TMI Blog2012 (10) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... creen Media Private Limited v. Union of India [2010 (2) TMI 269 - BOMBAY HIGH COURT reopening on the basis of finding in an order of assessment passed for a subsequent assessment year, where additional material has emerged before the A.O. to lead to the formation of belief that income chargeable to tax had escaped tax, is sustainable. The facts of the instant case stand on a rather stronger footing because here the reassessment is on the basis of the CIT(A)'s order for a subsequent year, thus the initiation of reassessment proceedings for the current year is in order - against assessee. Non deduction of TDS - Disallowance of interest payable to head office and other overseas branches - Held that:- As decided in Sumitomo Mitsui Banking Corporation v. DDIT [2012 (8) TMI 450 - ITAT, MUMBAI] the interest paid to the head office of the assessee bank by its Indian branch cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law - as interest paid by the Indian branch is not chargeable to tax in India, it follows that the provisions of section 195 would not be attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 31.03.2004, recording the following reasons :- "The CIT(A) in his order in appeal No. CIT(A)XXXI/ DDIT(IT)2(1)/IT-94/03-04 dated 12/12/2003 for A.Y.2000-01 has confirmed the addition of AO in taxing the interest paid to its Head Office and overseas branches amounting to Rs. 14,92,62,998/-. Similarly for A.Y.2001-02, the amount of Rs. 21,46,12,294/- has been brought to tax on account of interest paid to the Head Office and Overseas Branches by the assessee. The assessee has paid such interest to its HO and other overseas branches for earlier years also including A.Y. 1997-98, though the details of such interest paid are not available on records. However, considering the quantum of interest paid to HO and other overseas branches, which runs into crores of rupees for A.Y. 2000-01 and 2001-02, the quantum of such interest paid must be above Rs. 1,00,000/- in A.Y. 1997-98, which has not been brought to tax. I, therefore, have reason to believe that income exceeding Rs. 1,00,000/- has escaped assessment within the meaning of the provisions of section 147 of the I.T. Act, 1961." 4. The assessee raised objections to the initiation of reassessment proceedings before the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a subsequent decision rendered by a superior authority on a particular issue can be a good reason to initiate reassessment proceedings for the earlier years in which a contrary view has been accepted by the Assessing Officer. In the current year, the assessee claimed deduction on account of such interest, which came to be granted by the AO in the order passed u/s 143(3). As it subsequently turned out from the order of the CIT(A) for a later year that such a deduction is not permissible, in our opinion no fault can be found with the AO in initiating reassessment proceedings on this score. This proposition would have correctly applied to validate the initiation of reassessment proceedings if there had been no original assessment u/s 143(3) and further, a period of four years had not expired in issuing notice. 8. Once a case falls within the proviso to section 147, one needs to concentrate on the fact as to whether there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for reassessment where the original assessment was completed u/s 143(3) and a period of four years has expired from the end of the relevant assessment year. The exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction for interest paid to head office and other overseas branches; the completion of assessment u/s 143(3); initiation of reassessment proceedings after four years from the end of the relevant assessment year are mutatis mutandis similar to those for assessment year 1997-98. Following the view taken hereinabove we hold that the assessment was wrongly reopened. The assessment order pursuant to notice u/s 148 is set aside. Resultantly there is no need to adjudicate the other grounds taken by both the sides. 12. In the result, the appeal of the assessee is allowed and that of the Revenue is dismissed. Assessment Year 1999-2000 13. First ground of the assessees's appeal is against the initiation of reassessment proceedings. Here it is relevant to mention that the reasons recorded by the Assessing Officer continue to remain the same as were there in preceding two years. One relevant factor which has changed the complexion of the case for the current year vis- -vis the preceding years, is that the issuance of notice u/s 148 is within a period of four years from the end of the relevant assessment year. In such a case proviso to section 147 cannot apply. While dealing with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the sides, it is relevant to mention that a Special Bench in assessee's own case has decided these aspects in Sumitomo Mitsui Banking Corporation v. DDIT [(147 TTJ 649 (Mum.)] in relation to assessment year 2003-2004. The finding of the Special Bench can be summarized as under:- (i) Principle of mutuality applies under the Act. As such, there can be no deduction of interest paid by Indian branch to head office/other overseas branches. (ii) However, the assessee is entitled to deduction of interest paid to head office/other overseas branches as per the terms of the DTAA. (iii) Mutuality applies in relation to income earned by the Indian branch from head office/other overseas branches. As such the interest income so earned cannot be charged to tax. (iv) Consequently, the provisions of section 40(a)(i) cannot apply. 16. In view of the ratio of the above discussed Special Bench decision, it becomes manifest that the assessee is entitled to deduction of interest paid to its head office and other overseas branches. Accordingly ground no. 2 of the assessee's appeal is allowed. Since the amount cannot be charged to tax in the hands of the head office by reason of principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e direction of the ld. CIT(A) for not charging of interest u/s 234B. Having heard the rival submissions and perused the relevant material on record we find that the issue of charging of interest u/s 234B in the present case is no more res integra in view of the judgment of the Hon'ble jurisdictional High Court in the case of Director of income-tax (International Taxation) v. NGC Network Asia LLC [(2009) 313 ITR 187 (Bom.)] in which it has been held that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B. The same view has been reiterated in DIT (IT) v. Krupp UDHE GmbH [(2010) 38 DTR (Bom.) 251]. As the assessee before us is a non-resident, naturally any amount payable to it which is chargeable to tax under the Act, is otherwise liable for deduction of tax at source. In that view of the matter and respectfully following the above precedents, we hold that no interest can be charged under sections 234B and 234C of the Act. This ground is, therefore, not allowed. 21. In the result, the appeal of the assessee is partly allowed and that of the Revenue is dismissed. Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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