TMI Blog2017 (3) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... ten back. The ld AR for the assessee made the submission that provision written back during the year represents amounts which were disallowed in earlier years and therefore should be allowed in the year of written back. In our view the contention raised by the assessee require consideration by assessing officer, therefore, this ground of appeal is remanded to the assessing officer to appreciate and consider the above fact and pass the order afresh in accordance with law. In the result this ground of appeal is allowed for statistical purpose. Entrance fees paid for Corporate Club membership - Held that:- The ground of appeal under consideration is squarely covered by the decision in case of CIT Vs United Glass MGF Ltd [2012 (9) TMI 914 - SUPREME COURT] wherein it was held that Club membership fees for employees incurred by the assessee is business expenses under section 37 of the Income Tax Act. Taxability of Capital Gain pertaining to DBS FII operation in India as business income - Held that:- As considered the contention of ld AR of the assessee that DRP vide order dated 16 September 2010 held that Capital Gain arising on the sale of securities by DBS FII is not taxable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising of the same order thus clubbed together, heard and are decided by common order to avoid the conflicting decision. The assessee has raised following grounds of appeal: (1) The Commissioner (Appeals) erred in upholding the disallowance of ₹ 1,87,79,288/- being interest paid to head office/overseas branches. (2) The Commissioner (Appeals) erred in upholding the disallowance of ₹ 28,503/- being interest paid to NOSTRO accounts. (3) The Commissioner (Appeals) erred in upholding the amount of ₹ 79,47,690/- claimed for provision of standard asset written back. (4) The Commissioner (Appeals) erred in upholding the 1/5th of fee paid for Corporate Club membership. (5) The Commissioner (Appeals) erred in upholding of taxing the Capital Gain of ₹ 10,69,688/-pertaining to DBS FII operations in India as business income in the hand of appellant. (6) (a) In alternative, the assessee raised plea that in the event of loss of ₹ 6,74,26,015/- for AY 2005-06 is disallowed, the same may be reduced while computing the total income for the Assessment Year 2006-07, being the year of reversal. (b) Further in alternative, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident Banking Company in India being a branch of DBS Bank Ltd Singapore. The assessee filed return of income for relevant assessment year on 31st October 2005 declaring total loss of ₹ 28,58,789/-. The assessment was completed on 23 December 2008 under section 143(3). The assessing officer while framing assessment order besides the other addition and disallowance, disallowed interest expenses of ₹ 1,87,79,288/- on account of head office/overseas branch, disallowed interest expenses of ₹ 28,503/-on account of NOSTRO accounts, disallowed notional loss of ₹ 6,74,26,015/- on revaluation of unmatured outstanding forward foreign exchange contracts, disallowed the head office expenses of ₹ 68,81,733/-, disallowed deduction under section 44C on head office expenses of ₹ 40,13,250/-, disallowed ₹ 7947690/- claim for provision for standard asset written back , allowed only ₹ 6 lakh out of 1/5 of ₹ 30 lakhs for entrance fees paid for corporate club membership, taxed the capital gain of ₹ 10,69,688 /- . On appeal before Commissioner (Appeals) the claim of loss on revaluation of unmatured forward exchange contract and head offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be taxed in the hands of the assessee bank in India under the domestic law as it was payment to self. There was no express provision in the relevant tax treaty which was contrary to the domestic law. Therefore, interest payment was not taxable in the hands of the bank and thus there was no question of any tax deducted at source. The issue is thus covered in favour of the assessee and we accordingly set aside the order of CIT(A) and allow the claim of expenditure on account of interest. 5. Considering the decision of Coordinate bench in assessee s own case we find that the grounds of appeal raised by assessee is fully covered in favour of assessee, thus respectfully following the decision of Tribunal the ground No,1 of appeal is allowed. 6. Ground No. 2 relates to disallowance of ₹ 28,503/- interest paid to NOSTRO accounts. The ld AR of the assessee argued that that during the previous year relevant to the assessment year under consideration assessee have paid interest on NOSTRO account overdrawn. The interest has been directly debited from the Overseas Bank i.e. Bank of New York USA and it pertains to the branch in India. The ld AR explained that NOSTRO account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the details of provision for standard asset for assessment year 2002-03 to 2005-06 were provided to the lower authorities and copies of all those evidences are placed on record. The assessee was consistently offering to tax the provisions made for standard assets and claiming as deduction the provisions return back. The provisions of written back during the year represents amounts which were disallowed in earlier assessment year and therefore should be allowable in the year of written back. The ld AR in support of submission relied upon the decision of Delhi High Court in case of Steel and General Mills Co Ltd(96 ITR 438) and Madhya Pradesh High Court in case of Nathabhai Desabhai (130 ITR 238). On the other hand the learned DR for the revenue supported the order of authorities below. 9. We have considered the rival contention of the parties and further gone through the orders of authorities below. The assessing officer disallowed the provisions for standard asset written back holding that assessee has failed to furnish the information as to what extent such income had been offered in the earlier years for which write back has been claimed. The learned Commissioner (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranch in India, thus, the income and by DBS in the capacity of an FII is not directly or indirectly attributable to the branch in India as per the provisions of India- Singapore Double Taxation Avoidance Agreement (DTAA) Capital Gains on FII investment is not chargeable to tax in India. The ld AR of the assessee further submitted that activities of the Indian Permanent Establishment (PE) are independent of the activities of FII. Hence, it is erroneous to conclude that because of the Indian branch is also holding investments and is showing business income, Gain on investment made by FII would also be taxable in the hands of Indian branch as business income . In support of the submission the ld AR of the assessee relied upon the registration certificate obtained by FII and Article 13 of India-Singapore DTAA. It was also argued that as per SEBI Regulations 1995, FIIs can only make investment in Indian securities and so cannot and business income. The RBI guidelines also provide that a FII should use their funds for purpose as enumerated in the SEBI Regulations. The ld AR of the assessee finally submits that the DRP vide order dated 16 September 2010 for assessment year 2006-07 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the records and considered matter carefully. The dispute is regarding allowability of loss on account of revaluation of foreign exchange contracts which had not matured during the year on the balance-sheet date. The AO had disallowed the loss as contingent in nature as contract had not matured and also held that it was notional. CIT(A ) has allowed the claim following some decision of tribunal. We find the issue is covered by the judgment of Hon ble Supreme Court in case of CIT versus Woodward Governor India Private Limited (312 ITR 224) in which it has been held that adjustments on account of foreign exchange fluctuation can be made on each balance-sheet in respect of any forward foreign exchange contract pending actual payment and any loss arising therefrom has to be allowed as an item of expenditure under section 37(1). We, therefore, see no infirmity in the order of CIT(A) in allowing the claim of loss of the assessee. The order of CIT(A) is, therefore, upheld on this issue. 16. Considering the decision of Tribunal in assessee s own case for AY 2003-04 and keeping in view the principle of consistency the ground No.6 of assessee s appeal is allowed and the ground No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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