TaxTMI 
TaxTMI 
2024 (11) TMI 1500
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....see carried on its business of banking in India through its branches which it had acquired pursuant to a scheme of amalgamation sanctioned by the Reserve Bank of India (hereinafter referred as 'RBI') whereby the Indian branches of Royal Bank of Scotland N.V. (RBS N.V.) in India were merged into the assessee with effect from 27.02.2017. The ABN Amro Bank, a Netherlands entity, used to carry on banking business in India through its branches situated in India and on the acquisition of the ABN Amro bank by the Roay Bank of Scotland Group its name was changed to the Royal Bank of Scotland NV. This entity used to file its tax returns in India in respect of the profit that were attributable to its activities of the permanent establishment in India as well as in respect of other income which accrued or arose to it in India. Pursuant to an appeal effect order passed for A.Y 2014-15 by the Revenue a refund of income tax of Rs. 40,07,37,130/-, including interest of Rs.9,65,18,062/- in terms of Section 244A of the Act was granted. The said interest refunds were subjected to tax deducted at source of Rs. 96,51,807/- by the Revenue during the A.Y. 2019-20. Similarly, pursuant to certain appeal e....
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....ded and the assessee in this reply vide letter dated 25.02.2022, explained as to why the interest was not offered to tax. A copy of the said letter is available at page 4 of the Paper Book. Thereafter, the assessee vide letter dated 14th March, 2022, pointed out that it was only Indian branches that had merged and the Netherlands Entity continued to exist as a separate legal entity and as the interest u/s 244A was a statutory right it would accrue to Netherlands entity only and, therefore, it was rightly offered to tax in the hands of the Netherlands entity. Similarly, the assessee furnished an explanation before the ld. AO as to why it was credited to the books of account of the assessee. 06. The AO passed the draft assessment order on 23rd March, 2022, in terms of Section 144C of the act, where the ld. AO came to the conclusion that income credited to the Profit and Loss account by way of interest was liable to be taxed in the assessee's hands and the assessee has to explain as to why the refund received was not taxable in India. Accordingly, the AO treated the said sum of Rs. 6,18,50,000/- as an unexplained tax credit u/s 68 of the Act read with section 115BBE of the Act vide....
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....determined in the case of Netherlands Entity and not to the assessee. The ld. AR submitted that the assessee had taken over all assets and liabilities of the Indian branches that were in existence on 27.02.2017 and any amount which accrued thereafter to the Netherlands entity solely belonged to the Netherlands entity. The ld. AR submitted that the only reason why it was credited to the bank account and reflected in the books of account of the assessee was that because of Indian bank accounts of Netherlands entity that existed on 27.02.2017 vested in the assessee consequent to amalgamation and accordingly, as the said amount got credited to the profit and loss account. The ld. AR submitted that the said fact was neutralized by the assessee by reducing the same from the income of the assessee while filing the income tax return and copy of which is available in the paper book as stated hereinabove. The ld. AR placed reliance on the judgement of the Hon'ble Apex Court in Sutlej Cotton Mills Ltd. Vs. CIT 116 ITR 1 (SC) and Tuticorin Alkali Chemicals and Fertilizers Limited Vs. CIT 93 Taxmann 502 (SC). The ld. AR further contended that the said income have been assessed in the hands ....
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....e view that the interest earned from the tax department has to be assessed in accordance with Article 11(2) of the relevant DTAA. 010. The ld. DR on the other hand relied heavily on the final assessment order by submitting that the income has been correctly assessed in the hands of the assessee on the basis of credit being given in the bank account of the assessee besides the income tax refund and corresponding entities being accounted in the books of accounts and also in the profit and loss account. The ld. DR submitted that when the interest has been credited in the bank account of the assessee it is obvious and apparent that same has to be assessed in the hands of the assessee and not in the hands of the Netherlands entity which owned and operated all the branches in India till 27.02.2017 when the Indian branches amalgamated with the assessee though the ld. DR could not duly explain that on the basis of the returns and computation filed a copies of which are available be in the Paper Book, the said income has been assessed in the hands of the Netherlands entity and there is no doubt as to that. The ld. DR finally submitted that the final assessment order may kindly be upheld.....