TMI Blog2017 (12) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... HUDCO bonds of ₹ 2 crores. In the result ground No. 1 of the appeal is allowed. Disallowance of interest paid on borrowings from Head Office - Held that:- Explanation to section 9(1)(v) has been inserted w.e.f. 01.04.2015, therefore, the situation arises is that the assessee a branch of a foreign bank of non treaty jurisdiction who has paid interest to its foreign head office is allowable as deduction or not. Prior to 01.04.2015 if interest is paid by the assessee to its Taiwan Head Office it is payment to self. In para no 50 of the decision of the Sumitomo Mitusi banking cop V DDIT (2012 (4) TMI 80 - ITAT MUMBAI) while dealing with domestic tax law this issues has been discussed that in domestic tax law there is no question of granting deduction of interest paid by the assessee to its HO , because it is payment to self. The issue of any applicability of any DTAA is not before us, therefore various case laws cited before us are not relevant as they deal with various DTAAs. In the result we do not find any infirmity in the orders of lower authorities in denying deduction of interest paid to HO by the assessee. Denying the claim of the assessee u/s 44C - head office expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) s in upholding the action of the Ld. A.O. in disallowing a sum..of ₹ 16,61.289/- being expenses incurred by the Head Office and attributable to the branch (appellant) u/s 44C of the I.T. Act, 1961 is illegal arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 4) The action of the Ld. CIT(A) in confirming the action of the Ld. A.O. in adding the provision for bad and doubtful debts for computation of book profits u/s 115JB is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 5) The above grounds of Appeal are without prejudice to each other. 3. Brief facts of the case are that the assessee, a non-resident banking company, filed its return of income at a loss of ₹ 114915148/- on 10.11.2006. The assessment u/s 143(3) was made on 26.12.2008 where the income computed in the normal method was determined at Rs. (-) 104433143/- and u/s 115JB of the Act book profit determined at ₹ 18031766/-. Mainly the ld Assessing Officer disallowed expenses of ₹ 364264/- incurred in earning tax free interest income from investment of ₹ 2 cr. in HUDCO bonds. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act. 7. The ld Departmental Representative vehemently stated that the ld Assessing Officer has disallowed the above expenses which are incurred for earning exempt income i.e. u/s 14A of the Act. He further relied upon the decision of lower authorities. He further referred to the decision of the coordinate bench in assessee s own case for Assessment Year 2003-04 to 2005-06, wherein the issue is decided in para No. 17 against the assessee vide order dated 03.07.2017. In view of this, he submitted that the issue is required to be decided against the assessee. 8. We have carefully considered the rival contentions and also perused the orders of the coordinate bench in assessee s own case for Assessment Year 2003-04 to 2005-06 in ITA No. 212-214/Del/2016, wherein, it has been held that even in the remand proceedings the assessee failed to furnish any corroborative evidence to show how investment were made by it and through which funds. Therefore, it was held that in absence of discharge of onus the expenditure had to be disallowed. Therefore, the disallowance of ₹ 752494/- were disallowed in that year. For this year, the assessee has relied on the decision of Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ABN Amro Bank Vs. CIT ( ITA No. 458/2001 dated 23.12.2010) . He specifically referred to page No. 2 of that decision where the issue before the Hon ble Court was that whether interest payment made by an Indian Branch of the assessee to its Head office abroad is to be allowed as deduction in computing the profits of the appellant s branch in India. 11. The ld Departmental Representative vehemently submitted that the above decision does not apply to the facts of the case as, assessee has paid interest to its head office in Taiwan with which there is no Double Taxation Avoidance Agreement. Therefore, according to him, the provisions of double taxation avoidance are absent and only domestic tax law is to be seen. He vehemently referred to the provisions of section 9(1)(v) of the Act where it is stated that in case of an nonresident banking company any interest paid by the permanent establishment in India of such nonresident to the head office shall be deemed to accrue or arise in India and shall be chargeable to tax in addition to any income attributable to the permanent establishment in India. He therefore, submitted that above expenditure has rightly been added to the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and further, assessee has also not submitted the copy of debit note of the expenses. On appeal before the ld CIT(A) assessee remained unsuccessful. Therefore, assessee is in appeal on this ground. 14. The ld Authorised Representative submitted that complete details was submitted before the ld Assessing Officer and he referred to para No. 7 of the assessment order to demonstrate that various expenditure have been incurred by the assessee. He further stated that the ld CIT(A) has ignored the submission of the assessee that above expenditure has been attributed by the head office. He stated that complete break up was provided to the ld Assessing Officer as well as ld CIT(A). 15. The ld Departmental Representative submitted that no evidence has been submitted by the assessee. He referred to page No. 271 of the paper book which is stated to be the details submitted before the ld Assessing Officer. He stated that the above listing is merely the indirect allocation details provided which cannot be said to be the details of expenditure in term of section 44C of the Act. He further stated that provisions of section 44C provides that such expenditure shall be attributable to the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of provision for bad and doubtful debts of ₹ 21769446/- to the book profit u/s 115JB of the Act. 18. The ld Assessing Officer has made the addition of the above sum to the book profit which was also confirmed by the ld CIT (A) relying on the decision of Hon'ble Madras High Court. 19. The ld AR reiterated the same submission as were raised before the lower authorities. 20. The ld DR stated that this issue is squarely covered against the assessee by the decision of the Hon'ble Delhi High Court dated 30.07.2013, wherein, vide para No. 10 the Hon'ble High Court has held that, in view of the amendment there was no scope for argument or debate that the provisions of bad and doubtful debt has to be added to the profits in terms of clause (i) inserted by the Finance (No. 2) Act 2009 with retrospective effect from 01.04.2001. 21. We have carefully considered the rival contentions and perused the orders of the lower authorities. The clause (i) to the explanation to section 115JB has been inserted with retrospective effect from 01.04.2001 that the amount/ amounts set aside as provision for diminution in the value of any asset is required to be added to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
