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ADIT (IT) -3 (1) , Mumbai Versus The Hong Kong and Shanghai Banking Corporation Ltd. And Vica-Versa

2016 (2) TMI 433 - ITAT MUMBAI

Validity of reopening of assessment - Held that:- mere mentioning that sanctioning authority was satisfied is not sufficient to initiate re-assessment proceedings, where during the original assessment proceedings AO takes a particular view after considering the submission of the assessee. It is not the case where assessee had not filed details required by the AO. If the AO decided not to call for particular information the assessee cannot he held responsible for that omission/ commission. Theref .....

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, Judicial Member For the Petitioner : Shri Arvind Sonde For the Respondent : Shri Jasbir Chauhan ORDER Per Bench Challenging the orders dated 26. 3. 2009, 31. 3. 2009 and 22. 10. 2013for the assessment years 2000-01, 2001-02 and 2003-04 respectively of the CIT(A), the Assessing Officers(AO. s) have filed the present appeals. The assessee has filed Cross-Objections(CO. s)for the above mentioned Assessment Years(AY. s. ). As the issues involved in the appeals and the CO. s. are common, so, we are .....

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7, u/s. 147 r. w. s. 143(3)of the Act, determining the income of the assessee at ₹ 2, 78, 27, 09, 380 /-. 2. Effective Ground of appeal, filed by the AO, is about interchange income(fees)received by the Head Office(HO)/foreign branches of the assessee. During the re-assessment proceedings, the AO observed that the assessee had paid an amount of ₹ 3. 16 Crores to Visa Card and ₹ 4. 75 Crores to Master Card, that there were two types of transactions with regard to the credit card .....

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vided the details of interchange received by it. The AO estimated the total inter change fees received by the non India branches/HO of the assessee on account of use of cards in India @1% of the interchange received. The AO made an addition of ₹ 50, 75, 990/- to the total income of the assessee. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him it was argued that re-opening of the assessment was bad in law, that the .....

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er AY. s. his predecessor had adjudicated the issue of ICMED in favour of the assessee, that there was no change in the facts of the case. Finally, he deleted the addition made by the AO. 4. Before us, the Departmental Representative(DR)supported the order of the FAA with regard to the issue of reassessment and relied upon the order of the AO for taxability of ICMED. The Authorised Representative(AR)stated that the issue is covered in favour of the assessee by the decision of the Tribunal delive .....

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335), Maharashtra Sugar Mills Ltd. (263ITR180), Kelvintaor India Ltd. (320ITR561), Govind Chaudhary & Sons (109 ITR370). 5. We have heard the rival submissions and perused the material before us. We find that in the matter of Standard Chartered Grindlays Bank Ltd. (supra), the issue of taxability of commission with regard to Credit Cards was deliberated upon and decided by the Tribunal. We would like to re-produce the relevant portion of the order that deals with the facts as well as the rea .....

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k on international credit cards issued by them where the transactions were completed in India by the card holders and the cards were honoured by the branches of the assessee bank or branches of any other bank in India. The AO was of the view that whatever income arose in or from India to any foreign branch of the assessee is also taxable in India. The assessee could not furnish any details; at the same time it did not deny that no income arose from the transaction in India on credit cards issued .....

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IT Act all incomes accruing or arising directly or indirectly through or from any business connection in India or through or from any source of income in India can be taxed. As per s. 9(1)(v)(c), income can be deemed to have accrued in India only if payment is made for the debt that has been incurred in India by a non-resident which will not be the case here since the issuing bank which provides debt is outside India being a foreign branch. As per art. 7 of Indo-UK DTAA, income that can be broug .....

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dia from transaction in India by using credit cards of foreign branches should be taxed in India. This income can only be the income received by the Indian branch and such commission income being already included as an acquiring bank. The income to the foreign branch from the credit given to its card holders outside India cannot be taxed in the hands of the Indian branch since it is not arising in India and also it cannot be attributed to the assets and activities of the Indian branch as is requ .....

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chant shipments do not incur any debt. They merely receive charges for the goods sold or services rendered. However, the charges are received by the foreign branch for providing credit to their card holders outside India. The amount payable by the card holders who have acquired the credit card from branches outside India incurs the debt outside India. Therefore, the fees in respect of such transaction are not taxable in India. We, therefore, uphold the deletion of addition of ₹ 10 crores. .....

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u/s. 147 of the Act. We find that in the case under consideration the notice for re-opening was issued without the approval of the competent Authority. Therefore, we hold that the assessment order passed by the AO was invalid. CO. filed by the assessee is allowed. ITA/3689/Mum/09-AY. 2001-02, ITA/2358/Mum/14AY. 2003-04& CO. /245/Mum/2009, AY. 2001-02, CO. /129/Mum/2015 AY. 2003-04: 7. Grounds of appeal filed by the AO. s. and grounds of CO filed by the assessee for the above mentioned two AY .....

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