TMI Blog2012 (8) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian branch 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 PE - in favour of assessee. TP Adjustments - Held that:- Considering the assessee submission that direct salary cost should be considered and indirect overhead cost should not be considered as concerned employees performed insignificant role for the credit monitoring assistance done for the overseas associate enterprises. However no fresh ECB loans have been granted during the year under consideration but services indeed have been rendered by the assessee to its overseas entities. The cost of the two employees for this has been evaluated at ₹ 1,49,767/-, which is even admitted by the assessee. The question remains only for the allocation of indirect expenses which have been estimated by CIT(A) at ₹ 2,50,000/- and on the aggregate of salary and indirect expenses 10% mark up has been applied - partly in favour of assessee. Liability u/s.234b & 234C - Held that:- CIT(A) has deleted the interest levied on the assessee under section 234B & 234C on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounts The CIT(A) erred in confirming the view of the AO that the interest payable of ₹ 5,02,66,781 by the Appellant to its head office and other overseas offices is not deductible in computing its total income. The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the interest payable to its head office and its other overseas offices on the debit balance arising in their accounts in its course of business is deductible in computing its total income and the CIT(A) ought to have held as such. The Appellant submits that the AO be directed to delete the disallowance so made by him and to recompute its total income accordingly. 3. TP Adjustments The CIT(A) erred in upholding the adjustment made by the AO, to the extent of ₹ 4,39,743 to the total income on account of transfer pricing simply based on the order under section 92CA(3) of the Act without independently considering the submissions of the appellant. The Appellant submits that on the facts and circumstances of the case the CIT(A) ought to have appreciated that the allocation of indirect costs by the TPO, for the purpose of computin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Tribunal has been recorded in Para 8 of the said order and the same is reproduced below: 8. We have considered the rival submissions and have perused the records. The essential facts are as follows. When learned CIT(A) passed the impugned order, it contained no mistake or error. The question as to the correct rate of tax to be applied to the assessee involved a debatable issue, on which the revenue itself has taken contradictory stands for different years. The order of the assessing officer u/s. 154 thus could not have been sustained. However, the real question before us is whether the controversy gets settled by insertion of Explanation to section 90 with retrospective effect from 1/4/62. The assessee company is assessed in the status of a foreign company - a status same as that shown in the assessee s return. Section 2(23A) defines a foreign company as a company which is not a domestic company. Domestic Company has been defined under section 2(22A) as an Indian company or any other company which in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment within India of the dividends (includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Korea. 3.2 In view of the situation, after hearing both the parties, respectfully following the decision of ITAT in assessee s own case Ground No.1 of assessee s appeal is dismissed. 4. Ground No.2 was stated to be covered in favour of the assessee by the decision of Special Bench of ITAT in assessee s own case which is dated 30/3/2012 and copy of which is placed at pages 7 to 76 of the paper book. The issue was concluded in favour of the assessee by para 88 of the said decision, which is reproduced below: 88. Keeping in view all the facts of the case and the legal position emanating from the interpretation of the relevant provisions of domestic law as well as that of the treaty as discussed above, we are of the view that although interest paid to the head office of the assessee bank by its Indian branch which constitutes its PE 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 PE which is taxable in India as per the provisions of article 7(2) 7(3) of the Indo- Japanese treaty read with paragraph 8 of the protocol which are more beneficial to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illion to Reliance Petroleum Ltd.(RPL) and US$ 10 Million to National Thermal Power Corporation (NTPC). The period of loan was 6 years and 2.5 years respectively. It was submitted that loan regarding NTPC agreement was signed in May, 2001 and loan was disbursed in September, 2001. The assessee had participated as arranger along with State Bank of India, New York Branch. The loan provided to RPL was also in 2001 and assessee had worked as one of the arranger besides several others. No fresh loan was arranged during the year. The only function of the assessee s Mumbai branch was to assist overseas branch in monitoring the loan by reviewing financial statements and any developments which are reported in the newspapers in India. Thus it was submitted that very minuscule service was provided by Mumbai Branch to its Hong Kong branch for which it was designated two employees who provided these services to the overseas branch. It was submitted that there being no ECB transaction took placed during the year, the work in relation to monitoring was very minimal. It was pleaded that disallowance made by the AO was on higher side. On these submissions of the assessee Ld. CIT(A) has observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder and pleaded that relief has wrongly been granted by Ld. CIT(A). The AO was right in making the addition, which was very much reasonable. Therefore, Ld. DR pleaded that addition deleted by Ld. CIT(A) should be restored. 5.3 We have heard both the parties and their contentions have carefully been considered. The order of TPO has not been placed before us. But it is clear from the order of Ld. CIT(A) that assessee had submitted before him that direct salary cost should be considered and indirect overhead cost should not be considered as concerned employees performed insignificant role for the credit monitoring assistance done for the overseas associate enterprises. However, it is true that no fresh ECB loans have been granted during the year under consideration but services indeed have been rendered by the assessee to its overseas entities. The cost of the two employees for this has been evaluated at ₹ 1,49,767/-, which is even admitted by the assessee. The question remains only for the allocation of indirect expenses which have been estimated by Ld. CIT(A) at ₹ 2,50,000/- and on the aggregate of salary and indirect expenses 10% mark up has been applied. Con ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
