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TMI Blog2019 (3) TMI 1834X X X X Extracts X X X X X X X X Extracts X X X X ..... that interest paid by the branch office to head office is not chargeable to tax in view of the specific provisions of Article 11 of DTAA between India and Netherlands - CIT(A) was right in deleting the addition made by the AO towards disallowance of interest paid to head office. Hence, we are inclined to uphold the findings of the ld. CIT(A) and reject the ground taken by the revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As with view taken by the Co-ordinate Bench in assessee s own case for earlier years, we are of the considered view that there is no error in the findings of the ld. CIT(A) in deleting additions made towards disallowance of expenditure incurred in relation to exempt income u/s. 14A of the Act. Hence, we are inclined to upheld the findings of ld. CIT(A) and reject the ground taken by the revenue. - ITA No.678/Mum/2018 & 679/Mum/2018 - - - Dated:- 28-3-2019 - SHRI MAHAVIR SINGH, JM AND SHRI G. MANJUNATHA, AM For the Revenue : Shri Pankaj Kumar For the Assessee : Shri K.K. Ved Shri Ninad Patade ORDER PER G. MANJUNATHA (A.M): These two appeals filed by the revenue are directed against separate, but identical orders of the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h paragraphs 4 and 5 of Article 11 of the India-Belgium DTAA? 7. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision of the Hon'ble Calcutta High Court in the case of ABN Amro Bank in which it was held that the interest earned by the HO from the BO is not chargeable to tax in view of Article 11(7) of the DTAA between India and Netherlands when in fact the Hon'ble Calcutta High Court did not have the occasion to consider the provisions of Article 11(8) of the India - Netherlands DTAA which is similar to Article 11(5) of the India -Belgium DTAA and which allows for interest income to arise in the Contracting State in which the PE is situated (i.e., India) if it is borne by the PE and in spite of the payer not being resident in that Contracting State (India)? 8. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not considering that the Hon'ble Supreme Court in the case of ABN Amro Bank in Civil Appeal No. 8764/2012 had dismissed the Special - Leave Petition filed by the Department without assigning reasons and in light of the Hon'ble Supreme Court's own decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4. Aggrieved by the assessment order, the assessee preferred the appeal before the CIT(A). 5. The CIT(A) for the detailed reasons recorded in the appellate order deleted the additions made by the AO towards data processing cost u/s.40(a)(i) of the IT Act, 1961, disallowance of interest paid to head office and taxability of the same in the hands of the head office and also disallowance of expenditure incurred in relation to exempt income u/s.14A of the Income Tax Act, 1961. 6. Aggrieved by the CIT(A) order, revenue is in appeal before us. 5. The first issue that came up for consideration from ground No.1 to 4 of revenue appeal is disallowance of data processing cost u/s.40(a)(ia) of the IT Act, 1961. The ld. AR for the assessee, at the time of hearing submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT, Mumbai I Bench in assessee s own case for the A.Y.2012-13 in ITA No.6423/Mum/2016 where under identical set of facts, the Tribunal has deleted additions made by the AO towards data processing cost paid to its head office u/s.40(a)(i) of the Act for failure to deduct tax at source u/s.194J of the Income Tax Act, 1961. 6. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld DR on the other hand relied on the grounds of appeal and order of AO. 2.3. Since the facts in the instant year are identical to ones as in the earlier years and accordingly we respectfully following the decision of the Co-ordinate Benches hold that assessee is entitled for deduction of data processing cost of ₹ 88,26,181/- as the same is not royalty but reimbursement of Data Processing Charges and therefore there is no requirement of deduction of tax at source from the said reimbursement. This ground of Revenue is dismissed. 8. In this view of the matter and consistent with view taken by the Co-ordinate Bench, we are of the considered view that there is no error in the order of the ld. CIT(A) in deleting additions made by the AO towards disallowance of data processing cost, hence, we are inclined to uphold the findings of ld. CIT(A) and reject the ground taken by the revenue. 9. The next issue that came up for consideration from ground No.5 to 9 is disallowance of interest paid to head office and taxability of the same in the hands of the head office. 10. The ld. AR for the assessee submitted that this issue is also covered in favour of the assessee by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Therefore, the CIT(A) has passed well reasoned and speaking order which is in accordance with the ratio as laid by the tribunal in the earlier year and should be followed in the instant year also. 3.2. After hearing both the sides and perusing the material on record, including the decisions relied upon, we find that the issue has been decided by the Co-ordinate Benches in the earlier years from AYs. 2002-03 to 2011-12, wherein the Co-ordinate Benches have allowed the claim for deduction of interest paid by the branch office to its HO considering the fact that the assessee a banking company. The Calcutta High Court has held in the case of ABN Amro Bank 198 taxman 376 where an assessee is an branch (PE) of non resident entity i.e its Head Office(G.E.) and the interest paid by the P.E. to G.E. allowable since branch (P.E.) is separate and distinct from head office(G.E.)for the purpose of assessment under the I.T.Act and also held that interest earned by the head office (G.E.) from branch office(P.E.) is not chargeable to tax in view of the specific provisions of Article 11 of DTAA between India and Netherland. Therefore, respectfully following the decisions of the Co-ordinate Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt. Therefore, the disallowance u/s. 14A r.w. Rule 8D has to be made on the basis of Principles of Mutuality following the Special Bench decision in the case of Sumitomo Corpn. Vs. Dy.CIT [114 ITD 61]/[17 SOT 197] (Delhi) when the HO and branch office are fungible entities. 4.2. Ld. CIT(A) deleted the disallowance on the ground that if there is any exempt income earned by the branch which is exempt under the Income Tax Act, only then the provisions of Section 14A could be applied. According to the CIT(A) the assessee has not claimed any exempt income under theIncome Tax Act as is clear from the computation of total income and as regards the interest of ₹ 11,94,79,875/-, interest earned by the HO from the branch, the HO has not incurred any expenditure in India to earn it even though the interest earned by it is held to be not chargeable to tax under DTAA and therefore, the provisions of Section 14A of the Act would not apply. 4.3. Ld. AR at the outset pointed out that the issue involved in this case has been decided by the Co-ordinate Bench in assessee's own case in ITA Nos. 7481/Mum/2014 7482/Mum/2014, dt. 28-02-2017 for the AYs. 2010-11 2011-12 decided the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the result, appeals filed by the Revenue are dismissed in terms indicated hereinabove . 4.4. Since the facts of the present case before us are similar to the facts of the case as decided by the Co-ordinate Bench in the AYs. 2010-11 2011-12 (supra) in assessee's own case, we , therefore , respectfully following the decision of the Co- ordinate Bench, uphold the order of CIT(A) and the grounds raised by Revenue is dismissed. 17. In this view of the matter and consistent with view taken by the Co-ordinate Bench in assessee s own case for earlier years, we are of the considered view that there is no error in the findings of the ld. CIT(A) in deleting additions made towards disallowance of expenditure incurred in relation to exempt income u/s. 14A of the Act. Hence, we are inclined to upheld the findings of ld. CIT(A) and reject the ground taken by the revenue. 18. In the result appeal filed by the revenue is dismissed. ITA No.679/Mum/2018 (A.Y.2014-15) 19. The facts and issues involved in this appeal are identical to the facts and issues which we have already considered in ITA No.678/Mum/2018. The reasons given by us in the preceding paragraphs shall muta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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