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The Bank of Tokyo-Mitsubishi, UFJ Ltd. (Earlier known as The Bank of Tokyo Mitsubishi Ltd.) Versus DDIT Circle-1 (1) , New Delhi And Vice-Versa

2017 (9) TMI 1154 - ITAT DELHI

Salaries paid by the Head Office overseas in foreign currency to the expatriates working in India - Permanent establishment (‘PE’) of the Appellant in India - Held that:- This issue is covered in favour of assessee by the Delhi High Court order in own case [2016 (4) TMI 817 - DELHI HIGH COURT] relying on decision of ABN Amro Bank(2010 (12) TMI 340 - CALCUTTA HIGH COURT ). - Applicability of Section 115JB - Held that:- This issue is covered in favour of assessee by the Delhi High Court order .....

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eof. Consequently, the question of applicability of Section 115JB did not arise. As rightly pointed out till the insertion of Section 115JB, banking companies were required to prepare their accounts in terms of special acts that they were governed by, and therefore there were no computation provisions as regards such banking companies. The change brought out by Section 115JB was therefore not retrospective. - Applicability of rate of tax - Held that:- We find that this issue is covered agai .....

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Appellant : Sh. Percy Pardiwalla, Sr. Counsel, Nishant Thakur, Surender Bisht For The Respondent : Sh. T. M. Shivkumar, Int. Taxation ORDER PER BENCH These appeals are filed by the assessee as well as the Revenue against the order dated 31/3/2014 passed by CIT(A)-XXV, New Delhi for Assessment Year 2005-06. 2. The grounds of appeal are as under:- 1 Disallowance of salary paid overseas to expatriates of the Appellant working in India by the Head Office and the Indian taxes paid thereon by the Hea .....

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he Hon ble CIT(A) is erroneous in law as well as on facts on the following counts: a) That the Hon ble CIT(A) has failed to appreciate that the salary has been paid to the expatriates who are stationed in India and are working exclusively for business operations of the Indian PE of the Appellant and is thus an allowable expenditure as per Article 7(3) of DTAA; b) That the Hon ble CIT(A) has erred in observing that the nature of expense is covered under section 44C of the Act, even though, the sa .....

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voking the provisions of 115JB of the Act in the assessment order, and accordingly the order of the Hon ble CIT(A) is bad in law on the following counts: a) The Hon ble CIT(A) has erred in not appreciating the contention of the Appellant that being a banking company, the provisions of section 115JB of the Act is not applicable to the Appellant for the subject year. b) The Hon ble CIT(A) has erred in not appreciating the contention of the Appellant that operations of its Indian PE are taxable in .....

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the reduction for write back of provision for bad and doubtful debts and depreciation on investment while computing the book profits under section 115JB of the Act on the following counts: a) The Hon ble CIT(A) has erred in not adjudicating the issue of treatment of write back of provision for bad and doubtful debts and deprecation on investment while computing book profits under section 115JB of the Act. b) The Hon ble CIT(A) has erred in not allowing the reduction for write back of provision .....

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missing the ground of the appellant on the following counts: a) The Hon ble CIT(A) has erred in not allowing the deduction for Japanese Foodstuff by ignoring the fact that such expenditure constitutes as business expenditure for the Appellant. b) The Hon ble CIT(A) dismissed the ground without appreciating the fact that the same has been allowed in favour of the Appellant by the Hon ble CIT(A) himself in the order passed for Assessment Year 2002-2003 by following the judgment of Hon ble ITAT in .....

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may kindly be issued in this regard. 6 General a) Each of the above ground is independent and without prejudice to the other grounds of appeal preferred by the Appellant. b) The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable your Honour to decide this appeal according to law. I.T.A. No. 3755/DEL/2014 1. On the facts and in the circumstances of the case and law, Ld. C .....

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eived on account of interest from Indian branches of ₹ 2,39,12,393/-, when it was clearly recorded by the AO that not only the PE of the assessee bank is separate entity for the purpose of taxation but the assessee has also claimed the deduction of the same in the Income tax return. The interest paid by this PE to the Head Office is liable to tax in India. 3. On the facts and in the circumstances of the case and law, Ld. CIT(A) has erred in allowing the deduction on account of Head Office .....

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through its four branches at Mumbai, New Delhi and Chennai during the relevant Assessment Year. These branches of the assessee in India constituted Permanent Establishment (PE in short) of the assessee in India within the meaning of Article 5 of the DTAA. Therefore, the assessee claimed that it was liable to tax in India on the profit earned by the PE in accordance with the provisions of Article 7 of DTAA. During the A.Y. 2005-06, the assessee filed its original return of income u/s 139(1) of th .....

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New Delhi who continued the proceedings from the stage it was left by the erstwhile AO. While scrutiny proceedings on the basis of the original return were in progress a revised return of income u/s 139(5) was filed by the assessee on 30.03.2007 which was taken up for continuing scrutiny proceedings afresh on the basis of the revised return of income. The Assessing Officer conducting the scrutiny proceedings issued notices u/s 143(2) of the Act along with questionnaire requisitioning certain de .....

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₹ 68,23,72,860/- as against ₹ 45,00,99,039/- disclosed by the assessee. Tax @ 41.82% was levied resulting in demand of ₹ 29,07,13,730/-. Simultaneously the income of the assessee was also computed u/s 115JB determining the total income of the assessee at ₹ 58,82,64,841/- on which tax @ 7.81425% amounting to ₹ 4,61,27,317/- was charged. Since the tax payable under the normal provisions of the Income Tax Act was more than the tax payable on the MAT the tax liability .....

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ovisions while computing book profits under section 115JB for ₹ 8,34,30,738 vi. Interest received by HO/Overseas Branches from Indian PE for ₹ 2,39,12,393 vii. Interest received by Indian PE from HO/Overseas Branches for ₹ 48,67,806 viii. Non-applicability of MAT ix. Provision for doubtful debts and depreciation on investment while computing book profits under section 115JB for ₹ 34,00,710 and 9,26,88,687 x. Deduction of Head Office Expenditure as per section 44C of the A .....

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d Bank Guarantee, Salary paid to expatriate, disallowance of write back of income tax authorities while computing book profits under Section 115JB, expenditure on Japanese Food stuff as well as applicable rate of tax. The CIT(A) allowed the issues relating to disallowance of provision written back for wealth tax while computing book profits under Section 115JB, interest paid to HO/Overseas Branches by Indian PE and received by Indian PE from HO/Overseas branches and allowance of deduction under .....

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ecision dated 08.04.2016. Ground No. 3 and 4 are not pressed as the CIT(A) in rectification order dated 26.10.2015 granted the issue in favour of the assessee. For Ground No. 5 relating to applicable rate of tax, the said issue is covered against the assessee by the ITAT, Delhi vide order dated 19.09.2014 for A.Y. 2007-08 & 2008-09 in assessee s own case. 7. In respect of Revenue s appeal, for Ground No. 1 relating to addition of provision for wealth tax while computing book profit under sec .....

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arding deduction for interest paid by the Indian branches to HO/other overseas branches and Taxability of interest received by HO/other overseas branches from the Indian branches is covered in favour of the assessee by the Hon ble Delhi High Court vide order dated 08.04.2016. As relates to Ground No. 3 regarding allowance of deduction under Section 44C of the Act, the Ld. AR submitted that the same is covered in favour of the assessee by DRP directions for AY 2007-08. 8. The Ld. DR relied upon t .....

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nate bench at Kolkata in ABN Amro Bank v. JCIT (2005)97 ITD 1(ITAT (Kol). Further the ITAT followed the decision of the Bombay High Court in CIT v. Emirates Commercial Bank Ltd. (2003) 262 ITR 55 (Bom.) where the Bombay High Court approved the view taken by the ITAT. The ITAT agreed that the expenses have been incurred wholly and exclusively by the Indian branch and therefore no part of these expenses can be allocated to any other branch and the HO and that there was no dispute with regard to th .....

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1544 of 2006). 11. In that view of the matter, this Court declines to frame a question on this issue. The facts of the present appeal are also identical therefore, Ground No. 1 is allowed. 9.2 As relates to Ground No. 2 of the Assessee s appeal, the Hon ble Delhi High Court in Assessee s own case (ITA No. 604/2015 order dated 08.04.2016 held that Applicability of Section 115JB 20. The ITAT has after an elaborate discussion had come to the conclusion that the Assessee s claim for lower tax will h .....

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l the insertion of Section 115JB, banking companies were required to prepare their accounts in terms of special acts that they were governed by, and therefore there were no computation provisions as regards such banking companies. The change brought out by Section 115JB was therefore not retrospective. 21. The reasoning and the conclusion of the ITAT on this issue appears to suffer from no legal infirmity. Consequently, the Court declines to frame any question on this issue as well. The facts of .....

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n case. The ITAT held as under: 87. Ground No. 9 is regarding applicability of rate of tax. The assessee s grievance is that ld. DRP and AO did not adjudicate this under the provisions of Article 24 of the DTAA. The contention is that the applicable rate of tax on the income of the assessee attributable to its PE in India cannot exceed the applicable rate of tax (as per the Finance Act for the assessment year) in the case of domestic companies. 87.1 Having heard both the parties, we find that th .....

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refore, Ground No. 5 of the assessee s appeal is dismissed. 9.5 As relates to Revenue s appeal, since ground No. 2 of the assessee s appeal is allowed, the same becomes academic only and hence Ground No. 1 of the Revenue s appeal is dismissed. 9.6 As relates to Ground No. 2 of the Revenue s appeal, the same is covered in favour of assessee by the Hon ble Delhi High Court vide order dated 8.04.2016 wherein it is held as under: 12. This issue appears to be covered against the revenue by the decisi .....

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