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2017 (12) TMI 1417 - AT - Income TaxDisallowing being interest paid on pro-rata basis relating to earning tax free interest Income on tax free HUDCO Bond - Held that:- During the year assessee has made investment in HUDCO of ₹ 2 crores as mentioned at page No. 3 of the assessment order whereas, interest free funds available with the assessee of share capital and reserve and surplus of ₹ 42.28 crores as at 31.03.2006. Further, as at 31.03.1999 the available interest free funds in the form of share capital and reserve and surplus was ₹ 35.14 crores. In view of this the presumption would lie in favour of the assessee that assessee has made investment out of its own tax free funds. Therefore, following decision of the Hon'ble Bombay High Court in HDFC Bank Ltd Vs. DCIT [2016 (3) TMI 755 - BOMBAY HIGH COURT] we reverse the finding of the lower authorities and direct the Ld AO to delete the disallowance of ₹ 364206/- on account for interest expenses being allegedly paid on pro rata basis relating to earning of tax free interest income of ₹ 15.50 lacs on tax free HUDCO bonds of ₹ 2 crores. In the result ground No. 1 of the appeal is allowed. Disallowance of interest paid on borrowings from Head Office - Held that:- Explanation to section 9(1)(v) has been inserted w.e.f. 01.04.2015, therefore, the situation arises is that the assessee a branch of a foreign bank of non treaty jurisdiction who has paid interest to its foreign head office is allowable as deduction or not. Prior to 01.04.2015 if interest is paid by the assessee to its Taiwan Head Office it is payment to self. In para no 50 of the decision of the Sumitomo Mitusi banking cop V DDIT (2012 (4) TMI 80 - ITAT MUMBAI) while dealing with domestic tax law this issues has been discussed that in domestic tax law there is no question of granting deduction of interest paid by the assessee to its HO , because it is payment to self. The issue of any applicability of any DTAA is not before us, therefore various case laws cited before us are not relevant as they deal with various DTAAs. In the result we do not find any infirmity in the orders of lower authorities in denying deduction of interest paid to HO by the assessee. Denying the claim of the assessee u/s 44C - head office expenses restricted - Held that:- The actual expenditure said to be borne by the head office is ₹ 3781095880/-. However due to the restriction placed u/s 44C of the Act the above expenditure claim were restricted to ₹ 1661289/- for the purpose of section 44C of the act. The assessee has not produced details of the expenditure incurred by the assessee, which are attributable to the business of the assessee either before lower authorities as well as before us. In the present case the total expenditure incurred by the head office of NTD 27056314/- as well as pension of NTD 4481126/- was said to be attributable to the assessee’s business. The details of the expenditure with respect to nature of such expenditure, purpose of such expenditure and actual incurring of such expenditure were neither provided before the lower authorities as well as before us. In view of this, we do not find any infirmity in the order of the lower authorities in denying the claim of the assessee u/s 44C of the Act. In the result ground No. 3 of the appeal of the assessee is dismissed.
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