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2012 (12) TMI 640 - AT - Income TaxInterest income on NOSTRO and overseas placements maintained with branches outside India - deduction towards interest expenditure on such accounts. - interest income u/s 9(1)(v) - held that:- Tribunal in the case of ABN Amro Bank NV v. Asstt. DIT [2005 (8) TMI 294 - ITAT CALCUTTA-E] (SB) has held that the branch of the assessee bank cannot be treated as a separate entity. The transactions between the Head office and branch resulting into interest income or interest expenditure are to be viewed as transaction with self. On the basis of mutuality, it has been held that there can be neither any income in respect of interest earned from its overseas branches, nor there can be deduction for interest expenditure paid by the Indian branch to Head office or the other overseas branches. - the interest income of Rs. 4.88 crore which has resulted only from the assessee's dealings with its Head office or overseas branches cannot be charged to tax on the principle of mutuality will apply. Accordingly no tax can be levied on the interest earned by the assessee from its Head office or overseas branches. There is a clear distinction between the NOSTRO interest earned/paid by the assessee from/to its own Head office/overseas branches and NOSTRO interest paid/earned to/from other than assessee's own Head office or branches. Whereas in the first situation, the principle of mutuality will apply and in the later case it will not. No deduction on account of interest expenditure can be allowed which has been incurred by the assessee in relation to its own Head office and overseas branches. Both the grounds of assessee and revenue allowed.
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