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2014 (1) TMI 191 - AT - Income TaxInterest paid to and received from Head Office – Held that:- Following Sumitomo Mitsui Banking Corporation V/s Dy.DIT (IT) [2012 (4) TMI 80 - ITAT MUMBAI] - Indian Branch of Foreign Bank being part of Foreign Bank was not separate and distinct taxable entity in India as per the domestic law - It was foreign bank i.e. Head Office which was taxable entity in India - The interest received by Indian Branch of foreign bank from its head office, therefore, does not give rise to any income which is taxable in India because one could not make profit out of itself - No deduction with respect to interest paid by the assessee Branch of the assessee-company to its Head Office is to be allowed - The DRT in its direction has also directed AO to verify that the assessee itself made disallowance in the return of income filed - Decided in favour of assessee. Transactions charges on Nostro Account u/s 40(a)(i) – Held that:- Following assessee's own case for A.Y. 2005-06 - The transaction charges paid on Nostro Account were in the nature of bank charges for maintaining the accounts with banks outside India - These charges were recovered directly by way of debits to the concerned accounts of the assessee with these banks and the same represented business income of those banks which accrued/arisen outside India - No tax was required to be deducted at source from the transaction charges paid on Nostro account - Decided in favour of assessee. Expenses specifically incurred by HO for Indian branches – Held that:- Following assessee's own case for A.Y. 2005-06 - The traveling expenses incurred by the Head Office on traveling of its own staff are directly in connection with Indian branch and are allowable u/s 37(1) of the Act - Section 44C has no application to such expenses – Decided in favour of assessee. Expenses incurred on employee of the bank – Held that:- In the appointment letter of the employee from Oman office, allowances which were to be paid to him as well as the description of work is stated. On perusal of the said letter it is observed that he has to work on full time basis for a period of two years at Mumbai Branch. Not only this, we observe that Shri Zakariya also filed return of income in India for the assessment year 2006-07 - The said expenses paid to him could not be considered a part of section 44C and the same are to be allowed u/s 37 of the Act – Decided in favour of assessee. Taxability of year-end provision – Held that:- The assessee made excessive provision for expenses - Provision for excessive expenditure was made in accordance with regular method of accounting followed by it – The excess provision was disallowed on the condition that when the assessee reverse the excess provision, the said amount should not be charged to tax in the subsequent years – Decided against assessee. Reversal of excess provision – Held that:- The AO while discussing the said amount stated that the sum of Rs.58,948/- on account of reversal of excess provision expenses taxed in assessment year 2005-06 is reduced from total income for assessment year 2006-07 - The DRP also directed the AO to verify the above claim if found credited and make necessary adjustment to the credit to the total income - The AO has not deducted the said amount - The issue was restored for fresh adjudication. Credit of TDS – Held that:- The AO while giving effect to the direction of DRP has not complied with the directions - The assessment order passed by AO is a non-speaking order and only contains computation without giving reasons - The issue was restored for fresh adjudication. Refund of income tax along with interest – Held that:- AO has not considered the direction of the DRP nor any discussion is made in the assessment order as the order of the AO is a non-speaking order - The issue was restored for fresh adjudication. Carry forward of business loss and unabsorbed depreciations – Held that:- The AO failed to follow the directions of DRP - The claim of the assessee be examined and subject to verification to allow carry forward of business loss and unabsorbed depreciations if permissible /allowable under the Income Tax Act/Rules - The AO while passing the final assessment order after considering the recommendation of DRP has neither cared to consider the DRP direction nor given effect to the direction of the DRP – The issue was restored for fresh adjudication.
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