TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 972
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....isposed off by this common order, for the sake of convenience and brevity. 3. At the very outset, the counsel for the assessee stated that the grounds raised by the assessee and the revenue in their respective appeals have been considered and decided by this Tribunal in earlier assessment years. The counsel supplied the copies of the decisions of the Coordinate Bench in earlier years. Though the Ld. DR strongly supported the findings of the Assessing Officer but fairly conceded that the impugned issues are coming from earlier years and have been decided by this Tribunal. 4. We have carefully considered the orders of the authorities below and have also perused the detailed chart furnished by the assessee showing how the issues are covered. We find force in the contention of the counsel. The grounds of appeal taken by the assessee and the revenue were also there in earlier assessment years and have been decided by the Coordinate Benches. 5. The assessee is one of the largest banking and financial organizations in the world which is incorporated and registered in Hongkong. HSBC carries out the business of banking in India through its branch in accordance with the Banking Regulation....
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....e. We find considerable force in the arguments advanced by the ld. AR that the Indian banks have to establish relations with the overseas banks as the Indian banks themselves do not have network of branches outside India. lNM IB markets the Nostro accounts and trade finance services offered by overseas branches of HSBC to such Indian banks. The lNM IB division does not use any additional facility, and the employees providing this support do not have any special marketing skills or knowledge of the products provided by the overseas HSBC branches. It is important to emphasize that the global network of the assessee is a direct asset and mainly benefit the assessee to have global reach and the ability to offer services under its network. This directly encourages FI's to approach the assessee for the services as compared to others who may not have such global reach. It may also be noted that the overseas HSBC branches also provide services that benefit the assessee, i.e., in selling INR Vostro accounts of HSBC India to banks domiciled outside India, The assessee does not pay any amount to overseas HSBC branches for such marketing services. It is also pertinent to note that as a res....
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....banking activities and the said benefit directly flows to the assessee. 14.14. It would be crucial to note that assessee had reflected more than 100 international transactions in form No.3CEB filed along with the return of income and the same were accepted to be at arm's length by the ld. TPO. Admittedly these transactions include items which are marketed by INM IB division such as custodian charges, guarantee commission charges etc as is evident from Annexure 'C to form 3CEB. Hence, it could be seen that the main transactions were found to be at arm's length and the incidental benefit arising out of such transaction has been considered as a separate transaction. We find in the instant case that the main business transactions have been accepted to be at arm's length and hence, the ld. TPO cannot separately treat the incidental benefit as a separate transaction unless it is shown that they are separate from the main business activities. In this regard, we find that the ld. AR placed reliance on the decision of Co-ordinate bench decision of this Tribunal in the case of Det Norske Veritos A/S. v. Additional Director of Income Tax reported in 67 taxmann.com 16 (Mumbai Tribunal) where....
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....s ground is allowed. 9. The second grievance relates to the adjustment on account of Marketing and Support Services relating to External Commercial Borrowings. The Ld. CIT(A) has considered this grievance of the assessee on adjustment of Rs..3,49,53,287/- in respect of alleged services in relation to External Commercial Borrowings [ECB] at Para No. 29 of its order vide Ground No. 26 and at Para No. 29.2 and he has followed the orders of his predecessor for the A.Y.2002-2003, 2003-2004 & 2004-2005 and after observing that there is no change in the facts of the case, following the decision of his predecessor has deleted the adjustment. The Coordinate Bench in ITA No. 3857/MUM/2006 and others, has considered the issue at Para No. 17 of its order and at Para No. 17.12 held as under: - "17.12. We have heard rival submissions. At the preliminary facts stated hereinabove remained undisputed and hence, the same are not reiterated herein for the sake of brevity. It is not in dispute that assessee had received Debt Syndication Fees of Rs. 67,68,620/- together with 50,000 USD as its fee / commission income for enabling the Indian customers to avail ECBs from its overseas branches. The said....
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....11 mio * 2.5bps * 3.5 years) equals USD 8692 (i.e., Present Value of USD 9625) 60% of the above: USD 5215/- 86. From the working of the difference in the application of two methods as given by the ld. Counsel, we do not find any justification given by the ld.TPO to adopt 60% of NNBV allocation so as to take a contrary stand from the facts of the case presented by the assessee and the transaction of marketing of derivative services. Specially looking to the fact that derivative contract is solely between derivative contract is solely between the Indian customer and the overseas AE; and all risks associated with the derivative contract, including credit risk, market risk, liquidity risk, and country risk, are borne entirely by the overseas AE and the Assessee does not assume any risks in these transactions. For the activities performed, the Assessee has already earned a marketing fee from the AE, amounting to 30% NNBV and the AE is earning the remaining 70% to manage the transaction over its life and assumes all the risk associated with the transaction. Nowhere, ld. TPO has done any analysis of the comparable data as to why it should be adopted at 60%. Thus, we agree with the o....
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.... at LIBOR + 15 basis points based on the borrowing rate of the assessee on a USD loan taken from HSBC London. Such approach is not correct because LIBOR rate cannot be applied on the US loan taken from HSBC USA. The ld. TPO ought to have considered the Fed Fund which is a target interest rate that is fixed by the Federal Open Market Committee ('FOMC') for implementing the USA's monetary policies, plus the relevant geographic market funds is the USA, for which the Fed Fund rate used should be the most appropriate for the purposes of benchmarking rather than taking LIBOR rates. Accordingly, we agree with the contention of the ld. Counsel. Accordingly, we hold the order of the ld. CIT(A) and accordingly, the ground raised by the Revenue is dismissed." 14. Respectfully following the decision of the Coordinate Bench (supra), we decline to interfere. For the reasons given hereinabove, the issues relating to interest received from HSBC Hongkong, Singapore and Japan offices is also decided in favour of assessee and against the revenue. 15. The last dispute in transfer pricing issues relate to the Transition Support Services. The underlying facts in the issue are that the asse....
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.... the opinion that the impugned expenditure is in the nature of capital expenditure and the assessee has not submitted any documents to show the mode of determination of compensation. Moreover, the payments made to the employees are intended to compensate them for their remaining years of service left and thus cannot under any circumstances be allowed to be claimed in a single year. Allowing the expenditure allowable under section 35DDA of the Act, the Assessing Officer disallowed the excess deduction claimed. While deciding, the Assessing Officer followed the orders of his predecessor for the A.Y.2004-2005 and A.Y. 2005-2006. When the matter was agitated before Ld. CIT(A), the Ld. CIT(A) also followed the order of his predecessor for the A.Y. 2004-2005 and decided the issue against the assessee. The Coordinate Bench in ITA No. 7336/MUM/2010 for the A.Y.2004-2005 has considered a similar issue vide Ground No. 5 of the appeal before it and held as under: - "24. It has been stated that, the Assessee operated a separate VRS scheme from July 7, 2003, to July 31, 2003, which was considered for section 35DDA of the Act. The said VRS scheme is included on page 17 of the factual paper boo....
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....al sum paid by the assessee to its employees. This amount in the hands of the employee has been exempted under s. 10(10C) of the Act to the extent of Rs. 5 lacs. The relevant part of s. 10(10C) reads as under :..." 19. The submission of the learned Departmental Representative is that the provisions of s. 35DDA are applicable because the payment has been made in pursuance to scheme of voluntary retirement and it is not necessary that the said scheme should comply with guidelines as per s. 10 (10C). We are not inclined to accept the plea of the learned Departmental Representative. In the present circumstances, in order to resolve the dispute, we are of the opinion that principles of harmonious construction of statute have to be applied. As per these principles a statute must be received as a whole and one provision of the Act should be conformed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute. The provisions relating to voluntary retirement scheme are contained in s. 10(10C) and all the conditions laid down therein have to be fulfilled before exemption can be availed under the said section. The income and expenditure go t....
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....paid to Gillanders Arbuthnot and Company Ltd. Since the deduction has been allowed by the Coordinate Bench as revenue expenditure this ground becomes infructuous. 22. In the result, the captioned appeal relating to the domestic issues raised by the assessee are partly allowed. 23. Now coming to the domestic issues raised by the revenue in its appeals for the captioned assessment years in ITA Nos. 4787, 4788 & 7309/MUM/2016 are decided as under. 24. The first grievance relates to the expenses incurred for mobilization of deposits from Non-resident Indian. The Ld. CIT(A) has considered the grievance of the assessee at Para No. 5.1 of his order and at Para No. 5.5 he observed that this issue is covered in favour of assessee by the decisions of the Tribunal for the A.Y.1992-93, 1994-95, 1996-97, 1997-98 upto A.Y. 2001-02 and since there is no change of facts following the orders of the earlier assessment years, the Ld. CIT(A) has deleted the impugned addition. The Coordinate Bench in ITA No. 2680/MUM/2004 & ITA No. 4670/MUM/2005 in A.Y. 2000-2001 & 2001-2002 has considered a similar issue and has decided in favour of assessee. Respectfully following the decision of the Coordinate Be....
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.... that this issue has been decided against assessee and in favour of revenue. Therefore, we do not find any logic in revenue taking this ground in its appeal, the same is dismissed. 30. The next ground relates to the addition on account of interchange income received by the offshore (non-India) branches of the assessee. The First Appellate Authority has followed the decision of the Coordinate Bench given in favour of assessee in A.Y.2000-2001, 2001-2002, 2003-2004 & 2005-2006 in ITA Nos. 3688/MUM/2009, 3689/MUM/2009, 2358/MUM/2011 & 4786/MUM/2016 respectively. We find that the Coordinate Bench in ITA No. 4786/MUM/2016 has considered a similar grievance at Para No. 118 of its order wherein it has followed the decision given in A.Y. 2000-2001, 2001-2002 & 2003-2004, the findings read as under: - "118. This issue is covered in Assessee's own case for AY 2000- 01, 2001-02 and 2003-04 (3688/Mum/09, 3689/Mum/09, 2358/Mum/14) - the relevant para of the decision is reproduced as under: "We have heard the rival submissions and perused the material before us. We find that in the matter of Standard Chartered Grindlays Bank Ltd.(supra), the issue of taxability of commission with regard....
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....of the assessee, it cannot be said that Indian branch was in any way connected with the transaction or that income earned could in any way be said to have been directly or indirectly through PE in India. He accordingly held that the income arising in India from transaction in India by using credit cards of foreign branches should be taxed in India. This income can only be the income received by the Indian branch and such commission income being already included as an acquiring bank. The income to the foreign branch from the credit given to its card holders outside India cannot be taxed in the hands of the Indian branch since it is not arising in India and also it cannot be attributed to the assets and activities of the Indian branch as is required under art. 7 of DTAA. Therefore, there is no need to further estimate any income. He accordingly deleted the addition. XXXXXXXXXX 48. We have considered the rival submissions. We are in agreement with the finding of the learned CIT(A). Where the foreign branch has issued credit card and even if the transaction takes place in India, the credit is given to the customer outside India and the debt has also arisen outside India. The mercha....
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....ised by the revenue in its appeal for the A.Y.2008-09. While deleting the addition the Ld. CIT(A) followed the decisions given in A.Y. 1992-1993 to A.Y. 2001-2002 and also for the A.Y.2005-06 to 2007-08. We have carefully considered the underlying facts, the investment in tax free bonds brought to our notice as on 31.03.2007 was Rs..241 crores which came down to Rs..141 crores as on 31.03.2008 and the investment in shares which was Rs..4.02 crores as on 31.03.2007 became Rs..35.09 crores as on 31.03.2008. The own capital as on 31.03.2007 was Rs..56,84,85,32,000/- which was Rs..78,01,32,46,000/- as on 31.03.2008, this clearly show that the assessee was having sufficient interest free own funds to make the impugned investments in shares. Therefore, there is no question of utilization of any interest bearing funds. Therefore, there is no question of any disallowance of interest on earing exempt income. However, expenditure on account of administrative expenses cannot be ruled out, therefore in our considered opinion the disallowance to the extent of 1% of the exempt income should meet the ends of justice. Therefore, we direct the Assessing Officer to restrict the disallowance to the e....
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.... submission, Appellant has submitted that it has not borrowed money/ debt incurred from overseas banks. As such, payment of Nostro Account Maintenance charges would not be classified as interest u/s 2(28A) of the Act. It is also claimed that these charges do not accrue or arise in India. Reference is also made to CBDT Instruction dated 27.09.1988 whereby it is clarified that no tax is required to be withheld on SWIFT charges since the amount is directly debited overseas. It is accordingly submitted that the charges are not liable to tax in India and as such there 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 ....
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....tion 195 of the Act. Therefore, the provisions of Section 40(a)(i) of the Act cannot be attracted in case of the deemed remittance of Nostro Account Maintenance Charges without deduction of tax at source. In the case before us also the CIT(A) has concluded that the Assessee was not under obligation to withhold tax from Nostro Account Maintenance Charges in terms of Section 195 of the Act and therefore, could not be treated as an 'assessee in default'. Accordingly, demand raised by the Assessing Officer on the Assessee under Section 201(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 c....