TMI Blog2013 (9) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of the Act, there remains no need to examine the taxability or otherwise of this amount in their hands under the respective Double taxation avoidance agreements - CIT(A) was justified in reversing the AO's order insofar as the applicability of section 40(a)(i) was concerned – Decided against Revenue. Exemptions u/s 10(15) and 10(33) - 'Interest from tax free bonds - UTI dividend - Whether the CIT(A) erred in holding that since there was no nexus proved between tax free income and interest bearing funds, no disallowance can be made from the gross income claimed as exempt u/s. 10 of the I.T. Act – Held that:- No nexus had been proved between tax-free-income and interest bearing funds by the AO, that there were sufficient funds the findings shares/tax free securities that the action of the AO in disallowing exemption u/s 10 of the part of dividend/interest on tax free securities could not be sustained - AO had not given any details as how the alleged borrowed funds were used for earning tax free income, whereas the FAA had given a categorical finding; after considering the submissions made by the assessee bank during the appellate proceedings before him; that the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party for acting as an agent for mobilizing the deposits and to customers as incentive for placing the deposits as well as related costs in doing the activity outside India aggregating in all the US $ 69,87,112 as a deduction. The respondents pray that the AO be directed accordingly. (2) In the event it is held by any higher authorities that the treaty provisions are not applicable to the Bank, the appellants submit that the sum of ₹ 31,72,18,980 cannot be termed as fees for technical services under the Income-tax Act, as it is not a payment for rendering managerial, technical or consultancy services. The Respondents crave leave to add to alter, amend, vary, omit or substitute the aforesaid grounds of Cross Objection or add a new ground or grounds of Cross Objection at any time before or at the time of hearing of Cross Objection as they may be advised. ITA/7560/M/04-AY. 2001-02 Return of income, showing a loss of ₹ 7.48 Crores was filed by the = on 31.10.01.Assessment was finalised by the AO, on 25.03.2004, determining the income of the assessee at ₹ 56.71 Crores. 2. First Ground of appeal pertains to deletion of addition of ₹ 31.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overseas branches was not offered for taxation, that out of said amount ₹ 30.4 Crores had been paid to Fardan Trading Est for procuring the deposits, that Fardan Trading Est was an Indian entity incorporated for Abu Dhabi, that assessee bank had no shareholding in Fardan Trading Est, that ₹ 25.78 lacs were paid to certain customers from whom deposits were procured by Head Office/overseas branches, that certain other expenses on account of staff cost had been incurred by the H.O., that the expenditure incurred by the H.O. was reasonable, that no income was left out of ₹ 31.72 Crores that had accrued to the assessee, that in absence of specific article dealing with fees for technical services in the tax treaty between India and U.A.E. the aforesaid amount would fall in under Article 7, that said Article of the treaty dealt with business profit, that in computing the business profit deduction would have to be allowed for expenses incurred, that provisions of section 40(a)(i) were not applicable in the case under consideration, that there was no income chargeable to tax in India. Finally, he directed the AO to delete the addition. 2.2 Before us, Departmental Repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank u/s. 10 of the Act. During the assessment proceedings, AO found that assessee had earned exempt income of ₹ 3.22 Crores under the Heads 'Interest from tax free bonds' (3.01 Crores) and' UTI dividend' (Rs. 21.78 lacs), that the above receipts had been claimed as exempt u/s. 10(33) and 10(15) of the Act. As per the AO, net income earned out of such receipts; not the gross receipts; were exempt u/s 10(15) and 10(33) of the Act. He further held that assessee had deployed tax free funds as well as tax bearing funds for earning tax free income. He estimated pro-rata expenses incurred for earning tax free income which worked out to ₹ 2.74 Crores. Finally, he held that assessee was entitled to exemption of ₹ 48.43 u/s. 10(33) and 10(15) of the Act, as against ₹ 3.22 Crores claimed by it. 3.1 Assessee preferred an appeal before the FAA. After considering the submissions of the assessee and the assessment order FAA held that similar issue was considered by him in assessee's own case in earlier AYs., that no nexus had been proved between tax-free-income and interest bearing funds by the AO, that there were sufficient funds the findings share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of wealth tax payment of ₹ 1,05,000/-while computing the book profit u/s.115JB. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to delete the disallowance of ₹ 5,00,00,000/- on account of provision for bad debts made while computing the book profit u/s. 115JB. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the disallowance of ₹ 20,00,000/- of Head Office expenses is not in order while computing the book profit u/s. 115JB and in directing the Assessing Officer to delete it. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. ITA 4756/M/06 -AY2002-03. Assessee has filed following grounds of appeal: The Commissioner of Income-tax (Appeals)-XXXI, Mumbai [hereinafter referred to as the CIT(A)] erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 7.56 Crores. Assessment was finalised by the AO on 28.02.2005 u/s.143(3) of the Act determining the total income of the assessee at ₹ 2.92 Crores under normal provisions and at ₹ 12.77 Crores u/s.115JB of the Act. 6.1 First two ground of appeal filed by the AO are about apportioned proportionate interest expenses incurred for earning the income exempt u/s.10 of the Act. During the year, assessee bank had earned interest from tax free bonds of ₹ 3.01 Crores and had claimed it to exempt u/s. 10(15) of the Act. AO worked out exempt income on the basis which he had adopted for the AY. 2001-02. He held that assessee was eligible for exemption u/s.10(15) of the Act for ₹ 27.71 lacs only, as against ₹ 3.01 Crores. 6.2 Assessee filed an appeal before the FAA. After considering the submissions of the assessee and order of his predecessor for the AY 2001-02,he held that in absence of any nexus of the investment in bonds with borrowed funds no disallowance of interest could be made merely for the reason that assessee had incurred expenditure on certain borrowings. 6.3 Before us, DR relied upon the order of the AO. AR relied upon the order of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cross-objection filed by the assessee it was contended that MAT provisions are not applicable to a banking company and in this regard relied upon decision of the ITAT, Mumbai Bench in the case of Krung Thai Bank PCL v. Joint Director of Income-tax (International Taxation) [2010] 133 TTJ 435 9. Learned DR has not raised any objection for admission of this issue since ground raised by the assessee is supported by the decision of the ITAT, Mumbai Bench. By respectfully following the same we direct the Assessing Officer to reconsider the matter in accordance with law. Respectfully following the above order, we direct the AO to reconsider the matter in accordance with law. Ground Nos. 3, 4 5 filed by the AO are decided against him and additional ground filed by the assessee is allowed for statistical purpose. ITA No. 4756/Mum/2006 Assessment Year 2002-03 8. The first ground of appeal filed by the assessee is about restricting the deduction for H.O. Expenses. During the assessment proceedings, AO found that assessee bank had claimed H.O. Expenses of ₹ 1.79 Crores, that amount was claimed on the basis of actual expenses incurred by the H.O. that were attributab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round also. Thus, Ground No. 1 as raised by the assessee stands allowed. Respectfully following the order for the earlier years, we decide the ground no. 1 in favour of the assessee. 9. Ground No.2 is about applicability of tax rate. While deciding the tax liability of the assessee bank, AO held that business income of the assessee bank has to be taxed at higher rate than the tax rates applicable to domestic companies. In the appellate proceedings, FAA upheld the order of the AO. 9.1 Before us, AR of the assessee fairly conceded that issue was decided against the assessee bank by Tribunal's order dated 20.07.12 (ITA/)1996/M/2004). DR relied upon the said order of the Tribunal. We have heard the rival submissions. We find that Tribunal in its order dated 20.07.12 (supra) has decided the issue as under:- 32. In Ground No. 2, the assessee has challenged the AO's action for applying the tax rate of 48% to the assessee's business income instead of 35%. The CIT (A) too has confirmed the action of the AO after giving detailed reasoning in para nos. 6.4 to 6.7 of the order. 33. At the outset, learned Counsel submitted that this issue stands covered ag ..... 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