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TMI Blog2019 (1) TMI 1831X X X X Extracts X X X X X X X X Extracts X X X X ..... y', when such payment is based and determined on the usage of space/capacity and other keys towards usage of ICT infrastructure and further holding that the payment of Data Processing Cost is reimbursement of expenses and the provisions of Tax Deducted at Source (TDS) are not applicable and consequently no disallowance is called for under the provisions of Section 40(a)(ia) of the Act. 2.1. The facts in brief are that - assessee paid Data Processing Cost of Rs. 88,26,181/- to its HO, which according to the AO is a copy right protected intellectual property, known as ICT Infrastructure, which is IT Hardware imbedded with software and accordingly, the AO came to the conclusion that the it is a Royalty as per Clause-(iii), Explanation-2 to Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, the facts in brief are that assessee-branch in India during the year has paid interest of Rs. 11,94,79,875/- to its HO which is not taxable in the hand of H.O. under the Income Tax Act and therefore not offered to tax as income of the H.O. The AO disallowed the same on the ground that the decision of the ITAT in the case of Mitsui Bank [35 TTJ 426] and ITAT, Calcutta in the case of ABN AMRO Bank [97 ITD 89] and also that the DRP has disallowed the same in AYs. 2006-07 & 2007-08 though the credit of TDS deducted of Rs. 1,21,04,206/- u/s. 195 of the Act was allowed which was deducted in terms of Circular No. 740, dt. 17-04-1996 @ 10% under Article 11(2) of Tax Treaty between India and Belgium. 3.1. At the outset, Ld. Counsel for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, we dismiss the ground raised by Revenue. 4. The issue raised in Ground No. 3 is against deletion of disallowance u/s. 14A of the Act. 4.1. The facts in brief are that the assessee during the course of assessment proceedings made disallowance u/s. 14A r.w. Rule 8D to the tune of Rs. 2,15,61,865/-, comprising proportionate disallowance of interest of Rs. 1,34,59,230/- under rule 8D(2)(ii) and Rs. 81,02,635/- under Rule 8D(2)(iii). The said disallowance was made by the AO on the ground that the assessment of both HO and branch in India are done together. According to the AO, the branch has borrowed money from the HO, utilized and had paid back the interest on such debt and thus, the branch has claimed expenses in connection with payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's favour by the Mumbai ITAT, in assessee's own case for Assessment Years 2004-05, 2005- 06, 2007-08 and 2009-10. The Indian Branch has not received/earned any interest income from its Head Office or other foreign branches and hence there can be no question of the interest expense in question being incurred to earn any exempt income and hence the same cannot be disallowed u/s. 14A. The proposition that no disallowance can be made u/s.14Aof the Income-tax Act, 1961 in case there is no exempt income is now well settled and one can refer to the following cases wherein the said proposition has been upheld: * ClT v/s. Delile Enterprises (ITA No 110 of 2009) (Born) * Cheminvest Ltd., v/s. CIT (2015) 378 ITR 33 (Delhi) * ACIT vs. Lafarge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve". 4.4. Since the facts of the present case before us are similar to the facts of the case as decided by the Co-ordinate Bench in the AYs. 2010-11 & 2011-12 (supra) in assessee's own case, we , therefore , respectfully following the decision of the Coordinate Bench, uphold the order of CIT(A) and the grounds raised by Revenue is dismissed. 5. The issue raised in Ground No. 4 is against the order of CIT(A) holding that the interest income on Income Tax refund is to be charged only under Article 11(2) and not under Article 11(4) of Indo Belgium DTAA, despite the interest income being effectively connected with Permanent Establishment (PE). 5.1. The facts in brief are that assessee in its return of income, claimed the rate of tax @ 15%, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax in terms of Article 11 of DTAA by relying on the following decisions: i. MSM Satellite Singapore Pte. Ltd Vs. DCIT (ITA No. 1718/Mum/2015, dated 21 June 2017); ii. ACIT Vs. Clough Engineering Ltd., [138 TTJ 385] (Delhi) (SB); 5.3. Ld. DR on the other hand, relied on the grounds of appeal and the order of AO. 5.4. Having heard the rival contentions, material on record and the decisions relied upon, we find that the issue in the present case is whether the interest on income tax refund of Rs. 21,24,618/- is to be charged @15% or @40% has been adjudicated by the coordinate benches to be taxable at 15% plus surcharge. After perusing the facts of the case of assessee and Article 11 of DTAA, we are of the considered view that inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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