TaxTMI 
TaxTMI 
2015 (5) TMI 1277
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....he Government of U.A.E. and the Government of India (hereinafter referred to as the Tax Treaty). The appellants submit that in computing the taxable business income in India, the treaty allows a deduction for all expenses wherever incurred and reasonably allocable to the permanent establishment, including its share of executive and general administrative expenses. As the treaty overrides the domestic law, the amount allocated by the Head Office should be allowed as a deduction in full. The appellants pray that the AO be directed to allow the entire amount of Head Office expenses. 2. The CIT(A) erred in upholding the AO's action of not allowing the appellants claim that the tax rate applicable to its business income is 35% and not 48% being the rate applicable to foreign companies for the year under appeal. The appellants submit that in view of Article 26 of the tax treaty i.e. the non-discrimination clause read with Section 90(2) of the Act, the business income is chargeable to tax @ 35% as is applicable to domestic companies. The appellants pray that the AO be directed to tax its business income @ 35% as against 48%. The CI....
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....terest disallowed by him in the earlier years in respect of securities sold during the previous year relevant to assessment year 1998-99. The appellants crave leave to add to, amend, alter, vary, omit or substitute the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal as they may be advised. ITA No. 4793/Mum/2005,AY-2001-02 1. The Commissioner of Income-tax (Appeals)XXXIII, Mumbai (hereinafter referred to as the CIT(A)) erred in confirming the action of the Assistant Director of Income-tax (International Taxation)1(2), Mumbai (hereinafter referred to as the AO) in restricting the deduction of Head Office expenses by applying the provisions of section 44C of the Act, as against the appellants claim that the entire amount of Rs.1,53,42,210 allocated to the Indian branches should be allowed as a deduction as per the provisions of Article 7(3) of the DTAA between the Government of UA.E. and the Government of India. 2. The CIT(A) ought to have held that in case the higher authorities reverse the decision of the CIT(A) in the assessment year 19992000 of allowing the deduction for p....
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....from 18.11.1993, that as per the provisions of Article 7(3) deduction was allowable for all expenses irrespective of the fact as to whether such expenses were incurred in the state in which the permanent establishment was situated or elsewhere. However, the AO held that provisions of section 44C of the Act were applicable in the case under consideration and allowed 5% of the HOE, amounting to Rs. 31.85 Lakhs. 2.2. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Following the orders of his predecessor for AY.s. 1995-96 to 1997-98, the FAA dismissed the appeal filed by the assessee. 2.3. Before us, the AR stated that the order for the earlier years stand reversed in light of the decision given by the Special Bench in the case of M/s Sumitomo Mitsui Banking Corp. He relied upon the cases of Abu Dhabi Commercial Bank(ITA/3462/M/2010,AY-1995-96 & Other AY.s., dated 20.07.2012), Dalma Energy LLC(ITA/1664/Ahd/2008-AY-2004-05 dated 23.04.2012). Departmental Representative(DR)supported the order of the FAA. 2.4. We have heard the rival submissions and perused the material before us. We find that in the case of Abu Dhabi....
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....al Government has entered into an agreement with the Government of any country outside India or specific territory outside India, as the case may be, section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. This specific provision contained in section 90(2) makes it abundantly clear that in relation to the assessee like the one in the present case to whom the double tax avoidance treaty entered into by the Indian government applies, the provisions of Income-tax Act shall apply to the extent they are more beneficial to him. It, therefore, follows that if the provisions of the domestic law are more beneficial to the assessee than the provisions of the relevant tax treaty, the provisions of the domestic law shall override and prevail over the provisions of the treaty. Article 23 of the Indo Japanese treaty therefore cannot be interpreted in a way as sought by Shri Girish Dave because if such interpretation is assigned to article 23 and the interest income which is otherwise not taxable in I....
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....o.282/2007, dated 28/11/2007 which is effective from 1st day of April, 2008, paragraph 3 of Article 7 (Business Profits) has been replaced by the following :- "3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the tax laws of that State." (emphasis given) 14.1 In view of the aforesaid amendment, now the admitted legal position is that the admissibility of expenditure is to be governed by Article 7(3) of the Treaty upto the date from which the new amended provisions of the Treaty shall be applicable i.e. w.e.f. 1.4.2008. It can, inter alia, be summed-up that the contracting States and to avoid any conflict in the provisions of the tax laws vis-a-vis the provisions of Treaty, as also to streamline the applicable provisions of law, it was decided to incorporate that, for the purposes of determining the prof....
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....in nature, that the loss claimed by the assessee was on a pure estimate basis, that same was not allowable as per the provisions of section 37 of the Act. Finally he added an amount of Rs. 1.54 Crores to the income of the assessee. Aggrieved by the order of the AO, the assessee filed an appeal before the FAA. Following order of his predecessor for the AY 1997-98, the FAA dismissed the appeal filed by the assessee. 3.1. Before us, the Authorised Representative (AR) submitted that while deciding the appeal for AY 1997-98 (ITA/2154/Mum/2001 dated 23.08.2007), the Tribunal had decided the issue in favour of the assessee. He referred to the cases of Bank of Bahrain and Kuwait(132 TTJ 505) & Credit Lyonnais(AY. 1998-99 to 2000-01).DR relied upon the order of the FAA. We find that while deciding the appeal, filed by the assessee for the AY 1997-98, the Tribunal has held as under: 12. In ground no. 5, the assessee has raised the following grievance: "The CIT(A) erred in confirming the action of the ACIT of disallowing Rs.10,14,045/- being the loss on Forward Foreign Exchange Contracts which were unmatured on the last day of the previous year, The appellants submit t....
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....ing Officer on the ground that it is a contingent loss which depends on how the markets will move on a future date; the actual loss or profit will depend on the prevailing market price as on the date when tile contact is to mature e.g. on 10th May 1997 in this case, Reliance was also placed upon the Hon'ble High Court judgment in the case of CIT Vs Motor Industries Co. Ltd (229 ITR 137). The, Assessing Officer concluded that a loss, if any, on such forward contracts will .only accrue on the date on which the contract is settled. Referring to 'Hon'ble Madras High Court's judgment in the case Indian Overseas Bank Vs CIT (183 ITR 200), the Assessing Officer noted that profit on unmatured forward contract could not be taxed as income, and that such profits were only notional profits. The Assessing Officer concluded that similar loss on unmatured contracts is also a contingent loss and not eligible for deduction from business income. Aggrieved, assessee carried the matter in appeal before the CIT(A), but without any success. The assessee is not satisfied and is in appeal before us. 14. We have heard the rival contentions, perused the material on record and duly ....
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.... as deduction in computation of business income. In the light of these discussions, we are of the considered view that the very basis of the action of the Assessing Officer was vitiated in law and on facts. We, therefore, deem it fit and proper to direct the Assessing to delete the impugned disallowance. The assessee gets the relief accordingly. 16. Ground No.5 is thus allowed. Respectfully, following the above we are deciding the ground no.3 in favour of the assessee. 4. Last ground of appeal is about restricting the exemption in respect of interest on tax free bonds. During the assessment proceedings, the AO found that the assessee had received interest of Rs. 27.81 Lakhs on tax free securities, that it claimed that entire interest was exempt u/s 10(15)(iv)(a) of the Act. The AO asked the assessee to explain as to why the income derived from tax free securities should not be exempted instead of the gross receipts as claimed in the return. The assessee argued that gross interest was exempt and not the income derived from it. 4.1. During the appellate proceedings, before the FAA, the assessee contented that in the AY 1997-98 identical issue was decided in favour o....
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....te Bank of India (SBI)had launched IMDS in all countries where the local regulatory allowed them to implement the programme, that the acceptance of IMDS commenced on 21.10.2000 with the earlier closing dated 31.10.2000 and final closing date of 20.11.2000, that IMDS was a five year bank deposit product of SBI representing foreign currency denominated deposits in India for NRI's/Overseas Commercial Bodies, that SBI appointed SBI-Caps as the Lead Arranger for the programme, that the assessee-company was appointed as Arranger by SBI Caps, that the assessee was entitled for fees and service charges as a collecting bank as per the rates already fixed, that the assessee received Rs. 8.23 Crores as commission from SBI, that out of it Rs. 8.20 Crores were claimed as commission pertain to Overseas branches of Abu Dhabi & Dubai. The AO held that the commission income was arising on account of the agreement between the assessee and SBI/SBI Caps, that the assessee-company was incorporated in UAE, that it was not entitled for treaty benefit in terms of Article 4 of the Treaty, that the assessee was not resident of UAE and was not liable to pay tax. Finally, he held that commission income was ta....
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....posits (IMD) Programme, that bank was to be paid 0.25% commission on the amount collected by their designated branches, that SBI Capital Markets Ltd.(SBI CAP) also appointed the assessee as an arranger for mobilising deposits from the eligible depositors for the IMD programme, that the assessee was entitled to appoint some arrangers under the advice to the SBI CAP, that assessee had received fees amounting to Rs.5.28 Crores on account of commission as collecting bank and Rs. 31.72 Crores as commission on account of arrangers' fees, that assessee had remitted a sum of Rs. 31.72 Crores to its Head Office.AO made an enquiry about payment of Rs. 31.72 Crores. After considering the submissions of the assessee, AO held that services rendered by way of marketing and collection by the assessee bank and its overseas branches had a business connection in India, that the provisions of section 9(1) were attracted to the transaction in question, that activities carried out by the assessee bank were not covered by the explanation(a) to section 9(1),that the fees arisen from the activity were directly attributable to the operations carried out by the assessee in India, that payment made by the as....
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.... referred paragraph nos. 9 to 21 of the order dated 22.05.2013 of M/s Credit Lyonnais. 2.3. We have heard the rival submissions and perused the material before us. We find that in the case of Credit Lyonnais (Supra) issue of arrangers' fees with regard to mobilizing the deposits under IMD Programme has been discussed at length. While deciding the issue, Tribunal has also considered the applicability of the provisions of section 40(a)(i) and 195 of the Act. Deciding of issue of fees paid to the arrangers, Tribunal has held as under: "We, therefore, sum up our conclusion by holding that the amount paid by the assessee to the non-residents sub-arrangers is not a fees for managerial or technical or consultancy services. Hence, the same cannot be brought within the ambit of 'fees for technical services' as per section 9(1)(vii) of the Act. If this payment is not fees for technical services but only commission, the provisions of section 195 requiring the assessee to make deduction of tax at source before remitting or crediting the amount to the accounts of sub-arrangers, cannot apply. If no deduction of tax at source is required, obviously the provisions of section 40(a....