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TMI Blog2016 (3) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... T:- As decided in assessee's own case [ 2012 (8) TMI 329 - ITAT, MUMBAI] Payment on account of data processing charges paid to BNP Singapore cannot be taxed in the hands of the assessee. The conclusion arrived at by the coordinate bench, whatever may have been the path traversed by the coordinate bench to reach this point, are the same as arrived at by us. Of course, our reasons are different, as set out earlier in this order, but that does not really matter as on now. We fully agree with the conclusions arrived at by the coordinate bench. We, therefore, direct the Assessing Officer to delete the impugned disallowance - Decided in favour of assessee - ITA No.3541/Mum/2014 - - - Dated:- 31-3-2016 - Pramod Kumar AM and Pawan Singh JM For The Appellant : A.V. Sonde For The Respondent : Jasbir Chouhan ORDER Per Pramod Kumar AM: 1. By way of this appeal, the assessee appellant has called into question correctness of the order dated 5th February, 2014, passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the Assessment Year 2009-10. Grievances raised by the appellant are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09. Respectfully following the same, we dismiss the grievance raised by the assessee in ground no.1. 5. In respect of second ground of appeal, vide our order of even date, and in assessee s own case for the assessment year 2008-09, we have observed as follows:- 7. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 8. We find that while the CBDT circular No. 740, relied upon by the authorities below, does indeed state that the branch of a foreign company/concern in India is a separate entity for the purpose of taxation but this view has not really found favour with the judicial forums. Rejecting this approach after an elaborate analysis of the scheme of the Income Tax Act, Hon ble Supreme Court has, in the case of CIT Vs Hyundai Heavy Industries Co Ltd [(2007) 291 ITR 482 (SC)], has held that a taxable unit is a foreign company and not its branch or PE in India. The very foundation of dual taxable entity is thus laid to rest. There is only one taxable unit and that is the GE, though it is taxable in respect of the profits attributable to the PE, and there is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it that my attempts to get these views across have met with varying levels of success. In a way, Dr Kees van Raad s frustrations in being able to hammer this fundamental international tax principle does show how widespread this erroneous misconception is. 11. In any case, there is no dispute that the assessee is carrying on business in India through a permanent establishment and that, in terms of article 13(5) of the Indo French DTAA, the charging provisions of 13(1) read with 13(2) will not apply not apply in such a situation as long as the royalties, fees for technical services or the payments for the use of equipment are effectively connected with such permanent establishment .. . As article 13(5) states it in unambiguous terms, in such case the provisions of Article 7 .......shall apply . Under article 7, as is elementary, only such profits can be brought to tax as business profits as are attributable to the permanent establishment, and that has already been done. There is no dispute about this position. In this view of the matter also, there is no scope of further addition being made in respect of an intra GE charge for the services rendered another PE within the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Income-tax Act, interest paid by Indian Braches to head office and other overseas Branches was payment to self, which did not give rise to any income as per the Income-tax Act. In support of this contention, reliance was placed on behalf of the assessee on the decision of Hon'ble Supreme Court in the case of Sir Kikabhai Premchand vs. CT (Central) 24 ITR 506 as well as the decision of Kolkata Special Bench of the ITAT in the case of ABN Amro Bank NV vs. Asst. Director of Income-tax 98 TTJ 295. The contention of the assessee, however, was not accepted by the Ld. CIT (A) and relying on the decision of Mumbai Bench of the ITAT in the case of Dresdner Bank AG vs. Add1. CIT 108 ITD 375, he held that the interest paid by the Indian branches of the assessee bank to its head office and overseas branches was chargeable to tax in India. Accordingly, the addition made by the A.O. on this issue was confirmed by the Ld. CIT(A). 5. We have heard the arguments of both the sides and perused the relevant material on record. As agreed by the Ld. Representatives of both the sides, the issue involved in this appeal of the assessee now stands squarely covered by the decision of Speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned representatives of both the sides have also not made any separate submissions on this aspect of the matter specifically. Having held that the interest paid by the Indian branch of the assessee bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of s. 195 would not be attracted and there being no failure to deduct tax at source from the said payment of interest made by the PE, the question of disallowance of the said interest by invoking the provisions of s. 40 (a)(i) does not arise, Accordingly we answer question No. 1 referred to this Special Bench in the negative i.e. in favour of the assessee and question No. 2 in affirmative i.e. again in favour .of the assessee. As the facts and circumstances of the case during the year under consideration are peri materia, where payment made by assessee to Singapore Branch for data processing, was brought to tax. Respectfully following the order of the Tribunal in assessee s own case as well as the order of the Special Bench of the Tribunal in the case of Sumitomo Mitsui Banking Corporation (supra), we hold that the department was not justified in taxing the da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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