143(3) r.w.s. 144C for AY 2013-14. In appeal order dated 22.03.2019, the said disallowance has been deleted by my predecessor. In view of the above and considering the submission of the Appellant, I hold that the action of the ITO(IT) Wd 2(2)(2), Mumbai in holding the Appellant as assessee in default for not making TDS on Nostro Account maintenance charges, is not sustainable. Ground Nos 1 & 2 are accordingly allowed." (Exphasis Supplied] 11.2. We note that the decision of the CIT(A) is in line with the decision of the Mumbai Bench of t....
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....1) and 201(1A) of the Act was deleted by the CIT(A). In our view, the order passed by the CIT(A) does not suffer from any infirmity to this extent. 11.4. Further, we do not find merit in the contention advanced by Ld. Departmental Representative that Nostro Account Maintenance Charges are in the nature of 'interest' as defined under Section 2(28A) of the Act. On perusal of the aforesaid definition we find that term 'interest' is defined as under: ' interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized.' 11.5. The service fee and other charges included in the above definition of 'interest' are those charged in respect of (i) moneys borrowed, or (ii) debt incurred or (iii) in respect of any credit facility (which has not been utilized). In the case before us, the Assessing Officer has not brought on record any material to establish that the Assessee has borrowed money or incurred debt or availed any cred....