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TMI Blog2014 (2) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of Revenue. Applicability of Section 14A of the Act – Interest received from the head office – Held that:- The interest income received from head Office does not give rise to income - the expenditure incurred by the Assessee in relation to such income cannot be allowed – the additional groud taken by the department is to be allowed in favour of the department and against the Assessee and that the provisions of section 14A are applicable on the exempt interest income earned from Head Office/overseas branches – Decided in favour of Revenue. - ITA No. 1609/Mum/2008, ITA No. 1786/Mum/2008 - - - Dated:- 13-9-2013 - Shri B. R. Mittal And Shri D. Karunakara Rao,JJ. For the Petitioner : Shri P. J. Pardiwala For the Respondent : Ms. Neerja Pradhan ORDER Per B. R. Mittal, JM: These cross appeals are filed by the Department and the Assessee against the order of ld. CIT(A) dated 31st December, 2007 for the assessment year 2004-05. 1.1 Firstly we take up appeal filed by the Department being ITA No.1609/M/2008: 1.2 The department has taken up the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the earlier year i.e. assessment year 2002-03 that the broken period interest paid to the sellers at the time of purchase of securities is allowable as Revenue expenditure in that year, then AO be directed to allow deduction for the broken period interest disallowed in assessment year 2002-03 in respect of securities sold during the previous year relevant to the assessment year 2004-05. 4. In the event of any authority reversing the decision of the ITAT for the assessment year 1995-96 that the claim of bad debts written off of Rs.21.75 lacs, in respect of Biogenics (I) Ltd. is allowed as a deduction in the assessment year 1995-96 (being the assessment year relevant to the previous year in which such debts were written off), then the AO be directed to allow deduction for the same in the assessment year 2004-05 as the appellants have not recovered any amount till date. 5. The CIT(A) ought to have directed AO to grant interest upto the date of receipt of refund order. 1.5 The relevant facts are that the Assessee is a non-resident company and carried on business of banking including foreign exchange transactions. The Assessee bank is incorporated under the relevant O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been decided by his predecessor for assessment years 1996-97 to 2002-03 in assessee s own case. He further stated that ITAT Mumbai Bench has also decided the said issue against the Assessee and accordingly held that AO is justified in bringing to tax an amount of Rs.64,60,038/-. Ld. CIT(A) has further held that it was submitted that in the event interest received from Head Office is taxable in India interest of Rs.51,35,818/- paid to Head Office should not be added while computing total income. Therefore, the ld. CIT(A) held that AO is directed to allow interest paid to Head Office of Rs.51,35,800/-. Hence both parties are in appeal before Tribunal . 1.9 At the time of hearing the ld. Representative of both parties submitted that the above issue is now covered by the decision of the Hon ble Special Bench of the Tribunal in the case of Sumitomo Mitsui Banking Corpn. Vs. Dy. DIT(IT), Mumbai (136 ITD 66) (supra), whereby the Special Bench of the Tribunal held that interest income received from Head Office is not chargeable to tax being income to self and therefore, the principle of mutuality as provided under the Income tax act would be applicable in respect of such income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue in favour of the Assessee that the interest income received from Head Office is not chargeable to tax being it is an income to self. Consequently the interest paid by the Assessee Branch PE in India to Head Office is also not to be allowed as deduction. In view of Ground No.1 of the appeal taken by the department as well as by the Assessee are allowed by reversing the order of CIT(A). 2. In respect of ground No.2 taken by the department we observe that the said expenses comprising of Rs.17,59,457/- for travelling expenses incurred by Head Office on its employees and executives to monitor the operations of India branch and Rs.45,420/- is service fee paid to auditors for issuance of certificate of expenses and Assessing Officer disallowed the said claim that these expenses are within the purview of section 44C of the Act and not additional deduction or allowance as permitted under provisions of the Act. Being aggrieved the Assessee filed appeal before ld. CIT(A). The ld. CIT(A) by following the order of his predecessors in respect of assessment year 2001-02 and 2002-03 and also considering the decision of Hon'ble Bombay High Court in the case of CIT vs. Emirates Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that similar issue was considered by the Tribunal in Assessee s own case for assessment year 2002-03, 2003-04 in ITA Nos.2762/Mum/2006 and 1785/mum/2008 vide common order dated 22nd March, 2013 along with other appeals of the Assessee and the Tribunal vide para-28 decided the issue in favour of the Assessee and against the Revenue copy of the said order was placed before us to substantiate the above submission. On consideration of the orders of authorities below and earlier order of the Tribunal in Assessee s own case for assessment year 2002-03 and 2003-04 dated 22/03/2013 we observed that the Tribunal decided the case in favour of the Assessee and against the department and respectfully following the same we reject the ground No.3 of the appeal taken up by the department. 3. In respect of Ground No.4 taken by the department the ld.AR conceded that claim of bad debt of the above amount has been allowed in earlier assessment year 1995-96 and consequently the order of the ld. CIT(A) is to be reversed and confirm the action of Assessing Officer. In view of the above, ground No.4 taken by the department is allowed by confirming the action of Assessing Officer. 3.1 In respe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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