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2012 (10) TMI 443 - AT - Income TaxReopening assessment u/s 147 - AY 1997-98 & 1998-99 - Held that:- There is nothing in the reasons to indicate, even remotely, that the assessee did not disclose this necessary fact in its return or accompanying documents. It can naturally not be so because the deduction on account of interest paid to head office and overseas branches can only be claimed by way of a debit to the Profit and loss account which is always a part and parcel of the documents accompanying the return of income. Once the assessee disclosed the fact of claim of deduction on account of interest paid to head office or other overseas branches and the original assessment was completed u/s 143(3) accepting such claim, there can be no question of initiation of reassessment proceedings after a gap of four years from the end of relevant assessment year - in favour of assessee. Reopening of assessment - AY 1999-2000 - Held that:- The issuance of notice u/s 148 is within a period of four years from the end of the relevant assessment year - as decided in Multiscreen Media Private Limited v. Union of India [2010 (2) TMI 269 - BOMBAY HIGH COURT reopening on the basis of finding in an order of assessment passed for a subsequent assessment year, where additional material has emerged before the A.O. to lead to the formation of belief that income chargeable to tax had escaped tax, is sustainable. The facts of the instant case stand on a rather stronger footing because here the reassessment is on the basis of the CIT(A)'s order for a subsequent year, thus the initiation of reassessment proceedings for the current year is in order - against assessee. Non deduction of TDS - Disallowance of interest payable to head office and other overseas branches - Held that:- As decided in Sumitomo Mitsui Banking Corporation v. DDIT [2012 (8) TMI 450 - ITAT, MUMBAI] the interest paid to the head office of the assessee bank by its Indian branch 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 - as interest paid by the Indian branch is not chargeable to tax in India, it follows that the provisions of section 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 - in favour of assessee. Disallowance of inter office commission paid/payable by the assessee to head office and other overseas branches - Held that:- Since the principle of mutuality is applicable on transactions between Indian branch and head office and other overseas branches, there cannot be any income or any expenditure due to such internal transactions. As the inter office commission has been paid by the assessee to its head office and other overseas branches, it is obviously a transaction with the self. Accordingly the rule of mutuality applies and the assessee cannot be allowed any deduction in this regard. The view taken by the learned CIT(A) on this issue is upheld - against assessee. Interest u/s 234B - Held that:- As decided in DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) Versus NGC NETWORK ASIA LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B, thus ssue of charging of interest u/s 234B in the present case is no more res integra - in favour of assessee. Penalty u/s 271(1)(c) - disallowance u/s 40(a)(i) & income of the head office/foreign branches - Held that:- When the additions made in the assessment order have been deleted, obviously there cannot be any foundation for imposition of penalty qua such additions - in favour of assessee.
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