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TMI Blog2017 (10) TMI 1467X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 (7) TMI 1305 - ITAT MUMBAI] we dismiss this ground raised by the assessee. Payment made by India Branch to Overseas Branch / HO - data processing fees paid by Indian Branch office of the assessee to its Singapore branch under Article-13 of the India France tax Treaty - HELD THAT:- As decided in [ 2016 (3) TMI 1355 - ITAT MUMBAI] as held 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 [ 2012 (4) TMI 80 - ITAT MUMBAI] 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. - ITA No. 1182, 1374/Mum/2015, Assessment Year: 2010-11 - - - Dated:- 16-10-2017 - S/Shri Rajendra, A.M. and Sandeep Gosain,J.M. Revenue by: Shri Samuel Darse-CIT-DR Assessee by: Shri M.V. Sonde JUDGMENT Rajendra,AM: Challenging the orders dated 27/11/2014 of CIT(A)-55, Mumbai the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of foreign company, should not be regarded as violation of non-discrimination 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. ITA No.1374/Mum/2015: 4.First Ground of appeal, raised by AO is payment made by India Branch to Overseas Branch / HO.The issue is about data processing fees paid by Indian Branch office of the assessee to its Singapore branch to the tune of ₹ 13,17,18,199/- under Article-13 of the India France tax Treaty. We find that while deciding the appeal for AY -2009-10 (ITA/3541/Mum/2014 ; dtd.31.03.2016) the Tribunal has decided the issue against the AO as under:- 5. Ground No.3 pertains to subjecting the data processing ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Special Bench of the ITAT in the case of Sumitomo Banking Corp. Mumbai wherein it was held, after elaborately discussing the legal position emanating from the interpretation of relevant provisions of Indian Incometax Act as well as treaty, that interest paid to the head office of the assessee bank as well as its overseas branches by the Indian branch cannot be taxed in India being payment to self which does not give rise to income that is taxable in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 data processing charges to the Singapore Branch of the assessee by applying the provisions of Article 13 of the India-France Tax Treaty 13. In effect thus, reversing the stand of the DRP, the coordinate bench has come to the conclusion that the 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 contended that if principle of mutuality is applied in all the cases, Section 44C will be redundant. The CITDR Mr. Ajay Kumar Shrivastava further contended that the ITAT SB in case of Sumitomo Mitsui banking corporation 136 ITD 66(Mum)(SB) has held that the interest received by HO(GE) is not taxable in hands of GE in India under domestic law on principles of mutuality as the interest paid by PE to GE is payment to self. As per learned DR, before the SB, the counsels from both the sides did not dispute the position that such interest payments were covered by principles of mutuality being payment to self, though the revenue argued that for purpose of taxation under domestic laws also the PE and GE should be treated as separate entities. This argument was rejected by ITAT on grounds that under the domestic law there is only one assessable entity i.e. GE and PE is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 might here be pointed out that it has been held by the House of Lords in Sharkey Vs. Wernher (1956) AC 58 ; (1956) 29 lTR 962 (HL) that the general proposition that no one could trade with himself and make in its true sense or meaning taxable profits by dealing with himself is not universally true and that there are situations in which a man could be said to make a profit out of the consumption of his own goods. The Hon ble Supreme Court in Bangalore club (supra) also bas held that this maxim is not universally applicable. When the business activity of banking by assessee bank comprises of continuous/integrated inflows and outflows of money with several entities including customers, other banks and its own branches, then the profit of the bank s business would depend on net inflows out of all operations and it cannot be said that a part of such transactions are gove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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