TaxTMI 
TaxTMI 
2023 (9) TMI 1762
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.... short 'the Act']. The brief facts of the case as emanating from records are: The assessee is a France based multinational bank with branch offices in India. The assessee is a non-resident having Permanent Establishment (PE) in India. During the course of scrutiny assessment proceedings, the Assessing Officer made multiple additions/disallowances vide draft assessment order dated 30/12/2009. The assessee filed objections before the Dispute Resolution Panel (DRP) against the additions /disallowances made by the Assessing Officer. The DRP vide directions dated 24/09/2010 dismissed the objections filed by the assessee. The Assessing Officer passed the impugned assessment order in accordance with the directions of the DRP confirming additions/disallowances, hence, the present appeal by the assessee. 3. Shri P.J. Pardiwala, Sr. Advocate appearing on behalf of the assessee submitted at the outset that majority of the grounds raised in the present appeal have already been considered by the Tribunal in assessee's own case in the preceding Assessment Years. He referred to the order of Tribunal in ITA No.6706/Mum/2012 and 6682/Mum/2012 for Assessment Year 2005-06 decided on 05....
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....ranches is also allowed. The ld. Counsel for the assessee referred to Tribunal order for Assessment Year 2004-05 dated 10/12/2014(supra) (at page 175 of the paper book) and Tribunal order dated 05/01/2018 for Assessment Year 2005-06(supra) (at page 259 of the paper book) (supra). 8. We find that the issue is recurring in nature. The taxability of interest / commission paid to HO/Overseas branches has been considered by the Co- ordinate Bench in assessee's own case in Assessment Year 2004-05. The Co- ordinate Bench in turn placing reliance on the earlier decision of the Tribunal in ITA NO.4471/Mum/2009 for Assessment Year 2002-03 dated 21/03/2014 has decided the issue in favour of assessee. We find that the Tribunal has held that the ratio laid down in the case of Sumitomo Mitsui Banking Corporation vs. DCIT(supra) squarely applies to the issue in hand and thus, allowed the payment of interest and bank charges paid to HO/Overseas branches. No contrary material has been placed on record by the Revenue. Respectfully following the decision of Co-ordinate Bench in assessee's own case in the preceding Assessment Years ground No.2 and 3 of the appeal are allowed. 9. The asse....
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....assessee. No material has been placed on record before us to show any distinction in the impugned assessment year. Therefore, we find no reason to take a contrary view. Ergo, ground No.4 and 5 of appeal are allowed for the reasons stated in Tribunal order for Assessment Year 2004-05. 11. The assessee has raised additional grounds of appeal vide applications dated 14/01/2016 and 19/03/2018, The additional grounds of appeal are as under: Vide application dated 14/01/2016 " The Assessing Officer (AO) ought to have granted credit for taxes deducted by the India branch on Head Office System Implementation charges, Regional Logistics Asia Pacific costs & EDP recharge and Information Systems Asia Pacific charges." Vide Application dated 19/03/2018 " The DRP ought to have directed the AO to grant credit for taxes deducted by the India branch on Head office system implementation charges, EDP Recharge, Regional Service Center Asia charges and Asia Data Processing Centre costs." 12. The ld. Counsel for the assessee submits that the assessee has claimed TDS credit as a consequent relief to ground No.4 and 5. We find that similar grounds were raised by ....
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....ld. Counsel for the assessee, ground No.7 of appeal is dismissed as not pressed. Ground No.8 : Netting of Interest u/s. 244A of the Act against interest u/s.234D of the Act : 15. The ld. Counsel for the assessee submitted that the assessee was liable to pay interest of Rs. 73,63,170/- u/s. 234D of the Act and the same time the assessee was entitled to receive interest u/s. 244A of the Act. The assessee prayed for netting off of the interest. The Assessing Officer rejected the prayer of assessee. The assessee carried the issue in appeal before the CIT(A). The CIT(A) upheld the findings of Assessing Officer. The ld. Counsel for the assessee pointed that the Hon'ble Bombay High Court in Income Tax Appeal No.27 of 2016 for Assessment Year 2004-05, in the case of CIT vs. Credit Agricole Corporate and Investment Bank decided on 16/07/2018 has considered this issue and has decided the same in favour of the assessee. 15.1 We find that one of the question before the Hon'ble Bombay High Court in the aforesaid appeal was: 2."Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in allowing the interest paid under the provisions....
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....e "put to use" before 01/04/1999. The Assessing Officer further observed that the assessee failed to prove that the vehicles acquired were commercial vehicles. The ld. Counsel for the assessee pointed that the DRP in para 11.1 of the directions has given a finding that the vehicles owned by the assessee were for the purpose of transportation of the employees as well as for banking business. The expenses incurred on this vehicles have been allowed as business expenditure u/s. 37 of the Act. After having recorded the aforesaid facts, the DRP upheld the findings of Assessing Officer and dismissed objection of assessee. He submitted that there is no question of "put to use" after having accepted that the vehicles were used for transportation of employees and for other banking requirements. 17.1 Per contra, the ld. Departmental Representative supporting the assessment order contended that the assessee could not produce any documentary evidence to show as to when the vehicles were "put to use". 17.2 We have heard the submissions made by rival sides. We find that the DRP in its directions has given a finding of fact that the vehicles were used for transportation of employees and oth....
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....ome. He further submitted that payment made to self is not exigible to tax in view of deeming provisions in Article-7 of DTAA. The Assessing Officer rejected assessee's contention and held that the payment made for SA Charges, EDR Recharge and RLAP, RSCA Charges would give rise to income in the nature of Fee for Technical Services(FTS) in the hands of Head Office, hence, liable to be taxed in India under Article 13(4) of India - France DTAA. The Id. Counsel for the assessee submitted that similar addition was made in Assessment Year 2005-06. The Tribunal in Department's Appeal in ITA No.6682/Mum/2012 decided this issue in favour of assessee. 19.1 We find that in Assessment Year 2005-06,Assessing Officer held certain expenditure viz. interest on loan, interest paid on Nostro Account, etc. in the nature of FTS. The Tribunal placing reliance on the decision in the case of Steria India Ltd.(supra) decided the issue in favour of assessee. No contrary material has been placed on record by the Revenue. Following the decision of Co-ordinate Bench in assessee's own case on similar set of facts, ground of appeal No.11 is allowed. Ground No.12 : Double Taxation of Direct Exp....
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....'s length basis. In BNP Paribas SA (supra),it was held that once an enterprise was found to be carrying on the related business or profession through a PE or a fixed base in the other contracting state, the scheme of taxability on the gross basis, as implicit in the taxation of dividend, interest, royalties and fees for technical services, and other incomes, under the tax treaties, would comes to an end. In Indo French DTAA, for example, articles 11(6), 12(5), 13(6) and 23(2) provide so. We are aware that in the case of Sumitomo Mitsui Banking Corporation (136 ITD 66), the Special Bench has decided the issue in favour of the Department and against the assessee. But respectfully following the judgment of the Hon'ble Uttrakhand (supra), we decide ground no. 6 against the AO." No contrary material or decision has been brought to the notice of Bench. We find no reason to take a contrary view on similar facts in the impugned assessment year. Hence, ground No.13 & 14 of appeal are allowed. Ground No.15: Double Taxation of ECB Interest as income arising to Overseas branches on ECB to Indian borrowers and by way of Transfer Pricing adjustment income of Indian Branches : 22....
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....amount involved, the assessee is not pressing this ground of appeal. In view of the statement made by ld. Counsel for the assessee at Bar, ground No.19 of appeal is dismissed as not pressed. Ground No.20: Taxability in the hands of Indian Branch f Interest & commission arising to Overseas Branches in respect of ECB to Indian Borrowers: 26. The ld. Counsel for the assessee submitted that the Tribunal in Assessment Year 2005-06 in assessee's own case has held that adjustment should be made by taking into account only the fee and other charges received by the foreign branches from the borrowers of ECB and the rate of 20% estimated by the CIT(A) was held to be just and proper. The issue was carried in appeal before the Hon'ble Bombay High Court. The Hon'ble High Court has confirmed the view taken by the Tribunal. 26.1 Both sides are unanimous in stating that the issue raised in ground No.20 of appeal has been considered by the Co-ordinate Bench in Assessment Year 2005-06. We find that the issue is perennial. The Co-ordinate Bench while adjudicating this issue has in turn referred to the decision of Hon'ble Bombay High Court [Re. DIT vs. Caylon Bank ITA No.17....
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....s of the said banks. The ld. Counsel for the assessee submitted that the case of assessee is squarely covered by the decision rendered in the case of Barclays Bank PLC vs. ADIT, 90 taxmannn.com 378 (Mum-Trib). He submitted that the facts in the case of assessee are identical to the facts in the case of Barclays Bank PLC (supra). The only difference he pointed is in the rate of remuneration. The assessee has taken 50% of the markup or cost +10%, whichever is higher, whereas in the case of Barclays Bank PLC Indian branch was remunerated at 24.4% of INPV. The reasons for making addition in Barclays Bank PLC was similar to that of the assessee. The Tribunal held that the TPO has erred in considering JP Morgan Chase Bank and Bank of America NA as comparable for the aforesaid transactions The ld. Counsel for the assessee prayed for deleting the transfer pricing adjustment. 27.1 Per contra, ld. Departmental Representative placed reliance on the findings of TPO and DRP and prayed for dismissing ground No.21 of appeal. 27.2 We have heard the submissions made by rival sides and have examined the orders of authorities below. A perusal of the TPO order dated 30/10/2009 shows that the TPO....
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....ssee was limited to rendering the marketing services to overseas branches, that rest of the activities were handled by the AE.s. The derivative transaction does not end with marketing. It is a complex process. So, the AE would compensate the assessee for the services rendered to it. There would always be a relation between the compensation paid and availed services. The assessee had adopted the GTPP to determine ALP of the IT.s. In our opinion, there was no defect in its approach. On the other hand, method applied by the TPO and the details of controlled transactions, relied upon by him, were not available in the public domain. The assessee did not have any opportunity to examine the comparability of FAR of the transactions selected by the TPO. In our opinion, use of untested comparables to determine the ALP is against the basic spirit of the TP provisions and the Rule 10 of the Rules The TPO had also violated the principles of natural Justice by not confronting the assessee with the comparables used against it. He proposed an addition of Rs. 51.12 crores to the income of the assessee without affording an opportunity to it, so that it could become aware of the basis for the adjustm....
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....sessee's net profit margin from international transactions with its AEs has necessarily to be made with that of the net pro fit margin realized by the same enterprise or an unrelated enterprise from a comparable but definitely uncontrolled transaction i.e., a transaction between non-associated enterprises. There is no statutory sanction for roping in a comparable controlled transaction for the purposes of benchmarking. When it has been clearly mandated in all the relevant methods for determining ALP that the comparison has to be made by the enterprise's international transaction with comparable uncontrolled transaction, by no sheer logic a comparable controlled transaction can be employed for the purposes of making comparison. There is no warrant for diluting the prescription given by the statute or rules when such prescription itself serves the ends of justice properly and is infallible. If the view of the Revenue that a controlled transaction should not be shunted out for the purposes of benchmarking is accepted, then all the relevant provisions contained in Chapter X in this regard, will become otiose. If such a contention of making comparison with a comparable controlle....
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....t similar to the adjustment made in case of Barclays Bank PLC. Thus, in the facts of the case and the decision rendered in the case of Barclays Bank PLC we find merit in ground No.21 of the appeal. The T.P adjustment is directed to be deleted for parity of reasons. Ground No.22: Applicability of Section 115JB of the Act to the Banking companies: 28. The ld.Counsel for the assessee submits that the assessee is a Non- resident Foreign Banking Company. The Assessing Officer invoked the provisions of section 115JB of the Act to determine the book profits. The contention of the assessee is that assessee being a banking company does not maintain books of account in accordance with the provisions of Schedule -VI of the Companies Act, 1956, hence, the provisions of section 115JB are not attracted. The ld. Counsel for the assessee in support of his submissions placed reliance on the decision of Tribunal in ITA No.4702/Mum/2015 for Assessment Year 2005-06 titled DCIT vs. Credit Agricole Corporate and Investment Bank Ltd. decided on 30/06/2017. The ld. Counsel for the assessee further referred to the decision of Hon'ble Bombay High Court in the case of CIT vs. Union Bank of India in....
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....erred to Article - 7(3) and 26 the India -France DTAA. 30.1 Per contra, the ld. Departmental Representative vehemently placed reliance on the order of the Tribunal in assessee's own case for Assessment Year 2005-06. 30.2 We have heard the submissions made by rival sides. We find that the issue is perennial. The Co-ordinate Bench in appeal by the assessee for Assessment Year 2005-06 in ITA No.6706/Mum/2012 has decided this issue against the assessee by placing reliance on the order of Tribunal and the Hon'ble Bombay High Court in the preceding years. The ld. Counsel for the assessee informed that the assessee is in appeal before Hon'ble High Court against the order of Tribunal for Assessment Year 1996-97 and the appeal is pending for final disposal. Taking into consideration entire facts, we see no reason to take a different view in the impugned assessment year. Hence, the issue of rate of tax in present appeal is decided in terms of the earlier order of the Tribunal in assessee's own case. Ground No.24 of appeal is dismissed. Ground No.25: Levy of Interest u/s. 234B of the Act: 31. Charging of interest u/s. 234B of the Act is mandatory and consequential,....
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.... Ground No.5: Amount paid by assessee to Head Office towards credit risk assistance, EDP assistance, Head Office System Implementation, etc .; Ground No.6: Taxability of ECB interest arising to Singapore Branch in India in respect of ECB of Indian Borrowers; Ground No.7: Taxability of ECB interest arising to Hong Kong Branch in India in respect of ECB of Indian Borrowers; Ground No.8: Taxability in India of 50% of commission earned by Hong Kong branch on ECB to Indian Borrowers, 35. Both sides are unanimous in stating that majority of the issues raised in appeal for Assessment Year 2006-07 are subject matter of appeal either in appeal by the Department or the assessee in subsequent Assessment Years i.e. Assessment Year 2007-08, 2008-09 and 2009-10. We find that the issues raised in the appeal for Assessment Year 2006-07 are recurring issues that have been decided by the Tribunal in the preceding Assessment Years and those very issues are subject matter of appeal, either by the Department or the assessee in the subsequent Assessment Years as well. The facts germane to the issues in Assessment Year 2007-08 are similar to facts in Assessment Year 2006-07 decided by us(ibi....
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....respect of call placements and borrowings(Same as ground No.19 in appeal for AY 2006-07); Ground No.6: Taxability in the hands of assessee (Indian Branch) of interest and commission arising to overseas branches in respect of ECB to Indian borrowers(Same as ground No.20 in appeal for AY 2006-07); Ground No.7: Transfer Pricing Adjustment made in respect of commission earned by assessee (Indian Branch) for marking of derivative products (60% INPV)(Same as ground No.21 in appeal for AY 2006-07); Ground No.8. Deduction u/s.35DDA of the Act for expenses incurred on voluntary/early retirement plan and voluntary separation plan during Assessment Year 2004-05 : the ld. Counsel for the assessee submitted that the assessee had filed an application under section 154 of the Act before the Assessing Officer. The Assessing Officer vide order dated 16/11/2021 allowed the deduction u/s.35DDA of the Act, therefore, the ground has become infructuous. In view of the statement made by ld. Counsel for the assessee, ground no.8 of appeal by the assessee is dismissed as infructuous. Ground No.9: Deduction u/s. 35DD of the Act for amalgamation and major expenses incurred during Assessment Ye....
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....ect expenses towards credit risk assistance and EDP Assistance provided by HO to Indian Branches. (Same as ground No.4 in appeal by the assessee for AY 2006-07); Ground No.3: Taxability of interest paid by Indian Branch to HO and other overseas branches.(Same as ground No.10 in appeal by the assessee for AY 2006-07); Ground No.4: Amount paid by assessee to Head Office towards credit risk assistance, EDP Assistance, Head Office System Implementation, etc.(Same as ground No.11 in appeal by the assessee for AY 2006-07); Ground No.5: Taxability of ECB interest arising from Singapore Branch in India in respect of ECB of Indian Borrowers. (Same as ground No.13 in appeal by the assessee for AY 2006-07); Ground No.6: Taxability of ECB interest arising from Hong Kong Branch in India in respect of ECB of Indian Borrowers. (Same as ground No.14 in appeal by the assessee for AY 2006-07); Ground No.7: Taxability in India of 50% of commission earned by Hong Kong branch on ECB to Indian Borrowers. (Same as ground No.16 & 17 in appeal by the assessee for AY 2006-07). 38. Majority of the rounds raised by the assessee and the Revenue in cross appeals are similar to the one adjudica....
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....respect of ECB to Indian Borrowers: The facts in ground no.8 of appeal are similar to facts in ground No. 7 and 9 of the appeal. The Tribunal in AY 2005-06 in respect of Singapore and Hong Kong Branch has decided the issue in favour of assessee. For parity of reasons ECB interest arising to London Branch in India in respect of ECB to Indian Borrowers is not taxable in India. Thus ground no.8 is allowed. Ground No.9: Taxability of ECB interest arising to Hong Kong Branch in India in respect of ECB of Indian Borrowers. (Same as ground No.14 in appeal for AY 2006-07); Ground No.10: Double taxation of ECB interest as income arising to Overseas Branches on ECB to Indian Borrowers. (Same as ground No.15 in appeal for AY 2006-07); Ground No.11: Taxability in India of 50% of commission earned by Hong Kong branch on ECB to Indian Borrowers. (Same as ground No.16 & 17 in appeal for AY 2006-07); Ground No.12: Transfer Pricing adjustment in respect of commission income being twice charged to tax. (Same as ground No.15 in appeal for AY 2006-07); Ground No.13: Taxability in the hands of assessee (Indian Branch) of interest and commission arising to overseas branches in respect of ....