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TMI Blog2024 (3) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... cy as has been held in the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] there is no need for the Id. TPO to take a divergent stand when there is no change in the facts and circumstances during the year with that of earlier years Hence, we direct the Id TPO to delete the adjustment made in respect of guarantee fees. Decided in favour of assessee. Rate of tax on interest income from foreign currency loans - Tribunal has consistently held that interest income earned on foreign currency loans is taxable @20%. CIT(A) in impugned order has followed the decision of his predecessor in AY 2008-09, which in turn followed the decision of Tribunal in assessee's own case in AY 1997-98 - We find no infirmity in the findings of the CIT(A) on this issue, hence, ground No.1 of appeal is dismissed, sans-merit. Deduction u/s. 44C - AO allowed head office expenses only to the amount reflected in Form 3CEB - Assessee claimed that deduction u/s. 44C should be allowed to the extent of Rs. 9,90,15,825/- or 5% of adjusted total income, whichever is lower - AO rejected the contentions of the assessee further held that the assessee had furnished incomplete and partial details - HELD THAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee : Shri Nishant Thakkar And Ms. Jasmin Amalsadvala, Advocates For the Revenue : Shri Anil Sant, Sr. AR ORDER PER VIKAS AWASTHY, JM: These five appeals, cross appeals in Assessment Year 2010-11 and one appeal each for Assessment Year 2011-12,2012-13 and 2013-14 by the assessee are taken up together for adjudication as similar grounds are raised by the assessee in all these appeals. For the sake of convenience, the appeals are taken up for adjudication in seriatim of Assessment Year. ITA NO. 4981/MUM/2017(A.Y. 2010-11)- ASSESSEE S APPEAL: ITA NO. 4899/MUM/2017(A.Y. 2010-11)- REVENUES APPEAL: 2. These cross appeals are against the order of Commissioner of Income Tax Appeals-58, Mumbai [in short the CIT(A) ] dated 15/04/2017 for Assessment Year 2010-11. The assessee in appeal has raised twelve grounds. 3. Shri Nishant Thakkar appearing on behalf of assessee made a statement at Bar that on instruction from assessee /appellant he is not pressing grounds of appeal No.1 to 7. Thus, in light of statement made by ld. Counsel for the assessee grounds of appeal No.1 to 7 are dismissed as not pressed. 4. The grounds of appeal No.8 to 12 of the appeal are against Transfer Pricing adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the issue raised in ground No.8 to 12 of appeal by the assessee is similar to the one raised in appeal by the assessee for Assessment Year 2008-09. 7. We have heard the submissions made by rival sides and have examined the orders of authorities below. We find that the issue relating to TP adjustment for administrative support serves in relation to Inter Bank Indemnities have been considered by us in appeal of the assessee in ITA No.3862/Mum/2013, for Assessment Year 2008-09. The facts in the impugned assessment year are identical to the facts in Assessment Year 2008-09 except for the amounts. In Assessment Year 2008-09 the issue was decided in favour of assessee by us, holding as under: 34. Heard both the sides and perused the material on record. During the year BNS Overseas Branches executed interbank indemnities against which the BNS India issued guarantee on behalf of the clients of the overseas branches and vice-versa. BNS India received a commission of USD 125 per transactions for guarantee issued by it on behalf of its overseas branches and paid commission of USD 100 for the guarantees issued by the overseas branches on its behalf. Before us the ld. Counsel referred the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is held that where TPO observed that assessee had earned processing fees for issuing guarantees on behalf of its associated enterprises and rejected TNMM adopted by the assessee and proceeded to benchmark guarantee transaction using external CUP method, since data under CUP method was not available and data margins under TNMM was readily available and held that it would be appropriate to apply TNMM as most appropriate method. In the aforesaid decision it is held that TNMM method would be the most appropriate method in the facts and circumstances of the case and CUP could not be applied because of non-availability of data. The relevant operating part of the decision is reproduced as under: 3.6 Hence, from the aforesaid modus operandi, it could be concluded that assessee acts as a beneficiary bank Je issue guarantee in India on behalf of clients of overseas branches of ANZ based on the counter guarantee issued by such overseas ANZ branches. Since assessee is acting as the beneficiary, the entire risk of discharging the bank guarantees is borne by overseas ANZ branch issuing the counter guarantee. The assessee merely provides support service in connection with processing of the guar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness support services. Hence, when the data under CUP method is not available and data of margins under TNMM is readily available, then it would be appropriate to apply TNMM method as the Most Appropriate Method (MAM) in the facts and circumstances of the instant case. 3.7 We find that assessee had explained the entire transactions and the modus operandı applied by it in respect of the guarantee transactions before the Id TPO which are evident vide letter dated 9-10-2015 together with the fee charged for each type of services tendered by it. These details are enclosed in pages 316 to 322 of the paper book filed before us. We also find the assessee vide its letter dated 28-10-2015 had filed a detailed annexure enclosed in pages 328-331 of the paper book listing the guarantees issued by it based on counter guarantee received from overseas branches of ANZ The assessee also furnished the sample documents enclosing the copy of swift message received from ANZ New York advising the assessee to issue guarantee to Indian beneficiaries like Reliance Infrastructure Ltd., and providing counter guarantee. 3.8 The assessee also placed on record the copy of the swift message from assesse t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o need for the Id. TPO to take a divergent stand when there is no change in the facts and circumstances during the year with that of earlier years Hence, we direct the Id TPO to delete the adjustment made in respect of guarantee fees in the sum of Rs. 10,94,55,035/. Accordingly, the ground Nos 1 2 raised by the assessee are allowed. We have also perused the decision of ITAT Delhi in the case of Bank of Tokyo Mitsubishi UFJ Ltd. Vs. The DDIT (IT), Circle 1(1) vide ITA No.1162/Del/2014 wherein identical issue on similar fact was decided in favour of the assessee. Considering the facts and judicial pronouncements as discussed supra in this order the issue in the appeal is squarely covered by the decision of the ITAT Mumbai therefore, the decision of ld. CIT(A) in sustaining the arm s length price addition made by the assessing officer is not justified. Accordingly, ground nos. 9 to 13 are allowed. Since, both sides have unanimously admitted that the facts germane to the issue in the impugned assessment year are identical to ground 9 to 13 of the appeal for A.Y 2008-09, the grounds of appeal 8 to 12 in the instant appeal are allowed for parity of reasons. 8. In the result, appeal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functions, skills and intensities of marketing, particularly when the CIT(A) has rejected the assessee's comparable India Infoline Limited, stating that the insurance distribution activity is not functionally similar? 10. The ld. Counsel for the assessee submitted at the outset that the issue in ground No.1 of appeal by the Department relates to taxability of interest income earned on foreign currency loans granted to Indian concerns @40% under normal provisions of the Act instead of 20% under section 115A of the Act. This issue is recurring. The CIT(A) starting from Assessment Year 2000- 01 has been consistently holding that interest earned on foreign currency loans is liable to tax @20%. The CIT(A) held so following order of Tribunal in assessee's own case in ITA No.306/Mum/2001 for Assessment Year 1997-98. The CIT(A) in the impugned order followed the decision of his predecessor in Assessment Year 2008-09 holding such interest income taxable @20%. 11. The ld. Departmental Representative fairly stated that in the preceding Assessment Years this issue has been considered by the Tribunal in the appeals by the Revenue. 12. Both sides heard. We find that the issue of rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer allowed head office expenses only to the tune of Rs. 2.10 crores i.e. the amount reflected in Form 3CEB. The assessee claimed that deduction u/s. 44C of the Act should be allowed to the extent of Rs. 9,90,15,825/- or 5% of adjusted total income, whichever is lower. The Assessing Officer rejected the contentions of the assessee. The Assessing Officer further held that the assessee had furnished incomplete and partial details. No specific details in respect of the amount in excess of Rs. 2.10 crores is furnished by the assessee. The CIT(A) re-examined the documents and accepted submissions of the assessee. The CIT(A) allowed assessee s claim primarily for the reason that the claim of the assessee is within the limit of 5% of the adjusted total income and the said claim of the assessee is supported by auditors certificate. The Co-ordinate Bench in the case of Doha Bank QSC vs. DCIT (supra) held that head office expenses attributable to the business of assessee in India is allowable in accordance the provisions of section 44C, irrespective of the fact whether or not any amount is debited in the books of account. The relevant extract of the said order is reproduced herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision was explained by the CBDT Circular No. 2002, which reads as under: 25.1 Non-residents carrying on any business or profession in India through their branches are entitled to a deduction, in computing the taxable profits, in respect of general administrative expenses incurred by the foreign head offices in so far as such expenses can be related to their business or profession in India. It is extremely difficult to scrutinize and verify claims in respect of such expenses, particularly in the absence of account books of the head office, which are kept outside India. Foreign companies operating through branches in India sometimes try to reduce the incidence of tax in India by inflating their claims in respect of head office expenses. With a view of getting over these difficulties, the Finance Act has inserted a new section 44C in the Income-tax Act laying down certain ceiling limits for the deduction of head office expenses in computing the taxable profits in the case of non-resident taxpayers. Accordingly, we are of the considered view, that the legislature in all its wisdom had provided a basis for attributing a part of the head office expenses incurred by an assessee, a non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment Year 2010-11. 21. The ld.Counsel for the assessee stated at Bar that he is not pressing ground No.1 to 7 of the appeal. In respect of ground of appeal No.8 to 12 he stated that , the submissions made in Assessment Year 2010-11 would equally apply to the impugned assessment year. 22. The ld. Departmental Representative fairly stated that the issue raised in ground No.8 to 12 of the appeal by the assessee is identical to Assessment Year 2010-11. 23. Both sides heard. In view of the statement made by ld.Counsel for the assessee ground No.1 to 7 of the appeal are dismissed as not pressed. In so far as ground No.8 to 12 of the appeal are concerned, the findings given while adjudicating appeal of the assessee in Assessment Year 2010-11 would mutatis mutandis apply to the present set of grounds. Hence, ground No.8 to 12 are allowed in the similar terms. 24. In the result, appeal of assessee is partly allowed. ITA NO.820/MUM/2019 (A.Y. 2012-13)-ASSESSEE S APPEAL: 25. This appeal of assessee for Assessment Year 2012-13 is directed against the order of CIT(A) -55 Mumbai dated 03/12/2018. The grounds of appeal in the impugned assessment year are identical to grounds in Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- relating to earlier Assessment Years. The interest income was offered to tax @40% plus surcharge and cess. The assessee by way of additional grounds of appeal before the CIT(A) claimed that the interest on income tax refund is not taxable in view of Article 11(3) of India-Canada DTAA. He submitted that in accordance with clause(3) (supra) where payer of the interest is Government of the contracting State, no tax is payable on such interest in India. Since, interest on income tax refund is paid by the Government, the said interest is exempt from tax within the meaning of Article 11(3) of India -Canada tax treaty. To further support his submissions he placed reliance on the following decisions: (i) DIT vs. Credit Agricole Indosuez , 377 ITR 101(Bom) (ii) Ansaldo Energia SPA vs CIT, 384 ITR 312 (Mad) The ld.Counsel for the assessee submitted that the decision rendered by Hon'ble Jurisdictional High Court in the case of DIT vs. Credit Agricole Indosuez (supra) was cited before the CIT(A) . The CIT(A) instead of following the decision of Hon'ble Jurisdictional High Court referred to the decision of Hon ble Uttarakhand High Court in the case of B.J. Services Co. Middle East Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st-mentioned State if : (i) the payer of the interest is the Government of that Contracting State or of a political sub-division or local authority thereof; (ii) the beneficial owner of the interest is the central bank of the other Contracting State; or (iii) the interest is paid to an agency or instrumentality (including a financial institution) which may be agreed upon in letters exchanged between the competent authorities of the Contracting States. (b) (i) interest arising in India and paid to a resident of Canada shall be taxable only in Canada if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export Development Corporation; or (ii) interest arising in Canada and paid to a resident of India shall be taxable only in India if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export-Import Bank of India (Exim Bank). 4. The term 'interest' as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from Government securities and income from bonds or debentures, including premiums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of DIT vs. Credit Agricole Indosuez (supra) was: 2. At the hearing Mr. Tejveer Singh, learned counsel for the Revenue urges the following questions of law for consideration. (1) (2) .. (3) . (4) Whether, on the facts and in the circumstances of the case and in law, the ITAT has erred in directing the A.O to tax the interest received u/s. 244A at the rate prescribed in Article 12 of DTAA between India and France? The Hon ble Court dismissed the said question by observing as under: 6. Regarding Question 4 : (a) The Tribunal by the impugned order restored the issue of the rate at which interest is to be charged to tax on income-tax refund received under Section 244A of the Act to the Assessing Officer to be decided in the light of Indo-France DTAA and the decision of the Special Bench of the Tribunal in the matter of Asstt. CIT v. Clough Engg. Ltd. [2011] 130 ITD 137/11 Taxman 70 (Delhi). (b) The grievance of the Revenue is with the impugned order following the decision of the Special bench in Clough Engg. Ltd. (supra). (c) However we find that the decision in Clough Engg. Ltd. (supra) of the Special Bench had been followed by the Tribunal in DHL Operations B.V. v. Dy. DIT [IT Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 of the aforesaid treaty which deals with Interest , we find that provisions of clause (3) are pari-materia to clause (3) of Article 11 of India Canada-DTAA. Hence, the ratio decidendi in the case of Ansaldo Energio SPA (supra) would apply to the instant ground of appeal. 39. In so far as the decision in the case of B.J. Services Co. Middle East Ltd. vs. ACIT(supra) on which the CIT(A) has placed reliance, we find that it referred to UK-India DTAA. We have examined the provisions of the said treaty. The provisions of Article -12 dealing with interest in the said DTAA are not parimateria to India- Canada DTAA. There is no clause in Article-12 of India UK-Treaty similar to Article -11(3) in India Canada Treaty. Hence, the decision in the case of B.J. Services Co. Middle East Ltd. vs. ACIT(supra) would not apply to the facts of the present case. In the facts of case and the decision of Hon'ble Jurisdictional High Court, we find merit in ground No.2 of appeal, hence, assessee succeeds on ground No.2. 40. In the result, appeal of the assessee is allowed. 41. To sum up, assessee s appeal for Assessment Year 2010-11, 2011-12, 2012-13 and Revenue s appeal for Assessment Year 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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