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TMI Blog2018 (8) TMI 1856X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Year 2000-01 and 2001-02 [ 2013 (7) TMI 1134 - ITAT MUMBAI] , Assessment Year 2002-03 and 2003-04, Assessment Year 2004-05 Assessment Years 2006-07 2007-08 and for Assessment Year 2010-11 - Decided in favour of assessee. - ITA No.444/Mum/2017 Assessment Years: 2011-12 - - - Dated:- 29-8-2018 - Shri Joginder Singh, Judicial Member, and Shri Rajesh Kumar, Accountant Member Assessee by Shri Farrokh Irani Revenue by Shri Samuel Darse CIT-DR ORDER Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 30/08/2016 of the Ld. First Appellate Authority, Mumbai. The first ground raised by the assessee pertains to not accepting the claim that the rate of tax applicable to domestic companies and/or co-operative banks for Assessment Year 2011-12 is also applicable to the assessee in accordance with the provision of Article-26 (Nondiscrimination) of the India-France Tax Treaty. 2. During hearing, the ld. counsel for the assessee, Shri Farookh Irani, fairly agreed that this issue is covered against the assessee by the Mumbai Bench of the Tribunal for different Assessment Years. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, a foreign company was 48% compared to 38% applied in case of domestic companies. The assessee had argued that it was discriminatory and not in accordance with law. Reference was made to non-discrimination clause in the Treaty, as per which there should not be any discrimination between the domestic and the non-resident company. The Tribunal, however, referred to the Explanation in the Section 90, inserted in the IT Act with retrospective effect from 01-04- 1962 as per which the higher tax rate in case of foreign company, should not be regarded as violation of nondiscrimination clause. The Tribunal also referred to the judgment of the Hon ble Supreme Court in the case of ACIT Vs. J.K. Synthetics. The Tribunal accordingly, rejected the ground raised by the assessee. The facts in the present appeal are identical and, therefore, respectfully following the decision of the Tribunal in the case of M/s BNP Paribas(supra), we dismiss this ground raised by the assessee. 5. Resultantly, appeal of the assessee is partly allowed. Following the above, effective Ground of appeal raised by the assessee is decided against it. 2.2. We note that for Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own case for the AYs. 2001-02 to 2002-03. In AY 2001-02, the Tribunal has dealt with the issue at para 13, 14, 15 16 at page 5 and decided the issue in favour of the assessee. Similarly the Tribunal in assessee s own case in the AY 2002-03 2003- 04 decided the issue at page 2, 3 6 at para 3,4,5, 13. Learned AR also placed reliance on the decision of ITAT Special Bench in the case of Sumitomo Mitsui Banking Corporation Vs. DDIT(IT), reported in (2012) 145 TTJ (Mumbai)(SB) 649, wherein exactly similar issue has been dealt at para 88 page 700 701. 4.1 On the other hand, it was contended by the learned DR that mutuality issue was not argued before the lower authorities, whether transaction is covered by the Special Bench, the issue of mutuality was not considered by the Special Bench. He also relied on the observation made by Hon ble Supreme Court in the case of Bangalore Club Vs. CIT, reported in (2013) 350 ITR 509 (SC) and our attention was invited to para 23. It was contended by the learned DR that taking loan from HO at interest itself shows that borrowing is on commercial basis, therefore, there is no question of applying principle of mutuality. He further co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l entity can never make a profit out of its own members ... The principle that no one can make a profit out of himself is true enough but may in its application easily lead to confusion, At what point, does the relationship of mutuality end and that of trading begin is a difficult and vexed question. As per learned DR the next test of mutuality to apply is that all transactions must be within the members of mutual group. The assessee being in banking business is dealing with third parties as well as its own branches to earn its business income. The money advanced by BO to HO or HO to BO are during the course and part of regular banking activities which are also carried in similar fashion with third parties. Hence these are commercial transactions not limited amongst the mutual entities but extended to third parties also and the privity of mutuality gets diluted for this reason. Again referring to the decision of Hon ble Supreme Court, learned DR contended that all transactions between legal entity and its constituent members (such as BO and HO) are not always covered by principles of mutuality. The principle that no one can trade with himself is not universally applicable. It m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sumitomo Mitsui Banking Corporation (supra). Decision of the Hon ble Supreme Court in the case of Bangalore Club (supra) is distinguishable on facts where interest income was earned by assessee club from third party i.e. banks with which deposit was made. However, in the instant case HO has given funds to its branch i.e. assessee. Following were the observations at para of Special Bench 88 :- XXXXX 4.6 In view of the above, since the issue under consideration is covered not only by the order of the Tribunal in assessee s own case for the AY 2001-02 to 2003-04 but also by the order of the ITAT s Special Bench in the case of Sumitomo Mitsui Banking Corporation (supra), we hold that the department was not justified in subjecting to tax the interest paid by the Indian Branch of the assessee to its head office and overseas branches applying the provisions of Article 12 of India-France Tax Treaty. Considering the above second Ground is decided against the AO. As a result appeals filed by the assessee and the AO stand dismissed. 3.3. We find that the issue taxability of interest paid by the assessee to its head office has been decided in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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