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2024 (12) TMI 972
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....ptioned appeals were heard together and are disposed 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 i....
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....e assessee had duly offered the aforesaid amount of Rs.4.4856 Crores as its income in the return of income. 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....
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....hat the assessee had considerably benefitted out of earning income from Indian FIs and float income pursuant to correspondent 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 Tribu....
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....ng that the lower authorities have followed the orders of earlier assessment years, respectfully following the decision of the Coordinate Bench (supra), this 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....
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.... of the deal: 3.5 years Value on the deal per annum: 10 basis points per annum (say) Credit risk on the deal: 3.5 basis points per annum (say) Other event risk/uncertainty, etc.: 4 basis points per annum (say) INPV on the deal: PV of (USD11 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....
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....t rate has been lower than the generally committed rates. Thus, assessee is not at disadvantage compared to transaction between HSBC USA and unrelated banks, therefore, we agree with the ld. Counsel that the transaction between the Assessee and HSBC USA is at an arm's length price. The ld. AO has applied ALP 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....
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....parated from the services of the bank during financial year ended 31.03.2006 and the bank paid an amount of Rs..15,52,94,665/- to such separating employees and claimed that such expenses are fully deductible under section 37 of the Act. After considering the detailed submissions of the assessee, the Assessing Officer was of 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 ....
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.... applicability of this section is attracted only when the payment has been made to an employee in connection with his voluntary retirement, in accordance with any scheme or schemes of voluntary retirement. Since the payment reduces the burden on the assessee relatable to subsequent years, the legislature inserted this section in order to allow only 1/5th of the total 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....
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....of Section 35DDA of the Act. Accordingly, this ground is allowed." 20. Respectfully following the decision of the Coordinate Bench (supra), the Assessing Officer is directed to delete the impugned addition. This ground in A.Y. 2006-2007, 2007-2008 and 2008-2009 is allowed. 21. The second grievance in the impugned assessment years related to the claim of depreciation on amount 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, 199....
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....T(A), this Ground is dismissed. 28. The next ground relates to the addition on account of overfunding of Employees Defined Benefit Pension Fund. For the reasons given hereinabove this ground is also dismissed. 29. The next ground relates to the addition of Rs..6,36,80,000/- in respect of provision made for unfunded pension liability in respect of Ex-employees. A perusal of the findings of the Ld. CIT(A) show 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 fi....
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....d in India by a non-resident which will not be the case here since the issuing bank which provides debt is outside India being a foreign branch. As per art. 7 of Indo-UK DTAA, income that can be brought to tax in India must be directly or indirectly attributable to the PE in India. Since the transactions were with appellant's foreign branches where the issuing bank and the acquiring bank in India was some bank other than the Indian branch 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 requ....
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....rant relief to the assessee by following the direction of the Special Bench in the case of Biocon Limited [35 taxman.com 335]". The appeal against which has been dismissed by the Hon'ble Karnataka High Court vide order dated 11.11.2022 in ITA No. 653 of 2013. 34. Respectfully following the decision of the Coordinate Bench (supra), the impugned grounds are dismissed. 35. Next ground relates to the deletion of the addition on account of tax free income. This issue is raised 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....
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....cision: I have considered the submission of the Appellant as well as the order under appeal. Various grounds of appeals raised are adjudicated below. 4.1 Grounds no. 1 & 2: These grounds pertain to AO's action of holding Appellant as assessee in default in respect of Nostro Account Maintenance charges paid / payable to foreign banks and subsequent raising of TDS demand, by holding that the charges are liable to tax in India and consequently, liable for tax deduction u/s 195 of the Act. In the 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....
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....lar issue involved in earlier years, we uphold the impugned order of the ld. CIT(A) deleting the disallowance made by the A.O. on account of transaction charges u/s 40(a)(i) of the Act and dismiss ground No. 3 of Revenue's appeal."(Emphasis Supplied) 11.3. Thus, the Tribunal has, in identical facts and circumstances, decided the issue in favour of the Assessee while holding that Nostro Account Maintenance Charges are in the nature of bank charges levied on transaction and the same are not subject to tax deduction at source under Section 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 suffe....