9911796707
TMI Blog2014 (2) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of actual payment in respect of taxes paid relating to assessee’s New York and Tokyo Branch after verification – Decided against Assessee. Disallowance u/s 14A of the Act – Income as Expenses – Held that:- The disallowance made by the AO by following 12% of the income as expenses is not justified and is not based on any rational basis - the disallowance of 0.5% of tax free income would be reasonable - The order of the CIT(A) set aside on the issue and the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee. - I.T.A. No.9155/Mum/2010, I.T.A. No.8297/Mum/2010 - - - Dated:- 8-5-2013 - Shri B. R. Mittal (JM) And Rajendra (AM),JJ. For the Petitioner : Shri J. D. Mistry For the Respondent : Shri Pravin Varma ORDER Per B. R. Mittal, JM: The cross appeals have been filed by the department and the assessee for assessment year 2000-2001 against order dated 12.10.2010 of ld CIT(A)-4, Mumbai. 2. Firstly, we take up the appeal of assessee being I.T.A. No.8297/M/2010. 3. Ground No.1 of appeal reads as under: On the facts and in the circumstances of the case and in law, the learned Additional Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances we have to see whether the invoking of provisions of section 40(a)(i) by the assessing officer and as upheld CIT(A) was right in law. Relevant portion of section 40(a(i) is extracted be follows. 40(a)(i) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable outside India. on which tax has not been paid or deducted under Chapter XVII-B. Provided that where in respect of any such sum, tax has been paid or deducted under Chapter XVll-B in any subsequent year. Such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid or deduction On a perusal of this section we have to necessarily hold that the deduction, if any, can be allowed, only in the year in which the tax has been paid or deducted under Chapter XVII-B. As in the impugned assessment year no tax has been deducted while remitting these amounts to companies situated outside India, we hold that the first appellate authority was right in upholding the disallowance made by the assessing officer This Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kyo Branch Business Tax and Pre factural Municipal Inhabitant tax of Rs.8,05,37,231 and the learned CIT (A) erred in setting aside this issue to the AO with a direction to allow after verification on the basis of actual payment made in respect of taxes paid. The (earned AO be directed to allow deduction for taxes paid in respect of New York Branch State Franchise Tax of Rs.49,63,956 and Tokyo Branch Business Tax, Pre factural Municipal Inhabitant tax of Rs.8,05,37,231 and reduce the total Income accordingly. 12. Assessee has claimed deduction in respect of New York Branch State Franchise of Rs.49,63,956/- and Tokyo Branch business tax and pre factural municipal tax of Rs.8,05,37,231/-. Assessing Officer disallowed the claim on the ground that assessee has not produced any documentary evidence to prove that above amounts have been actually paid. Being aggrieved, assessee field appeal before ld CTI(A). 13. On behalf of assessee, it was contended that details were submitted to the AO vide letter dated 5.12.2002. AO did not call for any further information or clarification. It was also contended that in earlier years, claim of the assessee was allowed by ld CIT(A). Ld CIT(A) after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that assessee has not disallowed any expenditure for earning above exempt income. Being aggrieved, assessee filed appeal before ld CIT(A). 18. On behalf of assessee, it was contended that assessee made investment in securities/lending out of assessee s own funds i.e. share capital reserves and surplus and non interest bearing funds. Alternatively, it was contended that the disallowance u/s.14A towards incurring of expenditure for earning exempt income could be of Rs.17,24,525 as under:- (Total Directors remuneration has been apportioned to the Treasury Division on the basis of the proportion that the Income of Treasury bears to the Total Income of the Bank i.e. Rs. 55,225,274,732) Expenses apportioned towards Total Expenses Exempt Income Exempt Income of Treasury Division Total Income of Treasury Division Expenses apportioned towards Exempt Income 31,368,387 1,098,865,940 19,987,916,145 Expenses apportioned towards Exempt Income = Rs.1,724,525 19. Ld CIT(A) has stated that he does not agree with assessee that no expenses have been incurred for earning dividend exempt income and interest on tax free bonds. Ld CIT(A) has stated that the disallowance worked o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restore the issue to the file of the AO with directions as given in the above para. The ground of appeal, is thus allowed in part. 21. We have considered submissions of ld representatives of parties and earlier orders of the Tribunal(supra). We agree with ld A.R. that the disallowance made by the AO by following 12% of the income as expenses is not justified and is not based on any rational basis. There is no dispute to the fact that for making the disallowance u/s.14A of the Act, the expenditure which is related to the income which does not form part of total income under the Act has to be identified. AO has to identify the expenditure which can reasonably said to have been incurred on tax exempt income before making any disallowance u/s.14A of the Act. On perusal of the order of the Tribunal for assessment year 2003-04(supra), we observe that assessee stated that the disallowance of 0.5% of tax free income would be reasonable. However, assessee also referred the decision dated 29.11.2011 of ITAT Kolkata in I.T.A. No.1625/Kol/2010 in the case of DCIT vs The Diamond Co. Ltd. , wherein, the issue was whether 1% disallowance was justified on the total dividend income and the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was disallowed earlier, in the year of payment of taxes. It was contended that deduction of Rs.96,18,000 be allowed during the assessment year under consideration. Assessee placed reliance on the CBDT Instruction No.F.No.275/201/95-IT dt.29.1.1997, which clarified that no payment for TDS should be enforced after the tax deductor has satisfied the officer in charge of TDS that taxes have been paid by the deductee assessee. Assessee also stated that AO has not discussed the said issue in the assessment order. Ld CIT(A) after considering the submission of assessee in para 35. has stated that assessee bank has paid to Master Card International without deducting tax. Hence, AO is justified in disallowing the payments. However, ld CIT(A) has directed the AO to verify the claim of the assessee regarding taxes paid in this year under consideration in respect of earlier years and allow them as per law. Ld A.R. during the course of hearing submitted that requisite details are placed at pages 70-75 of PB. Therefore, there is no question to verify and deduction should be allowed in assessment year itself. However, ld D.R. submitted that there is no discussion on the above issue in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) erred in excluding the profits of the foreign branches amounting to Rs.63.03 crore from the total income without appreciating that the bank is a resident assessee and under the provisions of section 5 of the I.T.Act all the income including income from foreign sources are to be included in the total income chargeable to tax. 3. On the facts and in the circumstances of the case and in law, ld CIT(A) erred in excluding the profits of the branches amounting to Rs.63.03 crores from the total income without appreciating that credit for taxes paid in foreign countries shall be allowed to set off against the tax chargeable on total income including the income from foreign sources which were subjected to tax in foreign countries. 29. At the time of hearing, ld representatives of parties conceded that above issue is covered in favour of the assessee by order of the Tribunal in assessee s own case for assessment year 2003-04(supra) which has been decided by following the earlier orders of the Tribunal in assessee s own case in I.T.A. No.1679/M/2001 dated 27.3.2008 for assessment year 1997-98. We observe that ld CIT(A) has decided the issue in favour of assessee by following the e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
