TMI Blog2012 (11) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... hence assessable to tax in the year in which the loan amount was disbursed. Income accrued at that very stage itself and could not have been deferred over the life of loan - CIT(A) was not justified in directing the spread over of the advisory fee over the period of loan - impugned order on this issue is vacated and restore the action taken by the A.O - In the result, the appeal of the assessee is allowed and that of the Revenue is partly allowed. Disallowance of Interest - Assessee in its appeal are similar to those for assessment year 2000-2001 but for change in the amount of Rs. 2,03,34,257 being the interest disallowed u/s 40(a)(i) and also charged to tax under Article 11 of the DTAA. Both the sides are in agreement that the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of Rs. 15,21,000 being interest paid to its Singapore branch u/s 40(a)(i) of the Act and simultaneously taxing the interest received by Singapore branch amounting to Rs. 15,21,000 as interest income in its hand under the provisions of Article 11of the DTAA between India and Canada. 3. At the very outset the learned Counsel for the assessee contended that the issue raised in this appeal is covered by the recent Special Bench order in the case of Sumitomo Mitsui Banking Corpn. v. Dy. DIT (IT) [2012] 136 ITD 66 (Mum.) holding that interest paid by the PE to head office or to other branches outside India is deductible in the hands of the PE and the same interest is not taxable in the hands of the head office. The learned Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad advisory fee/commission over a period of time instead of taxing it in the year under consideration. The facts apropos this ground are that the assessee rendered certificate for advisory services to three parties during the year in question. Vide order sheet entry dated 05.03.2003, the A.O. called upon the assessee to explain the modus operandi of the fee for advisory services and why the same was not offered for taxation in entirety in this year. The assessee furnished details submitting that it received fee from three clients namely:- (i) Tata Communication Limited, (ii) Birla AT T Communications Limited, and (iii) BPL Communications Limited, out of which a part was recognized as income and the remaining part was deferred to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s granted, the fee accrued to the assessee and further since the fee was not returnable at any point after receipt, the entire income accrued on the rendering of services. The AO found that not only the assessee acquired the right to receive the amount, but also actually received it during the year. Relying on the judgment of the Hon'ble Supreme Court in the case of E.D. Sassoon Co. Ltd. v. CIT [1954] 26 ITR 27, the AO held that the entire amount which was deferred by the assessee but received in the current year was also taxable as it also accrued in the year in question. The learned CIT(A) overturned the assessment order on this point by holding that a mere claim to income without any enforceable right there to cannot be regarded as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of advisory fee was returnable. As the said advisory fee is based on a percentage of loan, say 1%, and there is no question of repaying such advisory fee at any time after the receipt, in our considered opinion, the entire income accrued in the year in question itself on the rendering of services. There is no logic in spreading such advisory fee over the life of the loan. That being the position, the income accrued at that very stage itself and could not have been deferred over the life of loan. The learned Departmental Representative has correctly relied on the judgment rendered by the Hon'ble Kerala High Court in Kerala Urban Development Finance Corpn. Ltd. v. CIT [2004] 266 ITR 245 in which case the administration and supervision cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose for assessment year 2000-2001 but for change in the amount of Rs. 2,03,34,257 being the interest disallowed u/s 40(a)(i) and also charged to tax under Article 11 of the DTAA. Both the sides are in agreement that the facts and circumstances of the instant year are mutatis mutandis similar to those of the preceding year. Following the view taken hereinabove we decide both the grounds in assessee's favour. 9. First ground of the Revenue's appeal is admittedly similar to ground no. 1 for assessment year 2000-2001. Following the view taken hereinabove for the said earlier year, we decide this issue in favour of the assessee. 10. Second ground is also similar to that for assessment year 2000-2001, which has been decided by us in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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