TMI Blog2014 (4) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 195 consequently would not be attracted in case of such payment of interest by the Indian Branch to overseas Head Office and the question of disallowance of the said interest by invoking the provisions of Section 40(a)(ia) does not arise thus, the order of the CIT(A) upheld Decided against Revenue. Condonation of delay - Whether the delay in filing of appeal by the assessee was on account of sufficient reasons or not Held that:- In matters concerning the filing of appeals, in exercise of the statutory right, a refusal to condone delay can result in a meritorious matter being thrown out at the very threshold which would lead to miscarriage of justice - The judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so Relying upon Collector, Land Acquisition vs. Mst. Katiji Ors. [1987 (2) TMI 61 - SUPREME Court] and Vedabai Alia Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil [2001 (7) TMI 117 - SUPREME Court] - the court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression 'sufficient cause', ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest earned by head office. The AO also disallowed head office expenditure of Rs.47,65,429/-, which was claimed by the assessee under Section 44C of the I.T.Act. 3. Disallowance of Rs.47,65,429/- under Section 44C was made by the AO on the plea that expenditure has not been actually incurred by the assessee branch office in India. The AO further stated that these expenditures were not debited in the books of account of branch office and no entry at all is made in its books of accounts, however, same has been claimed as expenditure in the statement of income only. 4. By the impugned order, the CIT(A) allowed assessee s claim by observing that expatriate employees were working in India for the business operation of the assessee branch in India. Therefore, expenditure met out by the head office with regard to the business operation of the assessee branch in India is allowable under Section 44C of the Act. The CIT(A) further observed that it is immaterial whether the head office raised a debit note on branch office with regard to the expenditure met out by the head office in connection with business operations of the branch office. The precise observations of the CIT(A) are as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) deleting the disallowance of expatriate salary. 6. During the course of assessment, the AO also observed that assessee has debited an amount of Rs.81,69,614/- as an expenditure on account of payment of interest to the head office, which also included payment of Rs.35,13,949/- remitted without withholding of tax. The AO invoked provisions of Section 40(a)(ia) and disallowed Rs.35,13,949/-. 7. By the impugned order, CIT(A) allowed assessee s claim after having following observations :- 6.18 I have gone through the issue. Branch or PE will be considered as if a separate entity only for determining the profits earned by the PE. It is to be remembered that the assessment is made only on the appellant company and not on the branch of the appellant. I fully agree with the appellant s view for applying the provisions of Section 195 of the Act, there should be two legal entities. The payer and payee should be two distinct legal entities, Otherwise Section 195 cannot be invoked. The Hon ble ITAT Kolkata Special Bench in the ABN Amro Bank (supra) has held that Section 195 is not applicable to the payments made by the branch to head office. The same view is appreciated by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, therefore, as per Article 7 of DTAA, provides permanent establishment will be taxable in India finally the AO treated the head office and branch office as two different entities as per the domestic law as well as DTAA, therefore, disallowed the interest payment for non-deduction of tax under Section 40(a)(ia). We found that issue is squarely covered by the decision of the ITAT Special Bench in the case of ABN Amro Bank, 97 ITD 89. Recently the issue is also dealt by the ITAT Special Bench at Mumbai in the case of Sumitomo Mitsu Banking Corp. 136 ITD 66 (Mum)(SB), wherein it has been held interest paid by the Indian Branch of the assessee bank to its overseas head office is not chargeable to tax in India. It was further held that the provisions of Section 195 consequently would not be attracted in case of such payment of interest by the Indian Branch to overseas Head Office and the question of disallowance of the said interest by invoking the provisions of Section 40(a)(ia) does not arise. Respectfully following the said decision of the Special Bench, we upheld the impugned order of CIT(A) for deleting the disallowance of interest made under Section 40(a)(ia) of the I.T.Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said sufficient case. It is true that the words sufficient cause for not filing the Cross Objection within the period of limitation, no doubt is to be applied in a reasonable manner but depending upon the facts and circumstances of each case. Party has to give satisfactory explanation. 12. We have considered rival contentions and found that issue taken by the assessee is covered in favour of the assessee by the order of the Tribunal in assessee s own case in the immediately preceding year. With regard to the delay in filing appeal, we have considered the rival submissions carefully. The issue is whether the delay in filing of appeal by the assessee was on account of sufficient reasons or not. If the reasons are found to be sufficient and bona fide the delay deserves to be condoned. Before we evaluate the sufficiency of the reasons, it would be of relevance to keep in mind the broad judicial thoughts on the issue. No doubt filing of appeal is a right granted under the statute to the assessee and is not an automatic privilege, therefore, the assessee is expected to be vigilant in adhering to the manner and mode in which the appeals are to be filed in terms of the relevant provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the others courts in the hierarchy. 15. Furthermore, the Hon'ble Supreme Court in the case of Vedabai Alia Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil 253 ITR 798 held that the court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression 'sufficient cause', the principle of advancing substantial justice is of prime importance. The court held that the expression sufficient cause should receive liberal construction. In view of the above discussion, we condone the delay in the interest of substantial justice. 16. The issue with regard to addition of interest income earned by the head office from the branch office had already been decided by the Tribunal in assessee s own case in favour of the assessee by relying on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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