2024 (3) TMI 1200 - AT - Income Tax

TP adjustment for administrative support serves in relation to Inter Bank Indemnities - selection of MAM - HELD THAT - The facts in the impugned assessment year are identical to the facts in Assessment Year 2008-09 held that TNMM method would be the Most Appropriate Method in the facts and circumstances of the instant case and CUP could not be applied herein because of non availability of data. In any case in respect of adjustment made simply relying on 133(6) information from the market had been deleted by this Tribunal in the case of Asian Paints Ltd 2014 (1) TMI 16 - ITAT MUMBAI It is also prudent to note that the same transactions were accepted by the Id. TPO upto A Y2012-13 in the case of the assessee Hence even going by the rule of consistency as has been held in the case of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT there is no need for the Id. TPO to take a divergent stand when there is no change in the facts and circumstances during the year with that of earlier years Hence we direct the Id TPO to delete the adjustment made in respect of guarantee fees. Decided in favour of assessee. Rate of tax on interest income from foreign currency loans - Tribunal has consistently held that interest income earned on foreign currency loans is taxable @20%. CIT(A) in impugned order has followed the decision of his predecessor in AY 2008-09 which in turn followed the decision of Tribunal in assessee s own case in AY 1997-98 - We find no infirmity in the findings of the CIT(A) on this issue hence ground No.1 of appeal is dismissed sans-merit. Deduction u/s. 44C - AO allowed head office expenses only to the amount reflected in Form 3CEB - Assessee claimed that deduction u/s. 44C should be allowed to the extent of Rs. 9, 90, 15, 825/- or 5% of adjusted total income whichever is lower - AO rejected the contentions of the assessee further held that the assessee had furnished incomplete and partial details - HELD THAT - No specific details in respect of the amount in excess of Rs. 2.10 crores is furnished by the assessee - CIT(A) re-examined the documents and accepted submissions of the assessee. CIT(A) allowed assessee s claim primarily for the reason that the claim of the assessee is within the limit of 5% of the adjusted total income and the said claim of the assessee is supported by auditors certificate. The Co-ordinate Bench in the case of Doha Bank QSC 2020 (11) TMI 371 - ITAT MUMBAI held that head office expenses attributable to the business of assessee in India is allowable in accordance the provisions of section 44C irrespective of the fact whether or not any amount is debited in the books of account.No contrary material is brought before us by the Department to controvert the findings of the CIT(A) or the decision cited by assessee. Not allowing interest on income tax refund as exempt from tax in accordance with the provisions of Article 11(3)(a)(i) of India Canada DTAA - Whether interest income on income tax refund is exigible to tax in India or is exempt in light of provisions of Article 11(3) of India-Canada DTAA? - HELD THAT - The treaty under reference in the said case was India-Italy DTAA. On reading of Article 12 of the aforesaid treaty which deals with Interest we find that provisions of clause (3) are pari-materia to clause (3) of Article 11 of India Canada-DTAA. Hence the ratio decidendi in the case of Ansaldo Energio SPA 2016 (5) TMI 945 - MADRAS HIGH COURT would apply to the instant ground of appeal. In so far as the decision in the case of B.J. Services Co. Middle East Ltd. 2015 (5) TMI 1036 - UTTARAKHAND HIGH COURT on which the CIT(A) has placed reliance we find that it referred to UK-India DTAA. We have examined the provisions of the said treaty. The provisions of Article -12 dealing with interest in the said DTAA are not parimateria to India- Canada DTAA. There is no clause in Article-12 of India UK-Treaty similar to Article -11(3) in India Canada Treaty. Hence the decision in the case of B.J. Services Co. Middle East Ltd 2015 (5) TMI 1036 - UTTARAKHAND HIGH COURT would not apply to the facts of the present case. In the facts of case and the decision of Hon ble Jurisdictional High Court we find merit in assessee succeeds on ground No.2.

Summary

Issues Involved:
1. Transfer Pricing Adjustment on Administrative Support Services
2. Taxability of Interest Income on Foreign Currency Loans
3. Deduction under Section 44C of the Income Tax Act
4. Inclusion of Comparable Companies for Transfer Pricing
5. Taxability of Interest on Income Tax Refund under India-Canada DTAA

Summary:

Issue 1: Transfer Pricing Adjustment on Administrative Support Services
The appeals ITA No. 4981/MUM/2017 and ITA No. 4899/MUM/2017 for Assessment Year 2010-11 involved the issue of Transfer Pricing (TP) adjustment on account of administrative support services related to Inter Bank Indemnities (IBI). The assessee's grounds of appeal No. 8 to 12 were identical to those in ITA No. 3862/Mum/2013 for Assessment Year 2008-09, where the Tribunal had decided in favor of the assessee. The Tribunal found that the facts for the impugned assessment year were identical, and thus, for parity of reasons, allowed the grounds of appeal 8 to 12 in favor of the assessee.

Issue 2: Taxability of Interest Income on Foreign Currency Loans
The Revenue's appeal for Assessment Year 2010-11 raised the issue of whether interest income earned on foreign currency loans should be taxed at 40% under normal provisions or at 20% under Section 115A of the Income Tax Act. The Tribunal noted that this issue had been consistently held in favor of the assessee in previous years, including Assessment Year 1997-98. Therefore, the Tribunal dismissed the Revenue's ground No. 1, holding that the interest income is taxable at 20%.

Issue 3: Deduction under Section 44C of the Income Tax Act
The Revenue's grounds No. 2 to 4 for Assessment Year 2010-11 concerned the deduction under Section 44C. The Assessing Officer had disallowed a substantial part of the assessee's claim for head office expenses. The CIT(A) allowed the full claim, supported by the Tribunal's decisions in similar cases, stating that head office expenses attributable to the business in India are allowable under Section 44C. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's grounds No. 2 to 4.

Issue 4: Inclusion of Comparable Companies for Transfer Pricing
In ground No. 5 of the Revenue's appeal for Assessment Year 2010-11, the issue was the inclusion of M/s. Allianz Securities Ltd. as a comparable. The assessee did not contest this ground due to the smallness of the amount, and thus, the Tribunal decided in favor of the Revenue, allowing this ground.

Issue 5: Taxability of Interest on Income Tax Refund under India-Canada DTAA
In the assessee's appeal for Assessment Year 2013-14, the issue was whether interest on income tax refund is exempt from tax under Article 11(3)(a)(i) of the India-Canada DTAA. The Tribunal referred to the decisions of the Hon'ble Bombay High Court and Madras High Court, which held that interest on income tax refund is not effectively connected with the PE and is exempt under the relevant DTAA provisions. Therefore, the Tribunal allowed the assessee's ground No. 2, holding that the interest on income tax refund is exempt from tax.

Conclusion:
The appeals of the assessee for Assessment Years 2010-11, 2011-12, and 2012-13, and the Revenue's appeal for Assessment Year 2010-11 were partly allowed. The assessee's appeal for Assessment Year 2013-14 was fully allowed. The Tribunal's decisions were based on consistent application of previous rulings and relevant DTAA provisions.