TaxTMI 
TaxTMI 
2023 (11) TMI 1452
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....ked and accordingly disallowance should be deleted. 2. 2.1 The learned CIT(A) erred in law and on facts to treat Y2K expenditure (being staff cost, maintenance charges, and other related cost), directly attributed to the operations carried on in India, as Head Office expenses covered under section 44C of the Act. 2.2 The learned CIT(A) ought to have appreciate that expenses directly attributable to operation carried out in India cannot fall under purview of s. 44C of the Act and hence should be allowed in full. 3. 3.1 The leaned CIT(A) erred in law and on facts to disallow interest payable to head office/ overseas branch under section 40(a)(i) of the Act on the ground of no withholding of tax. 3.2 The learned CIT(A) ought to have considered that the interest payable is not taxable in the hands of the head-office and hence section 40(a)(i) of the Act is not applicable and accordingly disallowance should be deleted. 4. 4.1 The leaned CIT(A) erred in law and on facts to hold that interest payable by branch to head office is subject to tax in India in the hands of head office. 4.2 The learned CIT(A) ought to have considered that the....
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.... applying the provisions of section 115JA of the Act which stipulates the presumptive rate of profits. The learned CIT(A) failed to appreciate that the provisions of section 115JA of the Act were not attracted to the facts of the case. 9.2 The learned CIT(A) failed to appreciate that: ● Section 90(2) and Circular No. 333 dated April 12, 1982 issued by the Central Board of Direct Taxes (CBDT) provides that the provisions of the Act shall apply to the assessee, who is otherwise eligible for double tax treaty relief only to the extent that they are more beneficial to him. ● The DTAA specifically lays down the method determination of profits of the PE and therefore, it overrides the provisions of Section 1I5JA of the Act (which stipulates the presumptive rate of profits) and to which therefore, no recourse need to be had in view of the CBDT CircularNo.333 referred to above. ● Section 115JA (4) of the Act provides that, save, as otherwise provided in Section 115JA of the Act, all other provisions of the Act shall apply to every company mentioned in the said section. It therefore, appears that there is no intention of the Legislature ....
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....m marginal rate tax. 2. The revenue has raised the following grounds: - 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in holding that direct expenses incurred outside India of Rs. 27,27,34,667/- {are allowable under section 37(1) of the Income-tax Act and not subject to limits prescribed under section 44C of the Income-tax Act} as against expenses of Rs. 14,23,74,212/- claimed in the return. 2.On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing the additional claim of direct expenses incurred outside India of Rs. 13,03,60,455/-, contrary the decision of the Hon'ble Supreme Court in its judgment in the case of Goetze (India) Ltd. - Vs- CIT {(2006)284 ITR 323 (SC)} wherein it is held that the Assessing Officer has no power to entertain a claim made otherwise than by filing a revised return of income. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(Appeals) erred in allowing relief of Rs. 5,35,96,643/- out of expenses related to refurbishment of leasehold premises of Rs. 7,14,62,191/- claimed by the assessee. The ld. CIT (Appeals) ought to h....
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....treated as permanent establishment in India under the tax treaty. 4. During the year under consideration, the Appellant has raised various grounds of appeals before the Hon'ble ITAT against the order of Hon'ble CIT(A) dated 26 March 2009 passed under section 250 of The Income-tax Act, 1961 ('the Act'). The Appeal was also filed by the Department before the Hon'ble ITAT against the above Ld. CIT (A) order. The Appellant has filed the legal and factual paper books with respect to both the appeals (i.e., the Appellant's as well as the department's appeal) on 12 October 2022. The Appellant submits the brief synopsis of facts and submission on the grounds of appeal raised by the Appellant / Department before the Hon'ble ITAT for A.Y. 2000-01 as under: Bank's appeal no. 3458/Mum/2009 Ground No. 1: Payment to Master card International Incorporated, USA ('MasterCard') /Visa International Services Association, USA ['Visa International'] 1.1 Ground The learned Commissioner of Income Tax (Appeals) (CIT (A)) erred in law and on facts to confirm the disallowance of payments made to Master Card and Visa International. The l....
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....le to pay tax, hence, the Appellant was required to deduct tax at source on payments made to Visa International and Master Card. Further, the payment of taxes by Visa International and Master Card has not been made during the A.Y. under consideration, hence same also cannot be allowed as deduction during the year under consideration. 1.5 Appellant's submissions ● The Appellant submitted the copy of the order under section 154 of the Act, dated 29 August 2005, in case of MasterCard for A.Y. 2000-01 (copy enclosed at page 6 of the Bank's appeal Factual paperbook) and copy of PWC certificate, dated 10 November 2008, in case of Visa International (copy enclosed at page 9 of the Bank's Appeal factual paperbook) confirming the details of taxes paid by Visa International and MasterCard. ● Further, the Appellant submitted that this issue is covered in favor of the Appellant by the decision of the Co-ordinate bench of the Tribunal in the Appellant's own case for the assessment year 1999-2000, wherein the Tribunal followed the decision of Hon'ble Mumbai ITAT in the case of Celltick Mobile Media (India) (P.) Ltd., vs. DCIT[2021] (188 ITD....
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....enditure was attributable to the review, testing and modification of the Appellant's computer system. The expenditure comprises staff cost, expenditure related to the premises, maintenance charges. Etc. These expenditure incurred outside India is related to the operations of Indian business and the same is certified by the external Auditors. 2.4 AO's contention (Page14): The AO held that the expenses are in the nature of royalty, on which the Appellant has not deducted tax u/s. 195 of the Act and hence the expenditure is disallowed u/s. 40(a) (i) of the Act. 2.5 CIT's decision (page 11, para 5.3.2) ● The CIT(A) held that the expenditure pertaining to salaries and travel cost of employees of Head office attributable to India operations cannot be considered as payment for the use of any copyright nor can it be considered as payment for the use of industrial, commercial or scientific equipment. Hence, such expenditure does not fall within the definition of 'royalties' under Article 13 of DTAA. ● Further, by incurring such expenditure no technical knowhow was made available to the Appellant and for the same it will not fall wit....
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.... ● During the year under consideration, the Appellant had paid interest of INR 6, 66,000/- to Head Office (HO)/ Overseas Branch (OB) on overdrawn Nostro accounts. ● As the interest paid by the Appellant to HO / OB is not taxable in India, the Appellant had not deducted tax at source while crediting/paying the interest to HO / OB. 3.3 AO's contention (Page 21, para 9) The AO disallowed the interest payment on the ground that interest payable to HO/ OB is taxable in India on which the Appellant was required to deduct tax under section 195 of the Act. Since the Appellant had not deducted tax under section 195 of the Act, the same is disallowed under section 40(a) (i) of the Act. 3.4 CIT(A)'s Decision (Page 22, para 9.7) The interest payable to HO/OB is taxable in India on which the SCB was required to deduct tax u/s 195. Since SCB has failed to deduct tax u/s 195 of the Act, the expense is not allowable u/s. 40(a) (i) of the Act 3.5 Appellant's submissions The Appellant submits that this issue is covered in favor of the Appellant by the decision of the Mumbai Special Bench of the Tribunal in case of Sumitomo Mitsui Banking Corp....
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....ows that the provisions of section 195 of the Act would not be attracted and there being no failure to deduct tax at source from the said payment of interest made by the PE, the question of disallowance of the said interest by invoking the provisions of section 40(a)(i) of the Act does not arise. Accordingly we answer question No.1 referred to this Special Bench in the negative i.e. in favour of the assessee and question No.2 in affirmative i.e. again in favour of the assessee. 89. before parting, we may clarify that there may arise a situation where interest is payable by PE to GE and also there is interest receivable by PE from GE in the same year. A similar situation may arise where there are internal dealings of the Indian Branch of a foreign bank with its head offices as well as other overseas branches. In such a situation, the issue may arise whether only the net interest would be allowable as deduction while determining profits attributable to the PE in India. This issue, however, has neither been referred to this Special Bench nor any arguments have been advanced by both the sides thereon specifically during the course of hearing. We may further clarify that the is....
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....in the case of Sumitomo Mitsui Banking Corporation vs. DDIT (2012) (136 ITD 66) (SB-Mumbai ITAT). Hence, in the given situation respectfully following the decision of special bench (supra), ground raised by the assessee is allowed. Ground No. 4: Interest income of Head Office / Overseas Branch 4.1 Ground: (a) The leaned CIT(A) erred in law and on facts to hold that interest payable by branch to head office is subject to tax in India in the hands of head office. (b) The learned CIT (A) ought to have considered that the interest income is not taxable in the hands of the head-office accordingly no tax should be levied in the hands of the head-office. 4.2 Brief Facts ● During the year under consideration, the Appellant had paid interest of INR 6, 66,000/- to Head Office (HO)/ Overseas Branch (OB) on overdrawn Nostro accounts. ● As the interest paid by the Appellant to HO / OB is not taxable in India, the Appellant had not deducted tax at source while crediting/paying the interest to HO / OB. 4.3 AO's contention (Page 24, para 10): The Ld. AO relied on the circular No. 740 dated 17 April 1996 and the commentary of Klaus ....
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....nt order of A.Y. 2001-02 and hence, the Appellant does not wish to press this ground in A.Y. 2000-01. As this ground of appeal not pressed effectively before us based on its own assessment findings, same is dismissed as not pressed. Ground No. 6: Expenditure on refurbishment of premises 6.1 Ground 6.1 The learned CIT(A) erred in estimating 25% of Rs. 7,14,62,191/-, being the expenditure incurred on refurbishment of leasehold premises, as capital in nature. Accordingly, expenditure of Rs. 1,78,65,548/- was disallowed as capital expenditure on which depreciation at the eligible rate was allowed. 6.2 the learned CIT (A) ought to have allowed the said expenditure as revenue in nature and accordingly disallowance should be deleted" 6.2 Brief Facts ● During the F.Y. under consideration, the Appellant has incurred expenditure on renovation of its various leasehold premises. The expenses incurred are mainly on account of interior works, electrical works, cabling and wiring, carpets, etc. ● These expenses have been accounted as deferred revenue expenditure and amortized over a period of three years in the books of account. However, in the computa....
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....mises and appropriate to itself all the material thereof without paying to the lessors any compensation and construct a new building thereon to suit the purpose of their business as per the plan approved by the lessors. Under Clause 2 of the lease deed, the lessee was required to pay a rent of Rs. 1000/- per month for the first fifteen years Rs. 1500/- per month for the next ten years Rs. 1650/- per month for the next ten years and Rs. 2000/- per month for the remaining years. The lease deed further provided that the new construction shall, right from the commencement of the work, be the property of the lessors; and upon completion of the work of construction the lessee will have only the right to be a tenant for a period of 39 years under the existing lease subject to the payment of rent and observation of other terms and conditions of the lease. The lessee shall not be entitled under any circumstances for any compensation whatsoever on account of its putting up the new construction in the place of the old. Acting under the lease agreement the assessee invested a sum of Rs. 1,62,835/- in the previous year relevant to the assessment year 1968/69 and Rs. 50,937/- during the....
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.... in which the building was situated was much higher and would be not less than Rs. 12,000/- as against which the maximum rent the assessee would be paying was only Rs. 2,000/-. This concessional rent was on account of the fact that the new building was constructed by the assessee at its own cost. In order to decide whether this expenditure is revenue expenditure or capital expenditure, one has to look at the expenditure from a commercial point of view. What advantage did the assessee get by constructing a building which belonged to somebody else and spending money for such construction? The assessee got a long lease of a newly constructed building suitable to its own business at a very concessional rent. The expenditure, therefore, was made in order to secure a long lease of new and more suitable business premises at a lower rent. In other words, the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts. The saving in expenditure was saving in revenue expenditure in the form of rent. Whatever, substitutes for revenue expenditure, should normally be considered as revenue expenditure. Moreover, assessee in the present case did ....
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....evenue, the lump sum payment should equally be regarded as a business expense, but if the lump sum payment brings in a capital asset, then that puts the business on another footing altogether. 3. Whether for the purpose of the expenditure, any capital was withdrawn, or, in other words, whether the object of incurring the expenditure was to employ what was taken in as capital of the business. Again, it is to be seen whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital. (Underlining ours) Relying upon the second test enumerated above, learned counsel for the appellant has submitted that the assessee got enduring benefit of a capital nature by spending the amount because the assessee obtained a new building for a period of 39 years. The difficulty, however, in the present case, arises from the fact that this building was never to belong to the assessee. Right from inception, the building was of the ownership of the lessor. Therefore, by spending this money, the assessee did not acquire any capital asset. The only advantage which the assessee derived by spending the money was that it got the lease of a new b....
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....see and making it more efficient and profitable. It was, therefore, revenue expenditure. In the case of Commissioner of Income-tax, Bombay City- I v. Associated Cement Companies Ltd. (172 ITR 257) the respondent-company entered into an agreement to supply water to the municipality and provide water pipelines as also to supply electricity for street lighting and put up a transmission line for that purpose. The assessee also agreed to concrete the main road from the factory to the railway station. The amounts expended for these purposes were held to be revenue expenditure since the installations and accessories were the assets of the municipality and not of the assessee. The expenditure, therefore, did not result in creating any capital asset for the company. The advantage secured by the respondent was immunity from liability to pay municipal rates and taxes for a period of 15 years. This Court said that had these liabilities been paid, the payments would have been on revenue account. Therefore, the advantage secured was in the field of revenue and not capital. In the case of Commissioner of Income-tax v. Bombay Dyeing and Manufacturing Co. Ltd. (219 ITF 521) the co....
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....f Income Tax (Appeals) (CIT (A)) erred in assuming that appellant had incurred expenditure to earn tax free income, and accordingly calculating disallowance u/s. 14A as per Rule 8D at Rs. 1,01, 20,545/- . 7.2 The learned CIT (A) ought to have considered the appellant's submission that the expression "in relation" to" u/s. 14A of the Act means dominant and immediate connection, as has been judicially defined by the Supreme Court in the case of H.H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur of Gwalior & Others v UOI (1971) 1 SCC '85, and Appellant had not incurred any expenditure in relation to exempt income. 7.3 the learned CIT (A) ought to have not disallowed the expenditure u/s. 14A of the Act and accordingly disallowance should be deleted." 7.2 Brief facts ● During the year under consideration, the Appellant had claimed the total interest received on tax free securities of INR 21,64,09,575/- as exempt u/s. 10(15)(iv) of the Act and divided received of INR 19,17,247/- as exempt under section 10(34) of the Act. ● The Appellant has not incurred any expenses that could be directly attributable to earning tax free income. 7....
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....30 taxmann.com 178) held that disallowance u/s. 14A of the Act is not warranted for investments made in tax-free bonds/ securities which yield tax-free dividend and interest in those situation wherein interest free own funds available to the assessee exceeded their investments (Copy of decision is enclosed in the Bank's Appeal legal paperbook - refer para 27, page 381), which reads as under: "27. The aforesaid discussion and the cited judgments advise this Court to conclude that the proportionate disallowance of interest is not warranted, under section 14A of Income Tax Act for investments made in tax-free bonds/securities which yield tax-free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments. With this conclusion, we unhesitatingly agree with the view taken by the learned ITAT favoring the assesses" In view of the above, the Appellant submits before the Hon'ble ITAT to follow the own case ITAT order for A.Y. 1999-00, dated 27 September 2022, and delete the disallowance of INR 1,01,20,545/- made by the Ld. CIT(A). Without prejudice to the above, if the Hon'ble....
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....merit, the Appellant submits that the set off of brought forward loss should be allowed as against the alleged income of Head Office, if held taxable in India, as under the provision of the Act, the assessable entity is only one i.e. there is no separate assessment for the branch and the HO. Therefore, irrespective of whether, the income is taxable as income of the branch or the HO, set off of the carry forward loss is required to be allowed to the bank. As Ground No. 3 & 4 already decided in favour of assessee, hence this ground of appeal became academic in nature, requires no further adjudication. Ground No. 9: Taxability under section 115JA of the Act 9.1 Ground 9.1 The learned CIT (A) erred in law in confirming the action of the Assessing Officer in applying the provisions of section 115JA of the Act which stipulates the presumptive rate of profits. The learned CIT (A) failed to appreciate that the provisions of section 115JA of the Act were not attracted to the facts of the case. 9.2 The learned CIT (A) failed to appreciate that: ● Section 90(2) and Circular No. 333 dated April 12, 1982 issued by the Central Board of Direct Taxes (CBDT) provides that....
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....ies on the following decisions, wherein it was held that provisions of section 115JA of the Act are not applicable to the Banking companies which are not required to prepare its books of accounts under the Companies Act: ● The Appellant's own case ITAT order dated 12 April 2019 for the A.Y. 1997-98 [2019] (104 taxmann.com 236) - (Mumbai ITAT) [refer para 8, page 113 of the Bank's Appeal legal Paper book] which reads as under: "8. We have considered rival submissions and perused material on record. The main plank of assessee' argument against applicability of section 115JA of the Act is, assessee being a banking company maintaining its accounts under the Banking Regulations Act, 1949, the provision contained under section 115JA of the Act will not apply. Undisputedly, the assessee is a banking company and has opened its branches in India after obtaining permission of the RBI. Therefore, the assessee is governed under the Banking Regulations Act, 1949. Section 115JA of the Act provides for computation of total income chargeable to tax to be an amount equal to 30% of the book profit in case such income is less than 30% of the book profit. However, s....
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....xactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee's own case for the A.Y. 1997-98, we allow the ground raised by the assessee". ● CIT vs. Union Bank of India [2019] (105 taxmann.com 253) (Bombay HC) [para 21, page 407 of the Bank's Appeal legal paper book] Accordingly, the Appellant submits that the provisions of section 115JA are not applicable in the Appellant's case. Respectfully following the decision of Coordinate Bench in assessee's own appeal and relying on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Union Bank of India [2019] (105 taxmann.com 253) (Bombay HC), this ground of appeal raised by the assessee is allowed. Ground No. 10: Head Office Expenditure 10.1 Ground: 10.1 The learned CIT(A) erred in holding the claim of the appellant for allowing Head Office Expenditure of Rs. 23,28,71,503/- in entirety on the ground that no revise return was filed for such claim and has restricted the claim under section 44C of the Act. 10.2 The Ld. CIT (A) failed to appreciate that ● The decision of the Supreme Co....
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.... issue is covered in favor of the Appellant by the decision of the Co-ordinate bench of the Tribunal in the Appellant's own case for the A.Y. 1999-2000 wherein the Tribunal, following the decision of the Mumbai ITAT in the case of Metchem Canada Inc. v DCIT 284 ITR (AT) 196 (copy of decision enclosed in the Appellant's legal paper book at page 415), has held that in view of Article 26 of the India-UK DTAA, provisions of section 44C of the Act will not be applicable to the Appellant (copy of A.Y. 1999-00 ITAT order handed over during the hearing on 27 September 2023- refer page 20, para 21), which reads as under: 21. Considered the rival submissions and material placed on record, we observe that Coordinate Bench in the case of Metchem Canada Inc., v. DCIT (supra) considered the similar issue and adjudicated in favour of the assessee. While deciding the issue, the Coordinate Bench held as under :- "3. We have heard the rival contentions, perused the material on record, and duly considered factual matrix of the case as also the applicable legal position. 4. We may, first of all, reproduces the relevant extracts from the provisions of arts. 7 and 24 o....
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....interest on moneys lent to the PE. Likewise, no account shall be taken in the determination of the profits of a PE, for amounts charged (otherwise than towards reimbursement of actual expenses), by the PE to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, know-how or other rights, or by wary of commission or other charges for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices. Article 24 - Non-discrimination 2. The taxation on a PE which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. 5. The core issue, as we have noted earlier as well, is whether or not the limitation on deduction of head office expenditure, as set out in Section 44℃ of the Indian IT Act, will apply in the case of non-resident companies governed by the India Canada DTAA, p....
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.... domestic taxation laws, the deduction is also required to be allowed for a proportion of overheads of the head office and such a deduction is to be allowed without any restriction other than those imposed on the resident enterprise. This makes two things clear-(a) that the restriction on admissibility of expenditure in accordance with the domestic law is, according to the OECD Commentary, is in respect of the normal business expenditure incurred by the PE; and (b) that the deduction on account of overheads of the head office is to be allowed without placing any restriction on such deduction save and except such restrictions as may also be placed on the resident enterprises. As the provisions of Article 24(2) of Indo-Canadian DTAA and of the provisions of Article 24(3) of the OECD Model Convention are in pari materia, the OECD Model Convention Commentary has a key role in determining the scope and connotations of art 24(2) of the Indo- Canadian DTAA. Hon'ble Andhra Pradesh High Court in the case of CIT v. Vishakhapatnam Port Trust (1983) 144 ITR 146 (AP), referred to the OECD Commentary on the technical expressions and the clauses in the model conventions, and referred to, with....
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....the considered view that a restriction on admissibility of head office overheads of PE of a Canadian company constitutes discrimination against such a PE vis-a-vis a domestic Indian entity because no such restriction is applicable for deduction of head office or controlling office overheads of an Indian entity. It puts PE of a Canadian company to an unfair disadvantage in as much as even legitimate business expenses attributable to the PE and deductible under Section 37(1) of the Act cannot be allowed as a deduction in the light of restriction placed under Section 44C of the Act, whereas all the legitimate business expenses of the Indian entity operating in India will be allowed as a deduction. The scope of deduction under Section 37(1) of the Act thus stands curtailed for PE of a Canadian company. 7. In the Indo-Canadian DTAA, arts. 24 to 28 are clubbed together under Chapter VI titled "specific provisions", whereas the provisions of arts. 6 to 21 are contained in Chapter III titled "taxation of income". It is thus clear that the provisions of Article 24 are specific provisions whereas the provisions of Article 7 are in the nature of general provisions. While taxation of ....
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....are not in the nature of restriction but provide only a fair method of allocation of head office overheads. It is also contended that in the absence of the provision of Section 44C of the Act, the head office expenses cannot be allowed at all for want of verification of expenses. We see no substance in this plea either. In the case of CIT v. Deutsche Bank AG (IT Ref. No. 139 of 1997, judgment dt. 24th July, 2003), upholding the action of this Tribunal, Hon'ble Bombay High Court held that in a case where Section 44C of the Act is held to be not applicable, the head office expenditure was allowable under Section 37(1) of the Act and that Section 44C of the Act puts a ceiling on the deduction of head office expenditure. Whatever be the object of the said section, it is clear that it is in the nature of a disabling provision which puts a ceiling on the admissibility of a deduction. It does constitute a restriction-and a restriction which is not similarly placed for a domestic enterprise. The head office expenses, to the extent the same can be fairly allocated to the PE, are admissible as deduction under Section 37(1) of the Act and this is so held by the Hon'ble jurisdictional ....
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.... In addition and without prejudice to the Additional Ground 1A above, in case it is held that interest on income-tax refund is taxable, it should be taxed only at the rate of 10% in accordance with provision of Article 12 of the Tax Treaty between India and United Kingdom and not at the maximum marginal rate tax." 11.2 Brief facts During the year under consideration, the Appellant received interest on IT refund of INR 3, 47,21,262/- for A.Y. 1994-95 and INR 375,41,827/- for A.Y. 1997-98. 11.3 Appellant's submissions In this connection, the Appellant submit as under: Interest is taxable in the year of finality / final output of the appellant proceedings The Appellant submit that the amount of interest to be taxed in the assessment year under consideration should be the amount of interest on income-tax refund basis the final outcome of the appellate proceedings. In other words, the Appellant submit that the learned AO be directed to tax interest on income-tax refund which is based on the finality / final outcome of the appellate proceedings this is because of the fact that the said interest may get reduced depending upon the fina....
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....llowing the Mumbai ITAT decision in the case of Avada Trading Vs. ACIT 284 ITR (A.T) 73 has held that the interest on IT refund would be assessable in the year in which it is granted [Page 36, para 26], which read as under: 26. Respectfully following the above said decision, additional ground no. (i) is allowed as per the stated direction in the above decision of the Coordinate Bench." With regard to the applicable rate, the Hon'ble ITAT followed the Bombay HC decision in the case of DIT vs. Credit Agricole Indosuez [377 ITR 102] and held that interest should be taxable as per the DTAA at the rate of 10%. The observation of the Tribunal at page 36, para 27 are as under: "27. With regard to Additional ground (ii) which in respect of "interest on tax refund be taxed at 10% as per India-UK Treaty", we observe that the Hon'ble Bombay High Court in the case of Director of Income-tax (IT) v. Credit Agricole Indosuez [377 ITR 102] held as under: - "2. at the hearing Mr. Tejveer Singh, learned counsel for the Revenue urges the following questions of law for consideration. "(1) ........ (2) Whether, on the facts and in the circum....
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....Tribunal was the rate of tax on which Income tax refund is to be taxed i.e. on the basis of the Articles of DTAA or under the Act. The Tribunal on examination of the DTAA in the above case concluded that interest on income tax refund is not effectively connected with the PE (Permanent Establishment) either on asset test or activity test. Therefore, taxable under the Article 11(2) of Indo-Netherlands tax treaty. The Revenue carried the aforesaid decision of M/s. DHL Operations B.V. (supra) in appeal to this Court, being Income Tax Appeal No.431 of 2012. This Court by order dated 17 July 2014 refused to entertain the appeal. In the circumstances no fault can be found with the impugned order of the Tribunal in restoring the issue to the Assessing officer to determine / adopt the rate of tax on refund in the light of the relevant clauses of Indo-France DTAA and the decision of Special Bench in Clough Engineering (supra) Accordingly, question 4 does not raise any substantial question of law so as to be entertained." 28. Respectfully following the above decision of the Hon'ble Bombay High Court, we allow the additional ground (ii) raised by the assessee." In view of above....
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....nses attributable to the Indian Branches basis the auditor's certificates. ● The Appellant has incurred the cost at different locations which are solely attributable to its Indian operations. These costs includes: (a) Costs of office of the Special Representative In India; (b) Singapore IT Hubbing/ IT Cable (c) Bank Master 1.3 AO's contention (Page 14): The AO held that the expenses were for payments which are in the nature of royalty on which SCB has not deducted tax u/s. 195 of the Act and hence the expenditure is disallowed u/s. 40(a) (i) of the Act. 1.4 CIT(A)'s decision (Page 11, para 5.3.2) Relying on Ld. CIT (A) order in the Appellant's own case for A.Y. 1994-95 to 1999-2000, Ld. CIT (A) held that expenditure is not in nature of head office expenses covered u/s. 44C of the Act. The expenditure does not fall within the definition of 'royalties' under Article 13 of DTAA. Further, by incurring such expenditure no technical know-how was made available to SCB and for the same it will not fall within the definition of fees for technical services. Accordingly, the provisions of section 40(a)(i) of the Act....
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....ect Income 5.1Ground On the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) erred in directing deletion of Rs. 79,92,431/- treated as indirect income earned by the Head Office by relying on submissions admitted in contravention to Rule 46A of the Income-tax Rules, 1962. 5.2 Brief facts ● The Assessee submits that the indirect income falling within the scope of Article 7 of the India UK tax treaty has been offered for tax. ● The Assessing Officer considered INR 79,92,421/- as indirect income arising to the Appellant on the similar activities as that of Indian Permanent Establishment undertaking by the Head Office directly with the Indian customer as taxable under Article 7 of India-UK tax treaty under the "force of attraction "rule. ● The said income was already forming part of profit and loss account and offered to tax in the computation of income. 5.3 AO's contention (Page 34, para 14) Relying on International Taxation Commentaries, Klaus Vogel, and AO held that the income of the head office would be taxable in India even when the head office is engaged in the same or similar activit....
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....irect Tax ('CBDT') instruction dated 23 January 2001, wherein the CBDT directed the Department to disallow VRS payments on the basis of various judicial pronouncements that such expenditure gives the benefit of enduring long-term nature of the payer and disallowed the same treating it as capital expenditure. 6.4 CIT(A)'s Decision (Page 41, para 17.3) The Hon'ble CIT (A) deleted the additions made by the AO by relying on the decision of the Hon'ble Bombay High Court in case of CIT vs. Bhor Industries Ltd (264 ITR 180). 6.5 Assessee's submissions ● The Assessee submits that this issue is covered in favor of the Assessee by the decision of the Co-ordinate bench of the Tribunal in the Appellant's own case for the assessment year 1999-2000, wherein the Tribunal following the decision of Hon'ble Bombay High Court in the case of CIT vs. Bhor Industries Ltd (264 ITR 180) (Copy of decision is enclosed in the Department's legal paper book at page 41) allowed the deduction of early separation scheme (Copy of A.Y. 1999-00 ITAT order dated 17 October 2022 was handed over during the hearing on 27 September 2023- refer page 23 and para 3....