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2014 (2) TMI 736 - AT - Income TaxDisallowance for payment made to the Head Office – Held that:- The certificate issued by Ernest and Young had been issued for the information of and assistance to the Bank's management in connection with the review by 'local tax authorities' - It was 'not to be used', circulated quoted or otherwise referred to 'for any other purposes' - FAA has not inquired in to the relevance of the said certificate as per the Indian tax laws - Assessee itself has disallowed an expenditure incurred under the head for the year under consideration and similar expenditure in subsequent years has been allowed by the AO - if any payment is only reimbursement it cannot be taxed-but if profit is embedded in it same has to be taxed – the matter needs further verification – thus, the matter remitted back to the FAA for fresh adjudication – Decided partly in favour of Assessee. Disallowance of interest paid to Head Office – Held that:- The decision in M/s. Sumitomo Mitsui Banking Corporation, C/o. BSR & Co., Chartered Accountants, KPMG Versus The Deputy Director of Income Tax (IT), Range 2(1), 2012 (8) TMI 450 - ITAT, MUMBAI] followed - interest paid to the head office of the assessee-bank by its Indian branch which constitutes its permanent establishment in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to the permanent establishment which is taxable in India - the interest paid by the Indian branch of the assessee-bank to its head office and other branches outside India 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 permanent establishment, the question of disallowance of the said interest by invoking the provisions of section 40(a)(i) does not arise – thus, the order of the FAA reversed - Decided in favour of Assessee.
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