TMI Blog2016 (5) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... being nonresident foreign company, the applicable tax rate as per the relevant Finance Act would be 40% plus surcharge. This action was upheld by the Learned CIT(A) in first appeal.This issue is covered against the assessee by the order of this tribunal in assessee’s own case for Asst Year 2004-05. Disallowance of offshore remuneration to the expatriate employees rendering services in Indian branches of the assessee - Held that:- Identical issue has been decided by the ITAT , Kolkata Bench in assessee’s own case pertaining to the Assessment Years 2002-03 and 2003-04 respectively, wherein the ITAT by following earlier order of the Tribunal has allowed the claim of the assessee subject to verification whether the expenditure was included for the purposes of section 44C. In this view of the matter, by following the earlier orders of the Tribunal (supra), we remit this issue back to the file of the Assessing Officer to allow the claim of the assessee subject to verification whether the expenditure was included for the purposes of section 44C of the Act. Deduction on interest payments made by the assessee (Indian Branch) to its Head Office - Held that:- We find that the Hon’ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 for Asst Year 2006-07 ; Appeal No. Nil dated 10-03-2011 for Asst Year 2007-08 and Appeal No. Nil dated 14-09-2012 for Asst Year 2008-09 against the orders of assessment framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. As most of the issues involved are identical in nature , they are taken up together and disposed off by this common order for the sake of convenience. 3. RATE OF TAX APPLICABLE TO THE BANK GROUND NO. 1 IN ASST YEAR 2005-06 GROUND NO. 1 IN ASST YEAR 2006-07 GROUND NO. 1 IN ASST YEAR 2007-08 GROUND NO. 1 IN ASST YEAR 2008-09 The facts in assessment year 2005-06 are stated herein and they remain the same for other assessment years also except change in figures and tax rates. The assesee bank is incorporated in Netherlands and is engaged in banking operations across the globe through various branches worldwide, including India. In India, the assessee (branches / permanent establishment) is registered as a Scheduled Bank in terms of Schedule II of the Reserve Bank of India Act, 1034. Article 7 of the Double Taxation Avoidance Agreement (DTAA) provides for taxation in India of a foreign enterprise in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an branch and thus are specific expenses incurred for the Indian operations. Article 7(2) and 7(3) of India Netherlands DTAA specify the manner in which the profits of the PE are to be computed and thereby provide that expenses which are incurred for the purpose of PE are to be computed and thereby provide that expenses which are incurred for the purpose of PE whether in India or elsewhere are to be allowed as a deduction in determining profits of the PE. It was further stated that this issue has been decided in favour of the assessee by this tribunal from Asst Years 1992-93 to 1996-97. The Learned CITA however found that this issue has been held against assessee for the Asst Years 1999-2000 to 2002-03 2004-05 and accordingly upheld the action of the Learned AO. Aggrieved, the assessee is in appeal before us. 4.1. Before us, the Learned AR stated that this issue is covered by the order of this tribunal in assessee s own case for Asst Year 2004-05 in ITA No. 1762/Kol/2008 dated 30.6.2010. We have gone through the said tribunal order, wherein it was held as under:- 6. Both the learned repesentatives of the parties agreed that identical issue has been decided by the ITAT , Ko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s own case reported in (2012) 343 ITR 81 (Cal) dated 23.12.2010 . It was stated that the Special Leave Petition filed by the revenue against this order has been dismissed vide order dated 3.8.2012. The Learned AR further stated that no disallowance was made by the Learned AO from Asst Year 2009-10 onwards. In respect of disallowance made in Asst Year 2008-09, the same was deleted by the Hon ble Dispute Resolution Panel (DRP). In response to this, the Learned DR fairly conceded that the issue is covered by the decision of the Hon ble Calcutta High Court in assessee s own case reported supra. 5.2. We have heard the rival submissions. We find that the issue is squarely covered by the decision of the Hon ble Calcuta High Court (supra) wherein the facts and questions raised before the Hon ble Calcutta High Court and the decision rendered thereon are as below:- Under article 5(2) of the Double Taxation Avoidance Agreement between India and the Netherlands, defining permanent establishment, a branch is to be taken as a permanent establishment and if it is further read with article 7, this permanent establishment or branch is to be treated as a separate unit. Article 7(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t source and remitted to the account of the central government on these interest payments, even though the Hon ble Calcutta High Court in assessee s own case reported in (2012) 343 ITR 81 (Cal) dated 23.12.2010 had held that no tax need to be deducted at source on the said payments. The Learned AR also prayed for admission of the additional ground raised for the Asst Years 2005-06 to 2007-08 as otherwise the assessee would lose its legitimate cash flow and government would be unjustly enriched. The Learned DR stated that no tax has been deducted by the assessee and hence the question of granting refund of TDS does not arise. In response to this, the Learned AR argued that let the fact as to whether the assessee branch had indeed deducted the TDS and remitted the same could be verified by the Learned AO and on this count, he prayed for set aside to the file of the Learned AO. He also stated that this issue has been held in favour of the assessee by the Hon ble DRP for the Asst Years 2009-10 to 2011-12 by allowing the relief for TDS claim. 6.1. We have heard the rival submissions. We find that the Hon ble Calcutta High Court had held in asesssee s own case reported in 343 ITR 81 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned AO classified ATM machines as other office machines and applied the depreciation rate of 25% being the rate of depreciation on plant and machinery . The Learned AO further observed that similar disallowance was made in Asst Years 2002-03 to 2004-05. On first appeal, the Learned CIT(A) upheld the action of the Learned AO as the tribunal in assesse s own case for Asst Year 2004-05 had held this issue against the assessee. Aggrieved, the assessee is in appeal before us. 8.1. The Learned AR stated that though this issue has been decided against the assessee in Asst Year 2004-05 by this tribunal, he argued that the same issue has been held in favour of the assessee by the following decisions:- Decision of Delhi Tribunal in the case of DCIT vs Global Trust Bank Limited in ITA No. 474/Del/2009 dated 20.4.2011 Decision of Hon ble Bombay High Court in the case of CIT vs Saraswat Infotech Ltd in ITA NO. 1243 of 2012 dated 15.1.2013 Decision of Mumbai Tribunal in the case of Saraswat Infotech Ltd vs CIT in ITA No. 3606/Mum/2011 dated 14.3.2012 Hence he prayed that the decision of Bombay High Court be followed which is also binding on this tribunal. In re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or related to it. The Special Bench accordingly held that routers and switches are also to be included in the block of computers entitled to depreciation at the rate of 60%. We find that the ATM machine is doing the logical, arithmetic and memory functions by manipulations of electronic magnetic or optical impulses giving debit or credit cash and thereafter dispenses the case and gives a printed receipt and hence it could be safely concluded that computer is an integral part of ATM machine and on the basis of the information processed by the computer in the ATM machine only, the mechanical functions of the dispensation of cash or deposit of cash is done. 8.2.1. We find that the issue is dealt with by the co-ordinate bench of Delhi Tribunal in the case of DCIT vs Global Trust Bank Ltd in ITA No. 474/Del/2009 dated 20.4.2011 , wherein it was held that :- 7. ATM is the computerized telecommunication device that allows bank s customers to access the bank at places other than the normal bank without having to take the trouble to go to the bank in person and collect the cash as is done under the conventional method of withdrawing money from the bank. The ATM machines are comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ATM cannot function without the help of computer and would be a part of the computer used in the banking industry. Reliance was placed by the Tribual upon the decision of the Delhi Bench of Tribunal in the matter of DCIT vs Global Trust Bank (ITA No. 474/D/09) wherein it has been held that ATM was a computer equipment and depreciation @ 60% was allowed. Held that We note that the Tribunal has arrived at a finding of fact on all the three questions. The revenue has not been able to show that the above finding of fact is perverse. Thus, we do not see any reason to entertain question (i), (ii) and (iii) above. Accordingly, the appeal is dismissed with no order as to costs. 8.2.3. In respect of the case relied on by the Learned DR on the decision rendered by this tribunal in assessee s own case for Asst Year 2004-05, we find that this decision was rendered on 30.6.2010 and thereafter much water has flown on the impugned issue by the decisions of Delhi and Mumbai Tribunal and the decision of Bombay High Court. Respectfully following the aforesaid judicial precedents, we have no hesitation in directing the Learned AO to allow depreciation at the rate of 60% on ATMs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP vide its order dated 23.12.2013 on appreciating the said judgement of Hon ble Apex Court had directed the Learned AO to delete the disallowance on this account for Asst Year 2009-10 . He further stated that the Learned AO himself had not made any disallowance on this issue from Asst Year 2010-11 onwards presumably appreciating the judgement of the Hon ble Apex Court (supra). In response to this, the Learned DR stated that the assessee before the Hon ble Apex Court was a leasing company, whereas the assessee before us is a banking company and argued that the said decision may not be made applicable to the case before us. He further argued that the issue before the apex court was who is the legal owner of the asset . According to him, the apex court did not render any judgement on whether lease rental is a capital or revenue expenditure. In Defence, the Learned AR argued that there is absolutely no difference whether the assessee is a banking company or a leasing company. He pleaded that the ratio decidendi of supreme court (supra) would be squarely applicable to the facts before us. He referred to the relevant clauses of the lease deed wherein the property reverts back to less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in books to comply with AS 19 issued by ICAI is of no relevance. We find that Circular No. 2/2001 dated 9.2.2001 stipulates that in a lease transaction, the owner of the assets is entitled to depreciation. In the instant case, the lessor being the owner had the right to claim depreciation and the assessee has not claimed any depreciation on the same for tax purposes. The assessee had claimed the entire lease rent as deductible expenditure. It is well settled that the CBDT Circulars are binding on the revenue authorities. 9.2.1. It is also not in dispute that the Hon ble DRP vide its order dated 23.12.2013 on appreciating the said judgement of Hon ble Apex Court had directed the Learned AO to delete the disallowance on this account for Asst Year 2009-10 . It is also not in dispute that the Learned AO himself had not made any disallowance on this issue from Asst Year 2010-11 onwards. 9.2.2. We find that the issue is squarely covered by the decision of the Hon ble Supreme Court in the case of I.C.D.S. Ltd vs CIT reported in (2013) 350 ITR 527 (SC) wherein it was held that :- Held, affirming the decision of the Tribunal, (i) that the assessee was a leasing company whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the allowability of depreciation on leased assets from the angle of the lessor, the principle laid down could be made very much applicable to the facts of the instant case for allowability of lease rentals in the hands of the assessee (lessee). 9.2.3. We also find that the issue is squarely covered by the decision of the Hon ble Rajasthan High Court (Jaipur Bench) in the case of Rajshree Roadways vs Union of India Ors reported in (2003) 263 ITR 206 (Raj) wherein it was held that :- Held, that under the agreement there was a clause that after completion of lease period, if one per cent. of the total consideration of the trucks was paid, the lessee would be the owner of those trucks. However, the agreement dealt with the ownership of the trucks under the agreement. There was a clear provision that the said machinery shall at all times remain sole and exclusive property of the lessor and the lessee shall have no right, title or interest thereon. It further that irrecoverable undertaking of the lessee that at no time during the currency of the lease agreement, which shall be non-cancellable, would the lessee attempt to capitalise the leased assets in its balance-sheet. As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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