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2012 (12) TMI 730 - AT - Income TaxNet interest and commission received from head office - CIT(A) deleted the addition - Held that:- Following the precedent for assessment year 1997-98 wherein relying on the case of Sumitomo Mitsui Banking Corpn. v. Dy. DIT (IT) [2012 (4) TMI 80 - ITAT MUMBAI] wherein held that neither any interest/commission received by the Indian PE from HO/other overseas branches can be charged to tax, nor there can be any deduction towards interest/commission expenditure incurred by the assessee towards HO /overseas branches & restored the matter to the file of AO with a direction to exclude the such amount and also not to grant deduction in respect of interest/commission received from the overseas HO/branches. Disallowance of broken period interest on PSU bonds - Held that:- The assessee switched over from one recognized method of valuation of bonds and securities to another recognized method in the previous year relevant to the assessment year under consideration in respect of PSU bonds. Broken period interest which was hither to capitalized came to be considered as deduction in the year of purchase. This changed method has been undisputedly followed by the assessee consistently in subsequent years. Considering the earlier order passed by the Tribunal in assessee's own case for AY 1991-92, the Tribunal decided it in favour of the assessee by holding that interest paid on broken period was liable to be allowed as deduction against the interest received in respect of the broken period - in favour of assessee. Interest on NOSTRO account - CIT(A) deleted charging of interest & enhancement to the tune of Rs. 27,31,95,602 u/s 14A - Held that:- Following the precedent for assessment year 1997-98 the interest of Rs. 3.98 crore on NOSTRO account is chargeable to tax and resultantly the disallowance u/s 14A made to the tune of Rs. 27.31 crore is deleted - grounds raised by the assessee as well as Revenue in this regard are allowed. Taxability of income at the rate of 48% as applicable to non-resident company - Held that:- The assessee fairly admitted that this issue has been decided against the assessee in earlier years - The impugned order on this issue for the current year as well and dismiss this ground. Interest received from branches on placement of overseas deposits - should it be charged to tax - Held that:- The interest received from branches should not be charged to tax as it is a transaction with self, the view has consistently been taken in earlier years but since the exact amount of interest received by the assessee from its HO/overseas branches is not emanating from record, AO is directed to find out such amount of interest received from HO/overseas branches and exclude it from the computation of total income - in favour of assessee for statistical purposes. Disallowance of loss on revaluation of unmatured forward foreign exchange (Forex) Contracts - Held that:- As decided in DCIT Versus Bank of Bahrain & Kuwait [2010 (8) TMI 578 - ITAT, MUMBAI] the loss incurred by the assessee on account of evaluation of the contract on the last day of the accounting year i.e. before the date of maturity of the forward contract, is allowable as deduction - AO directed to allow loss of Rs. 7.14 crore in this year and compute loss/profit on Forox contract maturing in the previous year relevant to the assessment year 1999-2000 by considering the impact of allowing of loss of Rs. 7.14 crore - in favour of assessee. Exemption of gross interest earned from tax free securities u/s 10(15) - Held that:- Exemption u/s 10(15) is to be allowed on gross interest and not on the net interest. Disregard the refund while calculating the interest u/s 234B - Held that:- CIT(A) has rightly considered the mandate of sections 234B and 234D. Obviously, the interest u/s 234B is required to be calculated on the basis of total income computed without considering the refund determined u/s 143(1). Disallowance of interest earned from HO was lower as compared to interest paid for FCNR-B Deposit - Held that:- Simply because the assessee paid interest on domestic deposits at a little higher rate than that it received on FCNR-B Deposits, it cannot be said that the interest paid should be disallowed to that extent. Write off of premium paid on purchase of securities amortised over the life of investments - Held that:- In agreement with the view canvassed by the CIT(A) as that when the assessee is purchasing securities as stock-in-trade, there can be no question of amortizing the premium paid for the purchase of securities over the life of such securities. The purchase price so paid has to be taken as such by disregarding the assessee's view point that the premium on purchase of securities should be amortized over the life of investment. To this extent the view taken by the CIT(A) approved with a little modification that not only when the securities are not only sold but also even when these get matured, income from then should be computed with reference to the cost of purchase of securities. Deduction independent of the provisions of section 44C - CIT(A)deleted the expenses claimed by the assessee on account of HO expenses independent of the provisions of section 44C - Held that:- Facts and circumstances of this ground are similar to those prevailing in the earlier years in which it has been held that the deduction has to be allowed independent of the provisions of section 44C - if during the fresh examination, the AO finds that the expenses of Rs. 1.06 crore or any part thereof represent apportionment of HO expenses as per Explanation to section 44C, such allocated expenses will not be allowed as deduction independent of section 44C. To the extent the expenses are found to be exclusively incurred by HO for the assessee, they will not fall within the definition of HO expenses and accordingly allowed as deduction independent of section 44C. This ground is, therefore, allowed for statistical purposes.
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