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TMI Blog2017 (3) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... g the amount of Rs. 79,47,690/- claimed for provision of standard asset written back. (4) The Commissioner (Appeals) erred in upholding the 1/5th of fee paid for Corporate Club membership. (5) The Commissioner (Appeals) erred in upholding of taxing the Capital Gain of Rs. 10,69,688/-pertaining to DBS FII operations in India as "business income" in the hand of appellant. (6) (a) In alternative, the assessee raised plea that in the event of loss of Rs. 6,74,26,015/- for AY 2005-06 is disallowed, the same may be reduced while computing the total income for the Assessment Year 2006-07, being the year of reversal. (b) Further in alternative, the assessee tastefully that in the event of loss of Rs. 9 519 9815/-being loss on revaluation of unmatured foreign forex exchange contract as on 31st of March 2004 pertaining to the Assessment Year 2004-05 is disallowed, the same may be reduced while computing the total income for the Assessment Year 2005-06, being the year of reversal. In cross appeal the revenue has raised following grounds of appeal: (1) on the facts and in the circumstances of the case and in law, whether the ld Commissioner (Appeals) was justified in holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 6,74,26,015/- on revaluation of unmatured outstanding forward foreign exchange contracts, disallowed the head office expenses of Rs. 68,81,733/-, disallowed deduction under section 44C on head office expenses of Rs. 40,13,250/-, disallowed Rs. 7947690/- claim for provision for standard asset written back , allowed only Rs. 6 lakh out of 1/5 of Rs. 30 lakhs for entrance fees paid for corporate club membership, taxed the capital gain of Rs. 10,69,688 /- . On appeal before Commissioner (Appeals) the claim of loss on revaluation of unmatured forward exchange contract and head office expenses of Rs. 68,81,733/- was allowed. Rests of the disallowance were sustained. Accordingly, both the parties filed appeal against the order of ld Commissioner (Appeal). The assessee filed appeal against the sustaining the various disallowance is claimed under various grounds of appeal. Similarly, the revenue has challenged the deletion of head office expenses and allowing the claim of loss on revaluation of unmatured forward exchange contract. The assessee bank further filed Cross Objection for appropriate direction to the assessing officer to grant refund on tax deducted at source on the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully covered in favour of assessee, thus respectfully following the decision of Tribunal the ground No,1 of appeal is allowed. 6. Ground No. 2 relates to disallowance of Rs. 28,503/- interest paid to NOSTRO accounts. The ld AR of the assessee argued that that during the previous year relevant to the assessment year under consideration assessee have paid interest on NOSTRO account overdrawn. The interest has been directly debited from the Overseas Bank i.e. Bank of New York USA and it pertains to the branch in India. The ld AR explained that NOSTRO account is an account maintained by an Indian Bank including foreign Banks branch in India, which is denominated in foreign currency. The Indian bank charged interest if the NOSTRO account has overdrawn balances. Interest paid by the assessee on overdrawn on NOSTRO account are on the Banks account maintained with foreign banks and not with NOSTRO account maintained with the head office/overseas branches of the assessee. Thus, consideration by Commissioner (Appeals) by placing reliance on the basis of ground No. 1 is factually incorrect. In alternative it was argued that if the deduction on account of interest paid to head office is allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ya Pradesh High Court in case of Nathabhai Desabhai (130 ITR 238). On the other hand the learned DR for the revenue supported the order of authorities below. 9. We have considered the rival contention of the parties and further gone through the orders of authorities below. The assessing officer disallowed the provisions for standard asset written back holding that assessee has failed to furnish the information as to what extent such income had been offered in the earlier years for which write back has been claimed. The learned Commissioner (Appeals) confirmed the disallowance holding that AO has no alternative to add back in absence of any detail. We have seen that the assessee bank have been consistently offering to tax the provisions made for standard asset and claiming as deduction the provision written back (as shown on page 50 to 113 of PB). The ld AR for the assessee made the submission that provision written back during the year represents amounts which were disallowed in earlier years and therefore should be allowed in the year of written back. In our view the contention raised by the assessee require consideration by assessing officer, therefore, this ground of appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income'. In support of the submission the ld AR of the assessee relied upon the registration certificate obtained by FII and Article 13 of India-Singapore DTAA. It was also argued that as per SEBI Regulations 1995, FIIs can only make investment in Indian securities and so cannot and business income. The RBI guidelines also provide that a FII should use their funds for purpose as enumerated in the SEBI Regulations. The ld AR of the assessee finally submits that the DRP vide order dated 16 September 2010 for assessment year 2006-07 and the assessing officer vide orders dated 14th Feb 2011 for assessment year 2007-08 dated 2nd Feb 2012 for assessment year 2008- 09 dated 26 March 2014 for the assessment year 2010-11 dated 18th March 2016 for assessment year 2012-13, in assessee's own case have decided this issue in favour of the assessee and held that Capital Gains arising on the sales of securities by DBS FII is not taxable in India as per article 13 of DTAA. On the other hand the ld DR for the assessee honestly supported the order of authorities below. 13. We have considered the rival contention of the parties. Further, we have considered the contention of ld AR of the assessee tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et in respect of any forward foreign exchange contract pending actual payment and any loss arising therefrom has to be allowed as an item of expenditure under section 37(1). We, therefore, see no infirmity in the order of CIT(A) in allowing the claim of loss of the assessee. The order of CIT(A) is, therefore, upheld on this issue." 16. Considering the decision of Tribunal in assessee's own case for AY 2003-04 and keeping in view the principle of consistency the ground No.6 of assessee's appeal is allowed and the ground No.1&2 raised in revenue's appeal is dismissed. 17. Ground No. 3 in revenue's appeals relates to applicability of provisions of section 44C in allowing head office expenses. The ld DR for the revenue supported the order of Assessing officer and argued that ld CIT(A) wrongly allowed the relief to the assessee. On the other hand the ld AR of the assessee argued that assessee has submitted the details of expenses aggregating to Rs. 68,81,733/-, which are available at Annexure-III of Transfer Pricing Report, copy of which is placed on record. The expenses consisting of reimbursement to the head office/branches for specific revenue expenses and the cost of staff. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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