9911796707
TMI Blog2018 (6) TMI 757X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the total income. 3. Brief facts are, as stated by the Assessing Officer, the assessee is a non-resident Banking Company operating in India as Branch of DBS Bank Limited, Singapore. The assessee is engaged in the Banking activities permitted by the Reserve Bank of India including Corporate and Institutional Banking, Trade Finance, Transactional and Treasury Solutions etc. For the assessment year under dispute, the assessee had filed its return of income on 31st October 2007, declaring income of Rs. 134,07,89,502. During the assessment proceedings, the Assessing Officer noticed that in the relevant previous year, assessee has debited an amount of Rs. 1,63,73,490 towards payment of interest to Head Office and Branches at Singapore, Hong Kong and London. Noticing that similar expenditure claimed was disallowed in assessment year 2003-04, 2004-05 and 2006-07, he called upon the assessee to explain why the expenditure claimed should not be disallowed. In response, it was submitted by the assessee that since the interest payment is an allowable expenditure under section 36(1)(iii) of the Income Tax Act, 1961 (for short "the Act"), it cannot be disallowed. Further, it was submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial bench in that case held that under the domestic law the interest paid by the Indian branch to the head office was not allowable as deduction as this was payment to self. Further it was also held that the interest payment was allowable as deduction while determining the profit attributable to the PE being the Indian branch under the provisions of Article 7(2) and 7(3) of Indo Japanese treaty read with paragraph 8 of the protocol. The special bench also held that the said interest cannot be taxed in the hands of the assessee bank in India under the domestic law as it was payment to self. There was no express provisions in the relevant tax treaty which was contrary to the domestic law. Therefore, interest payment was not taxable in the hands of the bank and thus there was no question of any tax deducted at source. The issue is thus covered in favour of the assessee and we accordingly set aside the order of CIT(A) and allow the claim of expenditure on account of interest." 6. Following the aforesaid decision, the Tribunal has allowed assessee's claim in assessment year 2005-06 and 2006-07 in ITA no. 8671/Mum./2010, dated 3rd March 2017 and ITA no.9067/Mum./2010, dated 12th Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss on account of revaluation of foreign exchange contracts which had not matured during the year on the balance-sheet date. The AO had disallowed the loss as contingent in nature as contract had not matured and also held that it was notional. CIT(A) has allowed the claim following some decisions of Tribunal. We find that the issue is covered by the judgment of Hon'ble Supreme Court in case of CIT. Vs. Woodward Governor India Private Limited (312 ITR 224) in which it has been held that adjustment on account of foreign exchange fluctuation can be made on each balance-sheet date in respect of any forward foreign exchange contract pending actual payment and any loss arising there from has to be allowed as an item of expenditure u/s 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." 11. Similar view has been expressed by the Tribunal in other assessment years also. In fact, the Hon'ble High Court while deciding the Department's appeals for assessment year 1998-99 and 2004-05, has upheld the view expressed by the Tribunal on the disputed issue which is evident from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. C.O. no.8/Mum./2014 - By Assessee 19. In view of our decision in ITA no.6865/Mum./2012, the grounds raised in the cross-objection have become infructuous, hence, dismissed. 20. In the result, assessee's cross objection is dismissed. ITA no.4948/Mum./2014 Assessee's Appeal - A.Y. 2008-09 21. Grounds no.1 to 4 are in relation to taxability of interest of Rs. 26,69,04,500, earned on investments made in Indian securities by DBS Bank Ltd., Singapore as Foreign Institutional Investor (FII). 22. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that as per notes to computation of income, the assessee has earned short term capital gain of Rs. 2,10,35,143, and interest income of Rs. 26,69,04,500 from FII. The Assessing Officer observed that while the assessee has offered the interest income from FII operations to tax, short term capital gain has been claimed as exempt. Referring to the decision of the Dispute Resolution Panel (DRP) in assessee's own case for assessment year 2006-07, the Assessing Officer, though, accepted assessee's claim that short term capital gain is exempt, however, he treated the interest income on FII operations as busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctfully following the aforesaid decision of the Co-ordinate Bench, we direct the Assessing Officer to assess the interest income from Government Bonds on gross basis as per Article-11 of the India-Singapore Tax Treaty. These grounds are allowed. 28. Grounds no.5 to 7 are not pressed, hence, dismissed. 29. In ground no.8, the assessee has sought a direction to grant refund of tax deducted at source on the interest paid to Head Office. 30. We have heard the parties on this issue. It is the contention of the assessee that since the interest paid is not taxable at the hands of the head office, the tax deducted at source on interest payment should be refunded. As could be seen, the learned Commissioner (Appeals) in Para-20 of the impugned order has already directed the Assessing Officer to examine assessee's claim. In view of the above, we direct the Assessing Officer to verify the claim of the assessee and allow consequential relief in terms of the order passed by us on the disputes raised in these appeals. This ground is allowed for statistical purposes. 31. Grounds no.9 is not pressed, hence, dismissed. 32. In the result appeal is partly allowed. 6038/Mum./2014 Revenue's Ap ..... 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