TMI Blog2023 (4) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... e has also not proved the beneficial ownership of the interest for the applicability of the aforesaid rate of tax under Article 11(2) of the India-Netherlands DTAA - remand this issue to the file of the AO for de novo adjudication after examining the applicability of the India-Netherlands DTAA in the present case - assessee shall be at liberty to adduce all the evidence in support of its submission of taxability @10% under Article 11(2) of the India-Netherlands DTAA. As a result, grounds no.1-4 raised in Revenue s appeal are allowed for statistical purposes. Addition in respect of interest received by the head office/overseas branches from the Indian branch - HELD THAT:- Special Bench in Sumitomo Mitsui Banking Corporation[ 2012 (4) TMI 80 - ITAT MUMBAI] held that the interest paid by the Indian branch is not taxable in the hands of the head office or overseas branches, all being the same entity. As regards the reliance placed upon the amendment to section 9(1)(v) of the Act vide Finance Act, 2015 w.e.f. 01/04/2016 by the AO, we find that the said amendment was held to be applicable prospectively from 01/04/2016 and not prior thereto by the coordinate bench of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities of branch (PE) of assessee in India and therefore the interest paid by Indian clients is liable to tax as its business Income at rate of 40%. 4. Whether on the facts and in the circumstances of the case and in law, Ld CIT(A) has failed to hold the receipt of interest on ECB loan as business income of its PE where he has accepted that the main business of the assessee is finance and loan to its customers and the interest income is part of the income of the assessee and Indian clients have deducted TDS on it. 5. Whether on the facts and in the circumstances of the case and in law, Ld CIT(A) has erred in deleting the addition of Rs.39,94,178/- made by the AO in respect of Interest received by head office/overseas branch from branch in India (Assessee). 4. The issue arising in grounds No. 1-4, raised in Revenue s appeal, is pertaining to the taxability of interest earned on External Commercial Borrowings ( ECB ) loans. 5. The brief facts of the case pertaining to this issue are: The assessee is an Indian branch of Co-operative Centrale Raiffeusen-Borenleen Bank B.A., Netherlands (Rabobank, Netherlands), a company incorporated in the Netherlands. In March 2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration. The AO proceeded to add the difference between the gross receipts as per Form 26AS and income as per the return. Accordingly, the AO made an addition of Rs.66,28,56,151, being the undisclosed gross receipts to the total income of the assessee and taxed the same @ 40%. The AO also granted the corresponding TDS credit amounting to Rs. 6,84,52,407, to the assessee. 7. The learned CIT(A) vide impugned order, following its order rendered in assessee s own case for the assessment year 2010-11, held that the interest income is includable in the hands of the assessee and the same is required to be taxed as per the rate provided in the India-Netherlands DTAA read with the provisions of the Act. Being aggrieved, the Revenue is in appeal before us. 8. We have considered the rival submissions and perused the material available on record. The assessee is an Indian branch of Rabobank Netherlands, a company incorporated in the Netherlands. During the assessment proceedings, it was observed that the tax credit of Rs.6,84,52,407, was not claimed by the assessee. As per the assessee, it has various branches around the world, which operate independently and have separate business un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower authorities as regards the provision under which this income is taxable under the DTAA. It is evident from the record that during the assessment proceedings, the assessee merely requested that the income be taxed at the rates prescribed under the treaty. Before us the assessee has prayed for the applicability of the rate of tax of 10% as per Article 11(2), however, the assessee has also not proved the beneficial ownership of the interest for the applicability of the aforesaid rate of tax under Article 11(2) of the India-Netherlands DTAA. Therefore, in view of the above, we deem it appropriate to remand this issue to the file of the AO for de novo adjudication after examining the applicability of the India-Netherlands DTAA in the present case. As the matter is remanded to the AO for fresh consideration, the assessee shall be at liberty to adduce all the evidence in support of its submission of taxability @10% under Article 11(2) of the India-Netherlands DTAA. As a result, grounds no.1-4 raised in Revenue s appeal are allowed for statistical purposes. 11. The issue arising in ground No. 5, raised in Revenue s appeal, is pertaining to the deletion of addition in respect of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee on this issue, by observing as under:- 5.3 Decision: I have perused and considered the AO's order and the submission of the Appellant. The AO has taxed interest paid by India branch in the hands of HO. The Appellant has disputed the addition stating that a branch and HO are one person for taxation purposes. The amount received by the HO from India branch is receipt from self and cannot be treated as income. Reliance is placed on Hon'ble SC decision in the case of Sir Kikabhai Premchand vs CIT (1953) 24 ITR 506 and some High Court decisions. Reliance is also placed on various decisions on the issue like decision of the Kolkata High Court in the case of ABN Amro Bank NV 198 Taxman 376 (SLP dismissed by Hon'ble SC on 03.08.2012) and Special Bench decision of jurisdictional Tribunal in the case of Sumitomo Mitsui Banking Corporation (2012) (136 ITD 66). It is also submitted that legal fiction with regard to Article 7(2) of IN treaty is essentially created to enable determination of profit of the PE and should not be extended to or have a bearing on any other provisions of treaty/act, except specifically provided for. In the case of Sumitomo Mitsui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the head office or overseas branches, all being the same entity. Further, as regards the reliance placed upon the amendment to section 9(1)(v) of the Act vide Finance Act, 2015 w.e.f. 01/04/2016 by the AO, we find that the said amendment was held to be applicable prospectively from 01/04/2016 and not prior thereto by the coordinate bench of the Tribunal in JP Morgan Chase Bank N.A. vs DCIT, [2020] 183 ITD 190 (Mumbai - Trib.). Thus, this amendment is not applicable to the year under consideration and would only be applicable to the assessment year 2016-17 and onwards. Therefore, respectfully following the aforesaid judicial pronouncements, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 5 raised in Revenue s appeal is dismissed. 16. In the result, the appeal by the Revenue is partly allowed for statistical purposes. ITA no.2513/Mum./2022 Revenue s Appeal A.Y. 2014 15 17. In its appeal, the Revenue has raised the following grounds: 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has failed to appreciate that during the AY 2014-15, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ITA No.2514/Mum./2022, for the assessment year 2013-14, the decision rendered therein shall apply mutatis mutandis. As a result, grounds no.5 raised in Revenue s appeal are dismissed. 20. In the result, the appeal by the Revenue is partly allowed for statistical purposes. ITA no.2978/Mum./2022 Revenue s Appeal A.Y. 2015 16 21. In its appeal, the Revenue has raised the following grounds: 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has failed to appreciate that during the AY 2015- 16, the assessee has operated through its branch Permanent Establishment unlike in AY 2010-11 where the assessee was acting through subsidiary Indian company. 2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in deciding the appeal stating that the facts of the appeal for AY 2010-11 were similar to present appeal, while the facts of the case that in AY 2010-11, the assessee acted through Indian company M/s Rabo India Finance Private Limited (Rabo India), whereas in AY 2015-16, the facts of the case is that during assessment proceeding the assessee itself disclosed that it has a bran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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