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TMI Blog2018 (6) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... ranger. The facts are contradictory to each other as per the assessee’s own record. The issue needs to be reexamined by the Assessing Officer in light of the claim of the assessee that ICICI Bank Ltd., Singapore branch is the main lender. The assessee is directed to substantiate its case with further evidences. In case, the Assessing Officer found that ICICI Bank Ltd., Singapore branch is lender of external commercial borrowing, than there is no default in deduction of tax at source u/s. 201(1)/201(1A) - Decided in favour of assessee for statistical purpose. - I.T.A. Nos. 4609, 4610 & 4611/Mum/2016 - - - Dated:- 8-6-2018 - Shri Mahavir Singh, JM And Shri G. Manjunatha, AM Appellant by : Shri Kirit Kamdar/ Shri Parth Achwal Respondent by : Shri Rajat Mittal ORDER Per G. Manjunatha, A. M. These three appeals filed by the assessee are directed against separate, but identical orders of the ld. Commissioner of Income Tax (Appeals)-55, Mumbai dated 29.03.2016 for the assessment years 2009-10, 2010-11 and 2011-12. Since the facts are identical and issues are common, for the sake of convenience these appeals were heard and disposed of by this common order. 2. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commissioner of Income-tax (OSD) -3(1), Mumbai stating that global income of the ICICI Bank Limited including that of its offshore branch in Singapore is chargeable to tax under the PAN AAACI1195H in Mumbai, India. 9. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in ignoring the contention of the appellant that, as per the provisions of section 194A(3)(iii) of the Act, there is no requirement to deduct taxes at source on the payment of interest made to ICICI Bank Limited, being a banking company under the Banking Regulation Act, 1949. 3. The brief facts of the case are that, it appears from the record that the assessee company had paid interest totaling to ₹ 11,69,45,505/- for the assessment years 2009-10 to 2011-12 on foreign currency loan called External Commercial Borrowings lent by a group of financial institutions arranged by the arranger, i.e., ICICI Bank Ltd., offshore branch, Singapore aggregating, US Dollars 20 million. The Assessing Officer has taken up proceedings u/s. 201(1)/201(1A) of the Income Tax Act, 1961 on the basis of Form 15CA and 15CB filed by the assessee to furnish the payments m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingapore states that in case of mandatory withholding, the borrower will be obliged to gross up such payments such that the recipient would receive the same amount as if no such deduction had been applied. The documentation charges and payment would be in US dollars. The assessee has uploaded 15CA and 15CB to the bank, therefore, these payments are evidently foreign payments and provisions of section 195(1) are applicable as it is an income deemed to accrue or arise in India as per Section 9(l)(v) of the IT Act. Recent insertion of Explanation to section 9(1) from 1,4.2010 further confirms the income of non resident will be deemed to accrue or arise in India whether or not the recipient has any establishment in India or rendered services in India. On going through the explanation and reply of the assessee it is perceived that the assessee's ground for non-deduction of TDS is entirely based upon section 194A(3)(iii) which is not applicable in the present case and cannot be accepted as the provisions of section 194A arc exclusively meant for payment to a resident while the interest has been paid to the non-resident entity. Hence, quoting of section 194A(3)(iii) does not help ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult of tax liability in the hands of a foreign resident by deducting the same from payment made to them at source. This fact further confirms that before making payments, the assessee has adopted every procedure of foreign remittance like uploading Form No.l5CA/l5CB as required u/s 195(6) of the Act r.w.r, 37BB of the IT Rules for the purpose, therefore it is established that the status of ICICI Singapore is non-resident and resident person. Furthermore, the assessee too failed to apply as required u/s 195(2). The rationale behind this is that the person responsible for making the payment cannot determine the income chargeable to tax India. The payer cannot act as an Assessing Officer when the sum paid to the non-resident is chargeable to tax in India. This view has been upheld by the Hon'ble Supreme Court in the case of GE India Technology Pvt. Ltd. 327 ITR 456. As in this case, the orders are being passed for FY 2008-09 to 2010-11 it is pertinent to make it clear that the proceedings are not time barred in view of provisions of section 201(3) of the IT Act which is applicable for payment to resident only. The matter in question relates to the non-resident However, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax deducted at sources, as this would be a case of defalcation of government dues. The employer has failed to pay the tax wholly or partly under sub-section (1A) of section 192, as the employee would not have paid tax on such perquisites. The deductee is a non-resident as it may not be administratively possible to recover the tax from the nonresident It is proposed to make these amendments effect from lsl April, 2010. Accordingly, it will apply to such orders passed on or after the lsl April, 2010. Considering the facts and circumstances of the case, it is held that the assessee has failed to deduct withholding tax as per section 195(1) on the interest payments made to non-resident person viz. ICICI Singapore during FYs 2006-07 to 2010-11 as mentioned below and therefore, treated an assessee deemed to be in default u/s 201 (I)/ 201(1A) of the IT Act. As the assessee has furnished of PAN of ICICI Singapore, the TDS rates @ 10% will have to be applied. As the issue involved is common in each year, a combined order is being passed for the sake of brevity. The short deduction u/s 201[1) and interest u/s 201(1A) are worked out as under:- Sr. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after considering the relevant submissions of the assessee rejected the legal plea taken by the assessee, challenging the jurisdiction of the Assessing Officer to pass the order u/s. 201(1)/201(1A) of the Act, by holding that irrespective of the place from where remittances were made, the jurisdiction starts from the place where the statutory forms were uploaded and if the assessee made a mistake while uploading the statutory forms, thus giving jurisdiction to the ITO(TDS), Noida, it is assessee s mistake when the Assessing Officer assumed jurisdiction because the forms were uploaded on a valid TAN registered with the Noida TDS office over which the ITO(TDS) had jurisdiction. Insofar as the applicability of provision of section 195 of the Income Tax Act, 1961 is concerned, the Assessing Officer referred to the submissions of the assessee and also letter dated 31.01.2007 issued by the ICICI Bank Ltd., Singapore branch to the assessee and its annexure observed that it is very crystal clear that the ICICI Bank Ltd. acted as an arranger cum facility agent cum conduit for lending of funds by various lenders either located in Singapore and/or in United Kindom and was definitely not a len ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the summary. This letter and the summary are strictly confidential and may not be shown or divulged to or used as a base for any discussions or arrangement with any third party except with the prior written consent of the Arranger. Please note that this communication should not be construed as giving rise to any binding obligation on the part of the Arranger unless the company communicates to the Arranger within 30 days of the date of this letter that the terms and conditions set out herein are acceptable to it. Yours faithfully (sd) BK lyer Head-Corporate and Institutional Banking, Singapore Branch (Sd) Accepted as per letter dtd.6.2.2007 For Bajaj Eco-Tec Products Ltd. Director Further, Page No.l of Annexure-I to the above letter dated 31.1.2007, which is relevant is reproduced below:- Annexure-I Bajaj-Eco Tec Products Ltd. Terms Conditions FACILITY: External Commercial Borrowing BORROWER: Baiaj Eco-Tec Products Limited {'the Company') PARENT: Bajaj Hindustan Limited ('BHL& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese loans were subject to the jurisdiction of Courts of England. It also becomes very clear from the perusal of these terms and conditions and the letter dated 31/1/2007 of ICICI Bank Ltd, Singapore branch that ICICI Bank Ltd Singapore Branch acted merely as arranger and it was not the lendcronunds but merely an arranger, facilitator and conduit through which the fundspassed through ultimately to the assessee in Mumbai and Noida. 7.6 Therefore, what becomes crystal clear is that ICICI Hank Ltd acted as an arranger cum Facility agent curn condujtjgrjending of funds by various lenders either located in Singapore and/or in United Kingdom and was definitely not a lender from whom the assessee borrowed funds and the actual lenders were various parties located in Singapore and/or U.K. to whom interest was paid by the assessee through the medium of 1CICI Bank Ltd in India and Singapore. ICICI Bank Ltd Singapore Branch was and facility fees. Thus, assessee paid interest to various lenders located either in Singapore T and/or UK or somewhere else in the world through the medium of ICICI BankLtdjn India and Singapore branch and this interest was routed through the medium of IC1C1 Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se banks in India will be acting as agents of the assessees who will make payments through banking channels. But that is not the case, banks act only as agents for making payments through which payments of various types can be made and it is the assessee having the bank account which makes payments to various parties liable for deducting tax at source and not the banks/And if the argument of section 194A(3] being applicable were invoked every time a payment of interest to a third party resident is made through cheque, the banks will not be able to function. Moreover, in the instant case, payment of interest is made to a non-resident as shown earlier and hence provision of section 195 of IT Act 1961 apply and not the provisions of section 194A of IT Act 1961, and hence it is held that interest payments made to the non- resident lender/s accrued and arose in India and since interest payments were made to non- residents, provisions of section 195 of IT Act 1961 were applicable and since the assessee did not deduct tax at source under section 195 of IT Act 1961, provisions of section 201(1)/201(1A] of IT Act 1961 were correctly applied and wore_ valid and order dated 30/3/2012 passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no requirement to deduct tax at source on interest payment made to ICICI Bank Ltd., being a banking company under the Banking Regulation Act, 1949. The ld. Commissioner of Income Tax (Appeals) grossly erred in not appreciating the fact in right prospective. Therefore, requested to delete the addition made by the Assessing Officer towards short deduction of tax and interest u/s. 201(1)/201(1A) of the Act. 10. The ld. Departmental Representative, on the other hand, strongly supported the order of the ld. Commissioner of Income Tax (Appeals) and submitted that the lower authorities have brought out clear facts to the effect that the assessee has borrowed external commercial borrowings from ICICI Bank Ltd., Singapore branch, which in turn arranged loan from known lenders which is evident from the loan agreement between the assessee and the ICICI Bank Ltd., as per which the ICICI Bank Ltd. acted as an arranger and agent. The ld. Departmental Representative further submitted that the letter addressed by the ICICI Bank Ltd. to the assessee categorically states that ICICI Bank Ltd., Singapore branch is an arranger cum facility agent and the lender are a group of financial insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the agreement dated 15.03.2007. The Assessing Officer further observed that as per the said agreement, the various clauses in agreement as well as the letter addressed by the ICICI Bank Ltd., categorically states that ICICI Bank Ltd., Singapore branch is only the agent for arranging external commercial borrowings. 13. It is the contention of the assessee that the ICICI Bank Ltd., Singapore branch is a main lender and also acted as an arranger cum facility agent to facilitate external commercial borrowings at USD 20 million which is evident from the agreement dated 15.03.2007 as per which Schedule 1, clearly specifies the name of the original lender as ICICI Bank Ltd., Singapore branch. The assessee further referring to the letter addressed by the office of the Jt. CIT (OSD)-3(1), Mumbai dated 27.04.2011 as per which the ICICI Bank Ltd including its offshore branches at Singapore and Hongkong are the part of the ICICI Bank Ltd., India having its registered office at Vadodra. The letter further states that ICICI Bank Ltd is an Indian resident company in terms of section 6(3) of the Act, and the global income of the ICICI Bank Ltd., including that of the offshore branches is char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an arranger cum facility agent. The said agreement further states in Schedule 1 at pg. 59 states that ICICI Bank Ltd, Singapore branch is original lender. But the letter written by the ICICI Bank Ltd., Singapore branch dated 31.01.2007 states that ICICI Bank Ltd., Singapore branch is an arranger and facility agent and the lender of the loan is a group of financial institutions to be assembled by the arranger. The facts are contradictory to each other as per the assessee s own record. Therefore, we are of the considered opinion that the issue needs to be reexamined by the Assessing Officer in light of the claim of the assessee that ICICI Bank Ltd., Singapore branch is the main lender. The assessee is directed to substantiate its case with further evidences. In case, the Assessing Officer found that ICICI Bank Ltd., Singapore branch is lender of external commercial borrowing, than there is no default in deduction of tax at source u/s. 201(1)/201(1A) of the Act. Hence, we set aside the issue to the file of the Assessing Officer with a direction to consider the issue afresh in light of the evidences filed by the assessee and pass a proper order as per law. 15. In the result, all th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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