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2013 (8) TMI 175 - AT - Income TaxDeduction of Staff costs and Specific expenses incurred by the head office on behalf of the assessee - whether such expenses were not covered by the expenses mentioned u/s 44C? - Held that:- These amounts ought to have been included in the overall Head office expenses deductible u/s 44C as canvassed on behalf of the Revenue is not acceptable as section 44C does not cover exclusive expenses incurred by the Head office for a particular branch. Rather, it embraces the allocation of common head office expenses defined in Explanation (iv) to section 44C amongst various branches. See CIT VS. Emirates Commercial Bank Ltd. (2003 (4) TMI 2 - BOMBAY HIGH COURT ), Addtl. DIT (IT) Vs. Bank of Bahrain & Kuwait (2011 (1) TMI 923 - ITAT, MUMBAI ) and JCIT VS. American Express Bank Ltd. (2012 (8) TMI 371 - ITAT MUMBAI). Since the claim of the assessee in the present case expenses were incurred by the head office exclusively for the Indian branch, could not be controverted on behalf of the Revenue, thus theses expenses have been rightly held to be allowable in full without being covered under head office expenses as provided for in section 44C. Against assessee. Exemption u/s 10 in respect of tax free bonds - Departmental appeal against allowing exemption - Held that:- As the investment in tax free bonds was made in an earlier year and there is no current fresh investment in any bonds fetching exempt income no interest can be disallowed u/s 14A. In so far as the disallowance of Operating expenses made by the A.O. is concerned, the AO made it on a proportionate basis by taking the figure of operating expenses from Profit and loss account and then apportioning it in the ratio of total interest earned as to interest of 9.5% tax free bonds. This does not appear to be a correct basis for apportionment. At the same time, it is noticed that the CIT(A) has also not given any reasons for deleting such disallowance. As in the case of Credit Lyonnais (2012 (12) TMI 640 - ITAT MUMBAI ), the tribunal has directed to curtail the disallowance for operating expenses at the rate of 2% of the exempt income. Following the precedent, AO directed to restrict the disallowance accordingly. Addition on account of transfer pricing adjustment - Revenue's appeal is against the deletion of addition - Held that:- Each LIBOR contributor panel bank formulates its own rate for a day which is put into the application which links directly to a rate setting team at Thomson Reuters. LIBOR is not a rate in itself which is charged or paid for the user of inter bank deposits. It is only an average' of the rates submitted by various panel banks, after exclusion of four each of highest and lowest responses, which is daily reported at 11:30 a.m.. It is required to be considered as arithmetical mean of such prices, thereby making available the option of plus minus 5% variation to the assessee. As the present addition of Rs.50,476 made by the AO was the outcome of not allowing plus minus 5% cushion, which is richly due to the assessee CIT(A) was justified in deleting this addition. Allowance of deduction of head office expenses - Held that:- As there is sufficient material justifying the payment made to head office to the tune of Rs.2.12 crore attributed by the head office to the Indian branch, against which the assessee claimed deduction to the permissible extent u/s 44C of Rs.98.98 lakh, we are of the considered opinion that no interference is warranted in the impugned order on this issue. Charging of interest u/s 234D - selection of date from which it will be charged - Held that:- Legislature cannot be considered as oblivious of the fine distinction between "the date of grant of refund" and "the date of receipt of refund" as the first refers to the date on which refund is issued, the second refers to the date on which it is actually received by the assessee. The legislature in its wisdom has employed the expression "date of receipt" in several sections, such as section 155(8A) before its omission and certain sections providing exemption under the head Capital gains'. To claim that the date of receipt of refund should be reckoned as a starting point instead of the date of grant of refund would amount to doing violence to the unambiguous language of the provision. As it is the expression date of grant of refund' which has been employed u/s 234D, which in the present case is 29.10.2004, the interest has been rightly charged from this date. This ground is, therefore, not allowed.
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