TMI Blog2019 (4) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... uction u/s 44C - assessee had claimed that amount being expenditure incurred by the head office in the nature of general, administrative expenses - India U.K. Tax Treaty - HELD THAT:- Since the assessee has not contested the applicability of section 44C of the Act either before the Assessing Officer or before Commissioner (Appeals) and has raised it for the first time before us, in our considered opinion, the Department should be given a fair opportunity to examine assessee s claim with regard to applicability or otherwise of section 44C qua Article 26 of India U.K. Tax Treaty. Therefore, we consider it fair and reasonable to restore the issue to the Assessing Officer for examining assessee s claim with regard to the applicability of section 44C of the Act keeping in view the relevant provisions of India U.K. Tax Treaty and the judicial precedents dealing with the issue. - Ground is allowed for statistical purpose. Deduction u/s 44C - Revenue appeal - The Assessing Officer after examining the nature of expenses held that the aforesaid expenditure claimed by the assessee being part of Head Office expenses is eligible for deduction under section 44C , hence, cannot be claimed as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een granted consequential relief in assessment year 1999 2000 and 2005 06 respectively. In view of the aforesaid submissions of the learned Sr. Counsel for the assessee, grounds no.1 and 2 are dismissed as infructuous. 3. In ground no.3, the assessee has challenged the computation of income under section 115JA of the Income-tax Act, 1961 (for short the Act ). 4. Brief facts are, the assessee is a foreign company incorporated by the Royal Charter under the laws of England and Wales. It carries on business of banking, financial service and allied activities. The assessee company opened branches in India to carry on such activities with the permission of Reserve Bank of India (RBI) under the Banking Regulations Act, 1949. For the impugned assessment year, the assessee filed its return of income on 28th November 1997, declaring total income of ` 2,54,830. In the course of assessment proceeding when the Assessing Officer proposed to compute assessee s tax liabilities under section 115JA of the Act, it was contended by the assessee that as per Article 7 of India U.K. Double Taxation Avoidance Agreement (DTAA) only business profit directly attributable to the Indian branches can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115JA of the Act is applicable only to domestic companies as it speaks of increasing the income by the amount of dividend paid or proposed. Learned Sr. Counsel for the assessee submitted, section 115JB of the Act, which is pari material to section 115JA of the Act, an amendment was made by Finance Act, 2012, effective from 1st April 2013, making it mandatory for all companies including banking companies to prepare their Profit Loss Account as per Schedule VI of the Companies Act, 1956. He submitted, the said amendment would be applicable form assessment year 2012 13 onwards. Learned Sr. Counsel for the assessee submitted, no such corresponding amendment like section 115JB(2)(b) of the Act was made to the provisions of section 115JA of the Act. Thus, he submitted, the provisions of section 115JA of the Act cannot be applied to the assessee. In support of his contention, learned Sr. Counsel relied upon the following decisions: i) ICICI Lombard General Insurance Co. Ltd. v/s ACIT, 54 SOT 538 (Mum.); ii) UCO Bank v/s DCIT, 156 ITD 146 (Kol.); iii) State Bank of Hyderabad v/s DCIT, 58 SOT 278 (Hyd.); iv) DCIT v/s Royal Bank of Scotland, 76 taxmann.com 91; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 115JB will not be applicable. The other decisions cited by the learned Sr. Counsel for the assessee also support this view. Further, the Tribunal, Mumbai Bench, in MSEB (supra), has held that since the assessee is not constituted as a company under the Companies Act, 1956, the provisions of section 115JA of the Act cannot be applied. While doing so, the Bench further observed that since the assessee Corporation is not required to distribute any dividend, it cannot be considered to be a company under the Companies Act, 1956. The facts involved in assessee s case are more or less identical to the facts of MSEB (supra). In view of the aforesaid, we hold that the provisions of section 115JA of the Act are not applicable to the assessee. This ground is allowed. 9. In addition to the original grounds raised in the memorandum of appeal, the assessee has raised following additional grounds vide letter dated 9th May 2011, subsequent to the filing of the present appeal before the Tribunal. 1. The learned Joint Commissioner of Income-tax, Special Bench 27, Mumbai (JCIT) erred in restricting the claim of Head Office Expenditure of ₹ 28,87,23,772/- to ₹ 5,91,00,313 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted, since, the assessee is governed by India U.K. Tax Treaty, it is eligible to claim benefit under the said tax treaty. He submitted, as per Article 26 of the India U.K. Tax Treaty, the assessee cannot be subjected to the restriction imposed under section 44C of the Act since such restriction is not applicable to an Indian Enterprises. He submitted, non discrimination clause under Article 26 of India U.K. Tax Treaty will be applicable to the assessee, hence, the Head Office expenditure incurred cannot be curtailed by applying provisions of section 44C of the Act. In support of such contention, he relied upon the following decisions: i) Rajeev Sureshbhai Gajwani v/s ACIT, 129 ITD 145; ii) Standard Chartered Bank v/s IAC, 39 ITD 145; iii) Metchem Canada Inc. v/s DCIT, 284 itr (AT) 196; iv) Rolls Royce Indl. Power Ltd. v/s ACIT, 42 SOT 264; and v) Daimler Chrysler India, 29 SOT 502. 12. The learned Departmental Representative strongly opposing admission of the additional ground submitted, assessee having claimed deduction under section 44C of the Act and having not contested the issue either before the Assessing Officer or before the learned Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provisions of India U.K. Tax Treaty and the judicial precedents dealing with the issue. Needless to mention, the Assessing Officer must provide reasonable opportunity of being heard to the assessee. Ground is allowed for statistical purpose. 15. In the result, appeal is partly allowed. ITA no.9229/Mum./2004 Revenue s Appeal 16. In ground no.1, the Department has challenged the deletion of disallowance of expenses amounting to ` 24,85,49,931. 17. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction of expenditure incurred outside India amounted to ` 24,85,49,931 comprising of salaries of expatriate employees, direct expenditure attributable to Indian branches and NRI expenses. The Assessing Officer after examining the nature of expenses held that the aforesaid expenditure claimed by the assessee being part of Head Office expenses is eligible for deduction under section 44C of the Act, hence, cannot be claimed as deduction separately. Being aggrieved with the aforesaid decision of the Assessing Officer, assessee preferred appeal before the first appellate authority. 18. Learned Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the Department in assessment year 1985 86 and 1986 87 as well as by the Tribunal in subsequent assessment years. 22. Having considered rival submissions we find that the allowability of broken period interest is a recurring dispute between the parties since long. The Hon'ble Jurisdictional High Court while deciding Income Tax Reference no.87/1996, for the assessment year 1985 86 and 1986 87, vide order dated 16th July 2003, has decided the issue in favour of the assessee. Subsequently, the Tribunal has allowed assessee s claim while deciding appeals for the assessment years 1989 90 to 1995 96 which is evident from the appeal orders placed in the legal paper book. Facts being identical, respectfully following the decision of the Hon'ble Jurisdictional High Court and the Tribunal in assessee s own case in preceding assessment years, we uphold the decision of learned Commissioner (Appeals) by dismissing the ground raised. 23. In ground no.3, the Revenue has challenged the deletion of addition of ` 6,78,011, on account of Guest House expenses. 24. At the outset, learned Sr. Counsel for the assessee submitted that the issue has to be decided against the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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