BARCLAYS BANK PLC,MUMBAI V. THE COMMISSIONER OF INCOME-TAX (APPEALS)-55, MUMBAI

ITA 1840/MUM/2024

AI Insights

The case involves two appeals by Barclays Bank Plc, Mumbai against the orders of the Commissioner of Income-tax (Appeals)-55, Mumbai, for the assessment years 2015-16 and 2016-17. The primary issue was the treatment of Derivatives Sales Credit (DSC) payments between Barclays Bank, India and Barclays Bank, UK. The AO had treated the DSC payments made by Barclays Bank, India to Barclays Bank, UK as income, which was contested by the bank. The Tribunal examined the nature of these transactions, the role of Barclays Bank, UK as the head office, and the global transfer pricing policy governing these transactions. The Tribunal concluded that the payments were correctly treated as expenditure and not as income, thus not attracting tax deduction at source.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775719 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2015-2016
• Appeal Filed On: 11-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA KUMAR; DR
• Assessee Lawyers: MADHUR AGRAWAL
• Keywords: Transfer pricing; TDS; Non-deduction of tax

Judgement Text

" | | | | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | | | | IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER I.T.A. No. 1840/Mum/2024 Assessment Year: 2015-16 & I.T.A. No. 1839/Mum/2024 Assessment Year: 2016-17 Barclays Bank Plc, Mumbai 9th Floor, Block B-6 Nirlon Knowledge Park Off. Western Express Highway Goregan East Maharashtra - 400063 [PAN: AABCF9791M] Vs The Commissioner of Income- tax (Appeals)-55, Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Madhur Agrawal, Adv. Revenue by : Shri Krishna Kumar, Sr. D/R सुनवाई की तारीख/Date of Hearing : 04/09/2025 घोषणा की तारीख /Date of Pronouncement : 10/09/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 1840/Mum/2024 & I.T.A. No. 1839/Mum/2024 are two separate appeals by the assessee preferred against the order of the ld. CIT(A) – 55, Mumbai {hereinafter “the ld. CIT(A)”} dated 13/02/2024 pertaining to AYs 2015-16 & 2016-17. 2. Since common issues are involved in both the appeals they were heard together and are disposed off by this common order for the sake of convenience and brevity. Printed from counselvise.com I.T.A. No. 1840/Mum/2024 & I.T.A. No. 1839/Mum/2024 2 3. We have heard the representatives on the facts of ITA No. 1840/Mum/2025 for AY 2015-16. 4. Briefly stated the facts of the case are that the assessee is engaged in the business of banking and is a branch of Barclays Bank Plc, U.K. The AO was in possession of the information about remittances made outside India to Barclays UK during FY 2014-15 i.e., AY 2015-16. A perusal of the details of remittances, the AO was of the opinion that the assessee has made remittances on account of ‘fees for technical services’ on account of Derivatives Sales Credit (DSC) to Barclays UK, on which no tax was deducted at source. The assessee was asked to give particulars of remittances and the status of TDS and was also asked to provide the reasons for non-deduction of tax at source. 4.1. The assessee filed a detailed reply which is as under:- “1. Barclays Capital, a division of Barclays Bank Pic managed the global derivative operations of the Barclays Group. The existing/prospective customers of the Barclays Group who wish to take derivative positions/ hedge their exposures in India, would approach Barclays Bank Pic, UK (hereinafter referred to as 'Barclays UK) being the head office or its overseas branches as the case may be with their requirements in relation to the desired derivative product. Barclays UK, being the head office and its overseas branches act as an intermediary between the client and Barclays India in respect of the derivative transactions to be undertaken by the client in India. Accordingly, Barclays UK and its overseas branches perform coordination/ liaising, origination and marketing activities of the derivative products. The payment for the aforesaid activities within the Barclays group is termed as DSC. 1. 1. Barclays India also undertakes origination, coordination/ liaising and marketing activities for clients/ prospective clients in India requiring exposure in UK or other overseas markets in respect of derivative products. For the aforesaid services, Barclays India receives DSC from Barclays UK. Thus, Barclays India pays as well as receives DSC. 1. 1. As per the global policy of Barclays Group, all the payments and receipts of DSC are routed through Barclays Bank Pic, UK, being head office. For the given nature of activity carried out, the settlement process (i.e. receipts/payments) is conducted through Barclays UK being the head office. Accordingly, for administrative purposes, Printed from counselvise.com I.T.A. No. 1840/Mum/2024 & I.T.A. No. 1839/Mum/2024 3 Barclays Bank Plc, UK acts as a centralized entity to collect and distribute the DSC to various branches for the activities undertaken by them……” \"2. Methodology of computing DSC 1. 1. In relation to the methodology of calculation of DSC, we wish to submit that the revenue in the books of Barclays UK (being the head office) and Barclays India is booked on the basis of 'Estimated Day-1 P&L' i.e. difference between the value of prospective net cash flows based on the transaction price (i.e. the price at which the transaction has been entered with the clients) and value of the prospective net cash flows based on market price/ price at which the transaction could be hedged in the market (i.e. the price based on the market parameters). 1. 1. The aforesaid methodology is used for computing both DSC payable as well as receivable from Barclays UK/overseas entities. Certain percentage of the total income received from derivative transaction is paid to the marketing/originating entity in the form of DSC. Further, we wish to submit that DSC remitted by Barclays India for the aforesaid services is in accordance with the global transfer pricing policy of the Barclays Group. A copy of the global transfer pricing policy is enclosed as Annexure 2. 1. 1. Based on the above, the total amount of remittance has two components: • Actual sales credit payment net off reversals / adjustment with respect to services provided by the overseas office to Barclays India; and • Reversal of excess sales credit received in prior months for services offered by Barclays India to Barclays UK. Accordingly, the actual amount to be remitted consist of the total DSC payable for services received during the year net of the reversals of amount paid in excess (which is recoverable/ recovered subsequently). 1. 1. Separately, during early 2016, an independent internal investigation/review of the DSC payment process was undertaken by Barclays India. Pursuant to the internal investigation/ review it was observed by Barclays India that on account of certain system inconsistencies/errors (being incorrect mapping of legal entities) Barclays India had inadvertently made excess payments which have been recovered subsequently….” 4.2. The underlying facts in the issue simply explained is that Barclays Bank U.K. and Barclays Bank, India are catering services to their respective clients. The clients of Barclays Bank, U.K. want to indulge in derivatives trading in Indian companies and for that they approached Barclays Bank U.K.. Similarly, client of Barclays Bank, India, approached Printed from counselvise.com I.T.A. No. 1840/Mum/2024 & I.T.A. No. 1839/Mum/2024 4 to indulge in derivative trading in U.K., for which Barclays Bank, India takes services of Barclays Bank, U.K.. When Barclays Bank, U.K., takes services of Barclays Bank, India, for its clients for derivative trading in Indian companies, Barclays Bank, India charges certain fees to Barclays Bank, U.K. Similarly, when Barclays Bank, India uses services of Barclays Bank, U.K., for its clients, indulging in derivative trading in U.K. companies, Barclays Bank, U.K. charges fees to Barclays Bank, India. The fees paid by Barclays Bank, U.K. to Barclays Bank, India, have been treated as income of Barclays Bank, India. To this extent, there is no anomaly. Surprisingly, the payments made by Barclays Bank, India to Barclays Bank, U.K., have been treated as income of Barclays Bank, India, which is not understandable. How the expenses became income of Barclays Bank, India. Not only this but the AO has treated the assessee in default for not deducting tax at source on the payments made to Barclays Bank, U.K. on the transactions explained hereinabove. 4.3. This can be further explained by an example. Assuming that Barclays Bank, U.K., has paid Rs. 90/- to Barclays Bank, India for the services availed by it from Barclays Bank, India and Barclays Bank, India has paid Rs. 10/- for the services availed by it from Barclays Bank, U.K.. The Indian company has shown Rs. 90/- as its income and paid taxes thereon. Rs. 10/- paid by it is an expenditure which has been treated as income of the assessee by the AO and further treated the assessee in default for not deducting tax at source which is against the cannons of law. Therefore, considering the totality of facts explained hereinabove, we do not find any merit in the impugned additions. The AO is directed Printed from counselvise.com I.T.A. No. 1840/Mum/2024 & I.T.A. No. 1839/Mum/2024 5 to delete the same. The effective ground/s raised by the assessee are allowed. 5. Since the facts of AY 2016-17 in ITA No. 1839/Mum/2024 are identical, thought the quantum may differ, the same is also allowed. 6. In the result, appeals of the assessee are allowed. Order pronounced in the Court on 10th September, 2025 at Mumbai. Sd/- Sd/- (ANIKESH BANERJEE) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 10/09/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u0015 थ / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "