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2013 (9) TMI 603 - AT - Income TaxTDS on Arrangers Fees - whether fee for technical services (FTS) or commission - u/s 195 r.w.s. 40(a)(i) - Held that:- Following M/s. Credit Lyonnais (through their successors : Calyon Bank) and Others Versus The Asstt. Director of Income-tax (International Taxation) - 1(2) And Others [2013 (5) TMI 639 - ITAT MUMBAI] - The amount paid by the assessee to the non-residents sub-arrangers was not a fees for managerial or technical or consultancy services - Hence, the same cannot be brought within the ambit of 'fees for technical services' as per section 9(1)(vii) of the Act - If this payment was not fees for technical services but only commission, the provisions of section 195 requiring the assessee to make deduction of tax at source before remitting or crediting the amount to the accounts of sub-arrangers, cannot apply - If no deduction of tax at source was required, obviously the provisions of section 40(a)(i) do not come into play - Once it was held that the said commission/brokerage was not chargeable to tax in the hands of non-resident sub-arrangers under the provisions of the Act, there remains no need to examine the taxability or otherwise of this amount in their hands under the respective Double taxation avoidance agreements - CIT(A) was justified in reversing the AO's order insofar as the applicability of section 40(a)(i) was concerned – Decided against Revenue. Exemptions u/s 10(15) and 10(33) - 'Interest from tax free bonds - UTI dividend - Whether the CIT(A) erred in holding that since there was no nexus proved between tax free income and interest bearing funds, no disallowance can be made from the gross income claimed as exempt u/s. 10 of the I.T. Act – Held that:- No nexus had been proved between tax-free-income and interest bearing funds by the AO, that there were sufficient funds the findings shares/tax free securities that the action of the AO in disallowing exemption u/s 10 of the part of dividend/interest on tax free securities could not be sustained - AO had not given any details as how the alleged borrowed funds were used for earning tax free income, whereas the FAA had given a categorical finding; after considering the submissions made by the assessee bank during the appellate proceedings before him; that the interest free funds available to the assessee were far more than the investment made during the year – The order of the FAA does not suffer from any legal or factual infirmity – Decided against Revenue. Head office expenditure - section 44C - AO held that expenses incurred by the H.O. which were not debited to the books of account of the assessee were not allowable, that expenditure which was executive and administrative in nature had to be treated as office expenses in respect of which deduction was allowable only as per the provisions of section 44C of the Act. - Held that:- following the decision in assessee's own case [2012 (7) TMI 703 - ITAT MUMBAI] decided in favor of assessee.
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