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TMI Blog2012 (12) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... elf, the same is deductible while determining the profit attributable to the PE which is taxable in India. Thus interest paid by the Indian branch of the assessee Bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of section 195 would not be attracted. In absence of any distinguishing feature brought on record by the Revenue. Appeal decides in favour of assessee. Additional grounds raised for the first time – Held that:- Following the decision in case of Tollaram Hassomal (2006 (3) TMI 136 - MADHYA PRADESH HIGH COURT) that 1additional grounds treating them to be legal grounds in appeal for the first time. Therefore remand the said additional grounds to the ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai being a permanent establishment in India ought to be governed by the provisions of the tax treaty. (c) The assessee has referred provisions of Article 7-3(b) of the DTAA between India and Belgium and submitted that the assessee should be allowed deduction to interest paid to H.O. as per the specific provision in the tax treaty. (d) The treaty cannot have the effect of imposing an obligation on an assessee in respect of interest paid by its branch in India to the H.O. (e) The treaty does not impose any obligation on the assessee to deduct tax at source in respect of interest paid by its branch in India to the H.O. (f) The fiction created by Article 7(2) is limited only for the purpose of determination of the profits attributable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming the order of ADIT disallowing the interest paid to Head Office of Rs. 1,22,80,824/- while computing the income from business of the India Branch. (b) He erred in relying on the decision of Kolkata Tribunal, Special Bench in the case of ABN Amro Bank. He erred in not considering Circular No. 740 dated 17 April 1996 issued by the Central Board of Direct Taxes. (c) He erred in not appreciating in the correct perspective the submissions made by the appellant. (d) He erred in not appreciating that the appellant and the head office in Belgium constitute separate legal entity for the purpose of taxation in India and therefore, interest paid by branch to Head Office was fully allowable as a deduction. 4. The assessee vide its lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . submits that since no addition was made by the A.O., the additional grounds raised by the assessee be rejected. 6. We have carefully considered the submissions of the rival parties and perused the material available on record. We find merit in the plea of the ld. counsel for the assessee that the additional grounds of appeal raised by the assessee do arise from the finding given assessment order (supra), therefore, following the ratio of the decision of Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income-tax (1998) 229 ITR 383 (SC), we admit the additional grounds raised by the assessee. 7. In Sumitomo Mitsui Banking Corporation vs. Dy. Director of Income-Tax (IT) (supra) it has been held (H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian branch of the assessee Bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of section 195 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) does not arise. Accordingly, question No.1 referred to before the instant Special Bench is answered in the negative i.e., in favour of the assessee and question No.2 in affirmative i.e., again in favour of the assessee. [Para 88] 8. In absence of any distinguishing feature brought on record by the Revenue, we respectfully following the above decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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