TMI Blog2012 (8) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant ‘tax treaty’ - Decided in favor of assessee. Dis-allowance u/s 14A of expenditure incurred in earning exempt income - Held that:- Since dividend income accrued from the investment out of its own funds, hence dis-allowance has been rightly deleted - Decided in favor of assessee. Guarantee commission offered to tax on accrual basis - addition - method of accounting - Held that:- Income from deferred guarantee commission did not accrue or arise in the year in which guarantee agreements were entered. It was held in case of CIT vs. Bank of Tokyo that such income should be spread over the period to which the guarantee commission related and should be assessed proportionately. Therefore, system of accounting regularly followed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Hyderabad. During the previous year relevant to A.Y. 2002-03, the Indian Branches of the assessee bank have paid total interest of Rs.1,48,30,613/- to its Head office and overseas branches and the same was claimed as a deduction while determining the profits attributable to Indian Branches, which was chargeable to tax in India. The said interest was treated by the A.O. as income of the assessee s Head office / overseas branches chargeable to tax in India. This decision of the A.O. was challenged by the assessee in the appeal filed before the Ld. CIT (A) and the contention raised before the Ld. CIT (A) in this regard was that the Head office of the assessee bank as well as all its branches being the same person and one taxable entity as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as its overseas branches by the Indian branch cannot be taxed in India being payment to self which does not give rise to income that is taxable in India as per the domestic law or even as per the relevant tax treaty . Respectfully following the said decision of Special Bench of the ITAT which is directly applicable in the present case, we delete the addition of Rs.1,48,30,613/- made by the A.O. and confirmed by the Ld. CIT (A) on this issue and allow the appeal of the assessee. 6. In ground no.1 of its appeal for A.Y. 2002-03, the revenue has challenged the action of the Ld. CIT (A) in deleting the addition of Rs.3,64,795/- made by the A.O. on account of expenditure incurred in earning exempt income . 7. During the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, we find no justifiable reason to interfere with the impugned order of the Ld. CIT (A) giving relief to the assessee on this issue. The same is therefore upheld and ground no.1 of the revenue s appeal is dismissed. 9. In ground no.2 of this appeal for the A.Y. 2002-03, the revenue has challenged the action of the Ld. CIT (A) in deleting the addition of Rs.67,63,204/- made by the A.O. on account of guarantee commission. 10. During the financial year 2000-01, the assessee received commission on guarantees provided to the clients amounting to Rs.4,25,41,914/-. The said commission to the extent attributable to the period ended 31st March, 2001 amounting to Rs.3,57,78,710/- was offered by the assessee to tax in A.Y. 2001-02 on accrual ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionately. Respectfully following the decision of Hon ble Madras High Court in the case of Bank of Tokyo (supra), we uphold the impugned order of the Ld. CIT (A) directing the A.O. to accept the method followed by the assessee. Ground No.2 of the revenue s appeal is accordingly dismissed. 12. Now, we shall take the Cross Appeals for A.Y. 2003-04 being ITA No.2048/M/2008 and 2049/M/2008 which are directed against the order of the Ld. CIT (A)-33, Mumbai dated 31.12.2007. 13. As regards the appeal of the assessee, it is observed that the solitary issue involved therein relating to the addition of Rs.1,81,78,299/- made by the A.O. and confirmed by the Ld. CIT (A) account of interest paid by the Indian Branch to Head Office / overseas branc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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