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2015 (6) TMI 974 - BOMBAY HIGH COURT

2015 (6) TMI 974 - BOMBAY HIGH COURT - [2015] 377 ITR 102 (Bom) - Disallowance under section 14A - Tribunal held that interest earned on the Nostro account is taxable and if the High Court decides that the interest earned on the Nostro account is not taxable, then consequential disallowance under section 14A may be directed - Held that:- The Tribunal by the impugned order allowed the Revenue's appeal holding that the interest received by the respondent-assessee on the Nos tro account amounting t .....

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exemption under section 10(15)(iv)(h) of the Act is to be allowed on gross basis and not on net basis. In spite of having accepted that exemption under section 10(15)(iv)(h) of the Act is to be allowed on gross interest before the Tribunal, the Revenue has proposed to above question for consideration without pointing out in any manner the basis for withdrawing the concession made before the Tri bunal. In any case in terms of section 10(15)(iv)(h) of the Act it is a self-evi dent position that in .....

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he Act without any restrictions contained in section 44C as per ITAT - Held that:- The Tribunal by the impugned order allowed a deduction under section 37 of the Act without in any manner being restricted by section 44C of the Act. This was on the basis of an agreed position before it that this issue stands covered by the decision of the Tri bunal in Joint CIT v. American Express Bank Ltd. [2012 (8) TMI 371 - ITAT MUMBAI ]. It is further pointed out by the respondent that the Revenue being aggri .....

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the impugned order restored the issue of the rate at which interest is to be charged to tax on Income-tax refund received under section 244A of the Act to the Assessing Officer to be decided in the light of the Indo-France DTAA and the decision of the Special Bench of the Tribunal in the matter of Asst. CIT v. Clough Engineering Ltd [2011 (5) TMI 562 - ITAT, DELHI ]. In the circumstances no fault can be found with the impugned order of the Tribunal in restoring the issue to the Assessing Office .....

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has admitted before it that to bring about parity, it is not claiming any deduction of interest paid by it to its head office while computing the taxable income.Accordingly, in view of the above settled position that no person can make profit out of itself, the proposed question of law not being substantial, is not entertained.- Decided against revenue - Income Tax Appeal No. 1430 of 2013. - Dated:- 17-6-2015 - M. S. SANKLECHA and N. M. JAMDAR, JJ. Tejveer Singh for the appellant. P. J. Pardiwal .....

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e assessment year 1997-98. 2. At the hearing Mr. Tejveer Singh, learned counsel for the Revenue, urges the following questions of law for consideration : "(1) Whether, on the facts and in the circumstances of the case and in law, the Tribunal has erred in holding that interest earned on the Nostro account is taxable ? Without prejudice, if the High Court decides that the interest earned on the Nostro account is not taxable, then consequential disallowance under section 14A may be directed. .....

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37(1) of the Act without any restrictions contained in section 44C ? (4) Whether, on the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal has erred in directing the Assessing Officer to tax the interest received under section 244A at the rate prescribed in article 12 of the DTAA between India and France ? (5) Whether, on the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal has justified in holding that interest rece .....

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y the impugned order accepting the Revenue's contention before it that the interest on the Nostro account is chargeable to tax. Accordingly, ques tion No. 1 does not give rise to any substantial question of law. Hence, not entertained. 4. Regarding question No. 2 The Tribunal records in the impugned order that the Revenue has before it accepted the position that the exemption under section 10(15)(iv)(h) of the Act is to be allowed on gross basis and not on net basis. In spite of having accep .....

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r has relied upon its own decision in other cases to hold in favour of the respondent-assessee and the decisions in those cases have not been shown to be inapplicable to the present facts and/or disturbed in appeal. Accord ingly, question No. 2 does not raise any substantial question of law to be entertained. 5. Regarding question No. 3 The Tribunal by the impugned order allowed a deduction of ₹ 48,60,008 under section 37 of the Act without in any manner being restricted by section 44C of .....

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l 1, 2015 (DIT (International Taxation) v. American Express Bank Ltd. [2015] 5 ITR-OL 153 (Bom)), dismissed the Revenue's appeal on the above issue by following its decision in CIT v. Emirates Commercial Bank Ltd. [2003] 262 ITR 55 (Bom). Accordingly, question No. 3 is not entertained as it does not raise any substantial question of law. 6. Regarding question No. 4 (a) The Tribunal by the impugned order restored the issue of the rate at which interest is to be charged to tax on Income-tax re .....

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the Special Bench had been followed by the Tribunal in I. T. A. No. 183/ Mum/2010 (DHL Operations B. V., the Netherlands v. Deputy DIT). The issue before the Tribunal was the rate of tax on which income tax refund is to be taxed, i.e., on the basis of the articles of the DTAA or under the Act. The Tribunal on examination of the DTAA in the above case concluded that interest on Income-tax refund is not effectively connected with the permanent establishment either on asset test or activity test. T .....

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es of the Indo-France DTAA and the decision of the Special Bench in Clough Engineering (supra). Accordingly, question No. 4 does not raise any substantial question of law so as to be entertained. 7. Regarding question 5 (a) Mr. Tejveer Singh, the learned counsel for the Revenue, submitted that this question ought to be admitted as a similar issue has been admit ted by this court. In support Mr. Singh tenders the order dated February 14, 2013, of this court in Income Tax Appeal (L.) No. 2078 of 2 .....

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on behalf of the Revenue and submits that in the present case the question as raised by the Revenue is not in respect of deducting the payment of interest to compute the total income but with regard to the chargeability to tax of the interest received by the Indian per manent establishment from its head office in computing the total income. It is pointed out that the Indian permanent establishment and the head office are one and the same person. It is settled position that one cannot make a pro .....

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the reliance by the Revenue on order dated April 14, 2013, of this court admitting the appeal in Antwerp Diamond Bank N. V. (supra), is concerned, deduction on account of interest paid by the Indian permanent establishment to its head office was in the specific context of articles 7(2) and 7(3) of the Indo-Belgium DTAA. The case of Antwerp Dia mond Bank N. V. (supra) before the Tribunal was a part of the Special Bench decision in Sumitomo Mitsui Banking Corporation. (supra) wherein at paragraph .....

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e not separate entities for the purpose of taxation under the domestic law and the same being one and the same entity recognised as one assessee under the domestic law, interest payable by Indian permanent establishment to foreign general enterprise of which it is a part, cannot be treated as expen diture allowable as deduction being payment to self. This position which is well settled under the domestic law has not been disputed even by the learned representatives of the assessees during the co .....

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r the purpose of computing the profits attributable to the permanent establishment in India, the said permanent establishment is to be treated as a distinct and separate entity which is dealing wholly independently with the general enterprise of which it is a part and deduction has to be allowed for all the expenses which are incurred for the purpose of permanent establishment whether in India or elsewhere barring the amount paid by a permanent establishment to the head office of gen eral enterp .....

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hus, the fact that the appeal in the case of Antwerp Diamond (supra) is admitted would have no relevance for admitting the present appeal on the proposed question No. 5. It is also necessary to point out that the Tribunal in the impugned order has recorded the fact that the respondent-assessee has admitted before it that to bring about parity, it is not claiming any deduction of interest paid by it to its head office while computing the taxable income. (d) Accordingly, in view of the above settl .....

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s prayer before the Tribunal, was to declare that the interest income earned on the Nostro account is taxable. The impugned order of the Tribunal granted the Revenue's prayer and held that the interest earned on the Nostro account is taxable. Before us, the question framed/agitated was that the Tribunal erred in granting interest on the Nostro account. It is beyond comprehen sion as to how a party can be aggrieved by an order that grants its prayer. (ii) Questions Nos. 2 and 3 as framed, wer .....

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Director of Income-tax (IT) (2), Mumbai, to file this appeal. Either there is no application of mind to the order of the Tribunal before filing of this appeal or the Revenue is deliberately seeking to keep the pot boiling, so that uncertainty is kept alive. It shows the casual attitude of the Revenue in filing appeals. This is not the first of its kind. We had earlier also passed orders disapproving this conduct of the Revenue but there is no improve ment. If filing of such appeals on questions .....

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us of the famous observations of Mr. Justice Crampton in R v. O'Connell [1844] 7 ILR 261 at 312 : "Another doctrine broached by another eminent counsel I cannot pass by without a comment. That learned counsel described the advo cate as the mere mouthpiece of his client, he told us that the speech of the counsel was to be taken as that of the client ; and, thence, seemed to conclude that the client only was answerable for its language and sentiments. Such, I do conceive, is not the offic .....

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se for his client. He will ever bear in mind that if he be the advocate of an individual, and retained and remu nerated (often inadequately) for his valuable services, yet he has a prior and perpetual retainer on behalf of truth and justice ; and there is no Crown or other licence which in any case, or for any party or purpose, can discharge him from that primary and paramount retainer." (emphasis supplied) (v) Undoubtedly, an advocate has to fearlessly put forth his client's point of v .....

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ome later deci sion of an higher forum, etc., then in such cases appropriately the appeal memo itself must specify the reasons for preferring an appeal failing which at least before admission the officer concerned should file an affidavit pointing out the reasons for filing the appeal. It is only when the court is satisfied with the reasons given, that the merits of the issue need be exam ined of purposes for admission (please see I. T. A. No. 37 of 2013 CIT v. Proctor and Gamble Home Products L .....

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