9911796707
TMI Blog2017 (10) TMI 1467X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the appeals for the earlier years. ITA/1182/Mum/2015: 3.The solitary Ground of appeal, raised by the assessee is about not accepting its claim about rate of taxes. The assessee had objected to the rate of tax applicable to domestic companies and co-operative banks were also applicable to it in accordance with the provisions of Article-26 (non discrimination) of Indo French Tax Treaty. We find that while deciding the appeal for the AY 1996-97 (ITA/2760/Mum/2000 dt.28/8/2013) the Tribunal has decided the issue as under : "4.The third issue is relating to tax rate. The assessee has submitted that the tax levied at higher rate in the case of foreign companies is discriminatory in nature and, accordingly, relief has been sought on this account. The claim has been rejected by the authorities below. 4.1 We have heard both the parties in the matter. We find that this issue has already been examined by the Tribunal in the case of M/s BNP Paribas, decided in ITA Nos. 4601 & 4602/ M/ 2004,vide order dated 1-7-2013. In that case also the tax rate applied in the case of the assessee, a foreign company was 48% compared to 38% applied in case of domestic companies. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ches. 4. The assessee, in the present case is a commercial bank having its Head Office in France. It carries on the normal banking activities Including financing of foreign trade and foreign exchange transactions in India through its eight branches situated at Mumbai, New Delhi, Kolkata, Bangalore, Pune, Ahmedabad, Chennai and Hyderabad. During the previous year relevant to A.Y. 2002-03, the Indian Branches of the assessee bank have paid total interest of Rs. 1,48,30,613/- to its Head office and overseas branches and the same was claimed as a deduction while determining the profits attributable to Indian Branches, which was chargeable to tax in India. The said interest was treated by the A.O. as income of the assessee's Head office/overseas branches chargeable to tax in India. This decision of the A.O. was challenged by the assessee in the appeal filed before the Ld. CIT(A) and the contention raised before the Ld. ClT (A) in this regard was that the Head office of the assessee bank as well as all its branches being the same person and one taxable entity as per the Indian Incometax Act, interest paid by Indian Braches to head office and other overseas Branches was payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutes its PE in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to, the PE which is taxable in India as per the provisions of art. 7(2) and 7(3) of the Indo-Japanese Treaty read with, para 8 of the Protocol whish are more beneficial to the assessee, The said interest, however, cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to' self which cannot give rise to income that is taxable in India as per the domestic law, Even otherwise, there is no express provision contained in the relevant tax treaty which is contrary to the domestic law in India on this issue, This position applicable in the case' of interest paid by Indian branch of a foreign bank to its head office equally holds good for the payment of interest made by the Indian branch of a foreign bank to its branch offices abroad as the same stands on the same footing as the payment of interest made to the head office, At the time of hearing before us, the learned representatives of both the sides have also not made any separate submissions on this aspect of the matter specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Branch offices to the assessee , amounting to Rs. 4,19,26,420/-.It was brought to our notice that identical issue was decided by the Tribunal in AY 2005-06(ITA/339/Mum/2010 ;16/07/2014) which reads as under :- 4. In ground No.2, the assessee is aggrieved by the action of the lower authorities for taxing the interest paid by the Indian branch of the assessee to its head office and overseas branches amounting to Rs. 3,09,48,018/-, applying the provisions of Article 12 (Interest of IndiaFrance Tax Treaty). In this regard, learned AR placed on record the order of the Tribunal in assessee's own case for the AYs. 2001-02 to 2002-03. In AY 2001-02, the Tribunal has dealt with the issue at para 13, 14, 15 & 16 at page 5 and decided the issue in favour of the assessee. Similarly the Tribunal in assessee's own case in the AY 2002-03 & 2003-04 decided the issue at page 2, 3 & 6 at para 3,4,5, & 13. Learned AR also placed reliance on the decision of ITAT Special Bench in the case of Sumitomo Mitsui Banking Corporation Vs. DDIT(IT), reported in (2012) 145 TTJ (Mumbai)(SB) 649, wherein exactly similar issue has been dealt at para 88 page 700 & 701. 4.1 On the other hand, it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the transactions between the closed group of members only as a class is exempt but income arising from operations with third parties was outside of the mutuality, rupturing the 'privity of mutuality', consequently, violating the one to one identity between the contributors and participators. (iv) The transactions resulting in income are not in nature akin to business, or tainted with commerciality. (v) It cannot be said that incorporation which brings into being a legal entity separate from its constituent members is to be disregarded always and that the legal entity can never make a profit out of its own members ... " The principle that no one can make a profit out of himself is true enough but may in its application easily lead to confusion, At what point, does the relationship of mutuality end and that of trading begin" is a difficult and vexed question. As per learned DR the next test of mutuality to apply is that all transactions must be within the members of mutual group. The assessee being in banking business is dealing with third parties as well as its own branches to earn its business income. The money advanced by BO to HO or HO to BO are during the course and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BO and HO only when the ultimate business profit is sum total of all the activities carried by the BO or HO in its jurisdiction of operation of banking business, The principle of trading with one self has to be seen w. r. t. whole activity comprising of the business and not by disintegrating various integrated operations of a common business. 4.5 We have carefully considered the arguments of rival parties, gone through the orders of authorities below as well as orders of the Tribunal in assessee's own case and also the order of the Special Bench in the case of Sumitomo Mitsui Banking Corporation (supra). Decision of the Hon'ble Supreme Court in the case of Bangalore Club (supra) is distinguishable on facts where interest income was earned by assessee club from third party i.e. banks with which deposit was made. However, in the instant case HO has given funds to its branch i.e. assessee. Following were the observations at para of Special Bench 88 :- XXXXX 4.6 In view of the above, since the issue under consideration is covered not only by the order of the Tribunal in assessee's own case for the AY 2001-02 to 2003-04 but also by the order of the ITAT's Special Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
