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TMI Blog2012 (8) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the benefit of non-discrimination clause as contained in Article 25 of the India Korea Double Taxation Avoidance Agreement as against tax rate of 40% (+ surcharge) levied by the A.O. as well as Ld. CIT(A). 4. At the time of hearing before us, the Ld. Representatives of both the sides have agreed that this issue is squarely covered in favour of the revenue and against the assessee by the decision of the Tribunal in the assessee's own case for the A.Y. 2002-03 reported in (2006) 6 SOT 145 (Mum) wherein a similar issue was considered by the Tribunal in Paragraphs no. 11.2 & 11.3 and 12 of its order which read as under: "11.2 It is, thus, evident that DTAA recognizes the fact that the amendments made in the IT Act are not affected in so far or they are not in conflict with the specific provisions of the DTAA. Therefore we are of the view that the amendment made in section 90(2) by way of insertion of explanation is applicable in so far as it is not in conflict with the provision of DTAA. In the context of amendment made in the section 90 w.r.e.f. 1.4.1962 it is useful to quote para 49 in the ABN Amro Bank NV case (supra) wherein Hon'ble ITAT has quoted from the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation with DTAA as (i) the area of operation of explanation and the Art-25(1) are in different field. (ii) Explanation clarifies the position as it always stood. (iii) DTAA did not prescribe any separate or specific rate or any particular criteria to be applied on income of Korean companies assessed in India. (iv) Explanation does not deal with assessability of any items of income. Secondly, even if any conflict is envisaged, still then the provision of DTAA will yield to law passed independently by Parliament in view of decision of Hon'ble Supreme Court in Gramphone Co.'s case (supra)". "12. The last argument of the learned counsel is that, at least sub paragraph 2 of Article 25, will hold the field. According to the assessee, an existence of a P.E. of assessee company is not disputed, Indian Enterprises such as domestic companies and co-operative societies are charged with lesser rates as compared to non-resident companies. This situation is less favourable for assessee-company. Therefore according to learned counsel, it hits Article-25(2). In our view this stand is misconceived. The word "less favourable" has not been defined either in the DTAA or in IT Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested in securities which were categorized as "available for sale". As per the accounting policy consistently followed, the net appreciation in the value of the said securities was not recognized as income by the assessee on the ground that it represented unrealized and notional profits. The A.O. following the stand taken in the case of the assessee for earlier years treated such net appreciation in the value of securities amounting to Rs. 44,98,000/- as income of the assessee taxable in the year under consideration and the said amount was added by him to the total income of the assessee. On appeal, the Ld. CIT(A) confirmed the addition made by the A.O. on this issue by taking a view, which was contrary to the view taken by his predecessors while deleting the similar addition made by the A.O. in the earlier years i.e. A.Y. 2001-02, 2002-03 and 2003-04. 8. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that a relief on similar issue was allowed by the Ld. CIT(A) to the assessee in the earlier years by deleting the addition made by the A.O. on account of unrealized profits on revaluation of securities and the appeals f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee as 'cost or market price whichever is less', the same in our considered opinion cannot be added to the total income. We, therefore, uphold the impugned order on this count. This ground fails. Similar grounds raised by the Revenue in asst. yrs. 2001-02, 2002-03 and 2003-04 are also liable to be and are hereby dismissed. Another connected issue in asst. yr. 2000-01 is against not allowing deduction claimed by the assessee at Rs. 45,000 on account of revaluation of remaining part of closing stock of securities. From the computation of income done by the AO it is apparent that he had allowed deduction for Rs. 45,000 as claimed by the assessee. In such a situation there cannot be any question of agitating for an addition which has not been made by the AO himself. This ground is not allowed." 9. As the issue involved in the year under consideration i.e. A.Y. 2004-05 and all the material facts relevant thereto are similar to that of the earlier years decided by the Tribunal, we respectfully follow the order of the Tribunal for the said earlier years and delete the addition made by the A.O. and confirmed by the Ld. CIT(A) on account of unrealized profits on the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee if the same has been offered to tax in the subsequent year i.e. A.Y. 2005-06. Subject to this direction, ground no.3 of the assessee's appeal is dismissed. 13. The issue raised in ground no.4 relates to the addition of Rs. 57,12,426/-made of by the A.O. and confirmed by the Ld. CIT(A) by way of disallowance of interest paid by the Indian Branch of the assessee bank to its Head office. 14. As agreed by the Ld. Representatives of both the sides, the issue involved in ground no. 4 of the assessee's appeal now stands squarely covered in favour of the assessee by the decision of Special Bench of the ITAT in the case of Sumitomo Mitsui Banking Corpn. v. Dy. DIT (IT) [2012] 136 ITD 66/19 taxmann.com 364 (Mum.) (SB) rendered by the wherein it was held that although the interest paid to the Head office of the assessee bank by the Indian branch which constitutes its PE in India is not deductible as expenditure in 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) and 7(3) of the relevant 'Tax Treaty' read with Paragraph 8 of the Protocol w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Special Bench of this Tribunal, we uphold the impugned order of the Ld. CIT(A) allowing the claim of the assessee for loss on account of revaluation of foreign exchange contracts and dismiss ground no. 1 of the revenue's appeal. 17. In ground no. 2 of its appeal, the revenue has challenged the action of the Ld. CIT (A) in deleting the addition of Rs. 59,10,370/- made by the A.O. on account of interest paid by the Indian branch of the assessee bank to its Head office treating the same as income arising in India in the hands of the Head office. 18. At the time of hearing before us, the Ld. Representatives of both the sides have agreed that the issue involved in ground no. 2 of the Revenue's appeal now stands squarely covered in favour of the assessee by the decision of Special Bench of the ITAT in the case of Sumitomo Mitsui Banking Corpn.'s case (supra) wherein it was held that interest paid to the Head office of the assessee bank by the Indian branch cannot be taxed in India in the hands of the assessee bank being payment to self which cannot give rise to income that is taxable in India as per Domestic Law or even as per the relevant 'Tax Treaty'. Respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 5 of this order. Following our conclusion drawn in A.Y. 2004-05, we dismiss ground no.1 of the assessee's appeal. 25. As regards ground no. 2 relating to issue of disallowance of interest paid by the Indian Branch of the assessee bank to its Head office, it is observed that this issue is similar to the issue involved in ground no. 4 of the assessee's appeal for A.Y. 2004-05 which has been decided by us in paragraph 14 of this order. Following our conclusion drawn in A.Y. 2004-05, we allow ground no. 2 of the assessee's appeal. 26. Ground no.3 raised by the assessee in this appeal relating to the addition made by the A.O. and confirmed by the Ld. CIT(A) on account of interest received by the Indian branch from its head office has not been pressed by the Ld. Counsel for the assessee at the time of the hearing before us. The same is accordingly dismissed as not pressed. 27. In its appeal for A.Y. 2006-07, the revenue has challenged the action of the Ld. CIT(A) in holding that 'salary' paid to expatriate employees deputed from Head Office to the Indian Branch is an expenditure to be allowed in full without the restriction of sec. 44C of the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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