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TMI Blog2023 (3) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT] . The Tribunal accordingly, rejected the ground raised by the assessee. Ground no.1 raised in assessee s appeal is dismissed. Taxability of data processing fees paid by the Indian branch offices of the assessee to its Singapore branch - HELD THAT:- As decided in own case [ 2019 (8) TMI 1856 - BOMBAY HIGH COURT] what was being paid by the Indian entity to its Singapore branch was only in the nature of reimbursement of expenses. This finding of fact was not challenged in the Revenue's appeal for Assessment Year 2006-07 or in these appeals for Assessment Year 2008-09 and 2009-10. The Revenue has not been able to show any difference in facts and/or in law in the subject Assessment Years to that in Assessment Year 2006- 07. Therefore, the above decision of this Court for Assessment Year 2006-07 will apply in these two Appeals. Ground no.2 raised in assessee s appeal is allowed. Taxability of interest payable/paid by the Indian branch office to the head office and its other overseas branches - AO held that the interest income of the head office/overseas branches would be taxable under Article 12 of the India-France DTAA at the rate of 10% - HELD THAT:- In view of Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 144C(13) of the Income Tax Act, 1961 ( the Act ) pursuant to the directions issued by the learned Dispute Resolution Panel ( learned DRP ) under section 144C(5) of the Act, for the assessment years 2017-18 and 2018 19, respectively. ITA no.1076/Mum./2021 Assessee s Appeal A.Y. 2017 18 2. In its appeal, the assessee has raised the following grounds: Aggrieved by the order passed by the Assistant Commissioner of Income-tax (International Taxation)-Circle 1(3)(1), Mumbai (AO) dated 8 April 2021 (copy of the order received vide e-mail dated 12 April 2021), under section 143(3) read with section 144C(13) of the Act, pursuant to the directions of the Hon'ble Dispute Resolution Panel-1 (DRP), Mumbai, BNP Paribas (the Appellant') respectfully submits that the learned AO has erred in passing the order on the following grounds: 1. The learned AO has erred in not accepting the claim that the rate of tax applicable to domestic companies and/ or co-operative banks for AY 2017-18 is also applicable to the Appellant, in accordance with the provisions of Article 26 (Non-discrimination) of the India France tax treaty. 2. The learned AO has erred in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.710,44,21,630. During the assessment proceedings, it was submitted that the tax rate as applicable to Indian companies carrying on similar business should be applied in its case instead of the rate of tax applicable to non-resident companies. The Assessing Officer ( AO ) observed that similar claim was made by the assessee in the earlier year also but the same was rejected. The AO vide draft assessment order dated 27/12/2019, after taking into consideration the directions issued by the learned DRP and orders passed by the coordinate bench of the Tribunal in assessee s own case in preceding assessment years rejected the claim of the assessee that the tax rate applicable to Indian companies carrying on similar business should be applied to its case. The learned DRP vide its directions dated 25/02/2021, issued under section 144C(5) of the Act rejected the objections filed by the assessee on this issue following its directions rendered in assessee s own case for the assessment year 2014-15. In conformity, the AO, inter-alia, passed the impugned final assessment order on this issue. Being aggrieved, the assessee is in appeal before us. 5. During the hearing, the learned counsel a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue has already been examined by the Tribunal in the case of M/s BNP Paribas, decided in ITA Nos, 4601 4602/M/ 2004,vide order dated 1-7-2013. In that case also the tax rate applied in the case of the assessee, 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 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. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the data processing fee paid by the branch office to the Singapore branch is taxable as fees for technical services and royalty as per the Act and the India-France DTAA and also the India-UK DTAA even if the Protocol to the India-France DTAA is invoked. The learned DRP, inter-alia, rejected the objections filed by the assessee on this issue by following the directions rendered in assessee s own case for the assessment year 2014-15. In conformity, the AO, inter-alia, passed the impugned final assessment order on this issue. Being aggrieved, the assessee is in appeal before us. 11. During the hearing, the learned counsel submitted that this issue has been decided in favour of the assessee by the Hon ble jurisdictional High Court and the coordinate bench of the Tribunal in assessee s own case. On the contrary, the learned DR vehemently relied upon the orders passed by the lower authorities. 12. We have considered the rival submissions and perused the material available on record. We find that the coordinate Bench of the Tribunal in assessee s own case cited supra, for the assessment year 2014-15, decided a similar issue in favour of the assessee, by observing as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pune Ahmedabad, Chennai and Hyderabad During the previous year relevant to AY 2002-03, the Indian Branches of the assessee bank have paid total interest of Rs 1.48,30,613/- to its Head office and overseas branches and the same was claimed as a deduction while determining the profits attributable to Indian Branches, which was chargeable to tax in India. The said interest was treated by the AO as income of the assessee's Head office/overseas branches chargeable to tax in India. This decision of the A.O. was challenged by the assessee in the appeal filed before the Ld CIT(A) and the contention raised before the Ld. CIT (A) in this regard was that the Head office of the assessee bank as well as all its branches being the same person and one taxable entity as per the Indian Income tax Act, interest paid by Indian Braches head office and other overseas Branches was payment to se 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 CIT (Central) 24 (TR 506 as well as the decision of Kolkata Special Bench of the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial to the assessee. The said interest. however, cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law. Even otherwise, there is no express provision contained in the relevant tax treaty which is contrary to the domestic law in India on this issue, This position applicable in the case of interest paid by Indian branch of a foreign bank to its head office equally holds good for the payment of interest made by the Indian branch of a foreign bank to its branch offices abroad as the same stands on the same footing as the payment of interest made to the head office. At the time of hearing before us, the 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. t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remains the same as was there before the Tribunal in the assessee's own case for A.Y. 2013-14, therefore, we respectfully follow the view therein taken. Accordingly. we herein direct the AO to delete the impugned addition of Rs 40,78,10.733/- The Ground of appeal No. 2 is allowed. 13. We further find that the Hon ble jurisdictional High Court dismissed the appeal filed by the Revenue against the order passed by the coordinate bench of the Tribunal in assessee s own case for the assessment year 2009-10 on a similar issue. The relevant findings of the Hon ble jurisdictional High Court in CIT vs BNP Paribas SA, in ITAs No.825 and 826 of 2017, vide order dated 27/08/2019, in this regard, are as under: 4. The Tribunal placed reliance upon the orders of its Coordinate Bench for the Assessment Year 2006-07 in respect of the same Assessee raising the same issue while allowing the appeal of the Assessee. We are informed that from the order of the Co-ordinate bench of the Tribunal for Assessment Year 2006-07, Revenue filed an appeal to this Court being Tax Appeal No.1192 of 2015 raising this very issue. This Court's order did not entertain this question as proposed therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated debt. Further, the assessee has paid an amount of Rs.55,38,692 as interest on Nostro overdrafts. The Indian branch office has claimed a deduction of such an amount citing the provisions of Article 7(3) of the India-France DTAA. During the assessment proceedings, the assessee submitted that such interest paid by the Indian branch office to the head office/overseas branches constitutes a payment of self and hence such payment is not taxable in India by placing reliance upon the decision of the Special Bench of the Tribunal in Sumitomo Mitsui Banking Corporation (supra). The assessee also placed reliance upon the decisions of the coordinate bench of the Tribunal in assessee s own case for the assessment years 2002-03 to 2005-06. The AO vide draft assessment order did not agree with the submissions of the assessee and held that under the Act there cannot be income from self and neither could there be payment to self as an allowable business expenditure. Thus, under the Act, the assessee bank could not debit interest payments to the head office and other branches and claimed the same as an expense, nor could it show interest received from its head office and other branches as int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2004-05. The learned counsel submitted that the taxability of the interest paid by the Indian branch office to the head office/overseas branch is governed by the provisions of Article 12 r/w Article 7 of the India-France DTAA and the amendment in the Act cannot override the provisions of the DTAA. 20. On the contrary, the learned DR filed detailed written submissions in line with the findings of the AO in the draft assessment order and vehemently relied upon the orders passed by the lower authority. 21. We have considered the rival submissions and perused the material available on record. During the year, the Indian branch office paid interest to its head office and other overseas branches on debt and overdrafts. In the present case, it is undisputed that the various branches of the assessee in India constitute the PE of the assessee under the provisions of the India-France DTAA. Further, it can also not be disputed that in terms of section 90(2), the provisions of the Act or the DTAA, whichever is more beneficial to the assessee shall be applicable. Thus, being an entity covered under the provisions of the India-France DTAA, the payment of interest to the head offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a PE. Article 7(3)(b) deals with payment by the PE to the head office of the enterprise and vice versa, and the same reads as under: (b) However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate profits for the PE and the GE treating them as distinct entities, in the case of Dresdner Bank AG (supra),was in the context of Section 5(2). The separate profit centre accounting approach for the HO does not hold good in the treaty context, because, even if it is an income of the GE as a profit centre, all that is taxable as business profits of the GE is the income attributable to the PE. As regards its being treated as interest income of the assessee, arising in the source jurisdiction, i.e. India, can only be taxed under Article 12 but then as provided in article 12 (5), the charging provisions of Article 12(1) and (2), which deal with taxability of interest in the source state, will not apply if the beneficial owner of the interest of the interest, being a resident of a contract state, carries on business in the other contracting state in which the interest arises, through a permanent establishment situated therein and that in such a case the provisions of Article 7, which deal with taxability of profits of the permanent establishment alone will apply. In plain words, when interest income arises to a GE even if that be so, the taxability under article 12 will not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, in view of aforesaid findings and respectfully following the judicial precedent in assessee s own case cite supra, we direct the AO to delete the addition on account of interest income received by the head office/overseas branches. As a result, ground no.4 raised in assessee s appeal is allowed. 26. During the hearing, it was, inter-alia, submitted by the learned counsel that in case ground no.4, raised in assessee s appeal, is decided in assessee s favour, then ground no.5 would be rendered academic in nature. As we have decided ground no.4 in favour of the assessee, therefore, in view of the submission of the learned counsel, ground no.5 is dismissed as having been rendered academic. 27. Ground no.6, raised in assessee s appeal is pertaining to short grant of credit of TDS. This issue is restored to the file of the AO with the direction to grant TDS credit, in accordance with the law, after conducting the necessary verification. As a result, ground no.6 raised in assessee s appeal is allowed for statistical purposes. 28. Grounds no.7 to 9, raised in assessee s appeal, is pertaining to the levy of interest under sections 234B, 234C and 234D of the Act, which is consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 270A of the Act: Each of the grounds of appeal referred above is separate and may kindly be considered independent of each other. The Appellant craves leave to add, alter, vary, emit, substitute or amend any or all of the above grounds of appeal, at any time before or at the time of the appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law. 32. The issue arising in ground no.1, raised in assessee s appeal, is pertaining to the rate of tax applicable to the assessee. Since a similar issue has been decided in assessee s appeal for the assessment year 2017-18, the decision rendered therein shall apply mutatis mutandis. As a result, ground No. 1 raised in assessee s appeal is dismissed. 33. The issue arising in ground no.2, raised in assessee s appeal, is pertaining to the taxability of data processing fees paid by the Indian branch offices of the assessee to its Singapore branch. Since a similar issue has been decided in assessee s appeal for the assessment year 2017-18, the decision rendered therein shall apply mutatis mutandis. As a result, ground no.2 raised in assessee s appeal is allowed. 34. During ..... X X X X Extracts X X X X X X X X Extracts X X X X
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