Hwaseung Materials (India) Pvt Ltd., Kanchipuram V. ACIT Salary Circle II, CHENNAI

ITA 1151/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4335 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBASHRI
• Assessee Lawyers: H CHANDRASEKARAN
• Keywords: Tax effect; TDS
• Section: 195

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . . . , ., # BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.1151/CHNY/2018 '' /ASSESSMENT YEAR : 2011-12 M/S. HWASEUNG MATERIALS (INDIA) PVT.LTD., SURVEY NO.73, A BLOCK, NO,100, THANDALAM POST , MEVALURKUPPAM, SRIPERUMBUDHURTALUK, KANCHIPURAM-602 105. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, SALARY CIRCLE-II, CHENNAI. PAN: AABCH8886P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. H.CHANDRASEKARAN, CA /RESPONDENT BY : MS.SUBASHRI,JCIT /DATE OF HEARING : 11.02.2019 /DATE OF PRONOUNCEMENT : 12.02.2019 / O R D E R PER S.JAYARAMAN, AM: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNAI, IN ITA NO. 19/ CIT(A)-13/2011-12 DATED 10.11.2017 FOR ASSESSMENT YEAR 2011-12. 2. M/S. HWASEUNG MATERIALS (INDIA) PVT. LTD., THE A SSESSEE, IS A MANUFACTURER OF SYNTHETIC RUBBER COMPOUND. WHILE MA KING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2011-12, THE AS SESSING OFFICER, 2 ITA NO.1151/CHNY/2018 INTER-ALIA, FOUND THAT ASSESSEE FAILED TO DEDUCT TAX ON THE INTEREST OF 33,88,264/- PAID ON THE FOREIGN CURRENCY LOAN TAKE N FROM ICICI BANK, HONG KONG AND HENCE, DISALLOWED THE INTEREST CLAIME D BY THE ASSESSEE UNDER SECTION 40(A)(I) . AGGRIEVED, THE ASSESSEE FI LED AN APPEAL BEFORE THE LD. CIT(A), WHO DISMISSED THE APPEAL. AGGRIEVED AGAINST THAT ORDER, THE ASSESSEE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS:- THE APPELLANT OBTAINED USD 3.3 MILLION DURING THE FINANCIAL YEAR 2008-09 AS EXTERNAL COMMERCIAL BORROWINGS FOR IMPOR T OF MACHINERY FROM HONGKONG BRANCH OF ICICI BANK LIMITED. ICICI BANK LIMITED IS A DOMESTIC COMPANY, RESIDENT IN INDIA. THE HONGKONG BRANCH OF ICICI BANK LIMITED IS MERELY AN INDIAN REGISTERED BANK BRANCH. THE HONGKONG BRANCH OF ICICI BANK LIMITED IS NOT A SUBSIDIARY OR ASSOCIATE OF THE ICICI BANK LIMITED, FOR IT TO BE C ONSIDERED AS A SEPARATE ENTITY HAVING A NON-RESIDENT STATUS. THE DETAILS OF CAPACITY OF FOREIGN OPERATIONS OF AL L THE INDIAN BANKS ARE AVAILABLE IN THE OFFICIAL WEBSITE OF RESERVE BA NK OF INDIA. IN THE LIST, THE HONGKONG BRANCH OF ICICI BANK LIMITED IS APPEARING IN THE COUNTRY-WISE BRANCH LIST AND NOT IN THE SUBSIDIARY LIST. THE LIST WAS SUBMITTED DURING THE APPEAL PROCEEDINGS. FOR EXAMPLE, THE ICICI BANK LIMITED IS HAVING SUBSI DIARY IN UK AND CANADA BY THE NAME ICICI BANK UK LTD AND LCLCL BANK CANADA LTD RESPECTIVELY AS A SEPARATE ENTITY AND 100 % SHAREHO LDING BY ICICI BANK LIMITED, INDIA. THIS MAKES IT VERY CLEAR THAT HONGKONG BRANCH IS ME RELY AN EXTENSION OF OPERATION INOVERSEAS. IT DOES NOT HAVE SEPARATE NAME. IT IS REFERRED BY THE NAME ICICI BANKLIMITED. THE INTEREST DUE CERTIFICATE AS GIVEN BY THE BANK A LSO SPECIFIES PAYMENT FAVOURING LCLCL BANK LTD., HONGKONG BRANCH AND ALSO MENTIONS REGISTERED OFFICE AND CORPORATE OFFICE PRE SENT IN INDIA. COPY OF INTEREST CERTIFICATE WAS SUBMITTED DURING T HE APPEAL PROCEEDINGS. 3 ITA NO.1151/CHNY/2018 INTEREST PAID TO HONGKONG BRANCH(FOREIGN BRANCH) OF ICICI BANK LIMITED (LNDIAN BANK) IS NOT LIABLE FOR TDS U/S 195 OR U/S I 94A. PROVISIONS OF SEC .194A (3) IS REPRODUCED BELOW:194 A (3) THE PROVISIONS OF SUB-SECTION SHALL NOT APPLY(HI) TO S UCH INCOME CREDITED OR PAID TO (A) ANY BANKING COMPANY TO WHICH THE BANKING REGULA TION ACT, 1949 (10OF 1949), APPLIES, OR ANY CO-OPERATIVE SOCIETY E NGAGED IN CARRYING ONTHE BUSINESS OF BANKING (INCLUDING A CO-OPERATIVE LAND MORTGAGEBANK), OR (B) ANY FINANCIAL CORPORATION ESTABLISHED BY OR UND ER A CENTRAL, STATE OR PROVINCIAL ACT, OR (C) (D) (E) (F) THIS INTEREST PAYMENT FOR THE AY 2012-13, AY 2013-1 4 AND AY 2014- 15 HAS BEEN ALLOWED TO THE ASSESSEE BY THE CIT (A) BASED ON THE ABOVE EXPLANATIONS. THE DISALLOWANCE OF INTEREST PAID TO ICICI BANK TO TUNE OF RS. 33,88,264/- U/S 40A(I) R.W.S 195 IS ARBITRARY AND A GAINST THE PROVISIONS OF INCOME TAX ACT. 3. THE LD. AR PRESENTED THE CASE ON THE LINES OF G ROUNDS OF APPEAL, SUPRA, AND INVITED OUR ATTENTION TO THE PAPER BOOK FILED, WHEREIN A COPY OF COUNTRYWISE BRANCHES OF OVERSEAS CENTRES AS ON 31.1 2.2015 CLAIMED TO HAVE BEEN DOWNLOADED FROM RBI WEBSITE WAS KEPT, AN D SUBMITTED THAT ICICI BANK HAD TWO BRANCHES IN HONG KONG. INVITING OUR ATTENTION TO THE COPY OF THE FINANCIALS OF ICICI BANK, HE SUBMITTED THAT THE BANKS TOTAL INCOME FOR THE YEAR ENDED 31.03.2011, COMPRISED D OMESTIC OPERATIONS IN INDIA AND FOREIGN OPERATIONS COMPRISE BRANCHES O UTSIDE INDIA AND OFFSHORE BANKING UNITS IN INDIA, WAS AT 326,219,453/- WHICH INCLUDES THE INCOME OF TWO BRANCHES IN HONG KONG. THIS MAKES IT VERY CLEAR THAT 4 ITA NO.1151/CHNY/2018 HONGKONG BRANCH IS MERELY AN EXTENSION OF OPERATION IN OVERSEAS. IT DOES NOT HAVE SEPARATE NAME. IT IS REFERRED BY THE NAME ICICI BANK LIMITED.THE INTEREST DUE CERTIFICATE AS GIVEN BY T HE BANK ALSO SPECIFIES PAYMENT FAVOURING LCLCL BANK LTD., HONGKONG BRANCH AND ALSO MENTIONS REGISTERED OFFICE AND CORPORATE OFFICE PRE SENT IN INDIA. COPY OF INTEREST CERTIFICATE WAS SUBMITTED DURING THE APPEA L PROCEEDINGS. THEREFORE, THE INTEREST PAID TO HONGKONG BRANCH(FOR EIGN BRANCH) OF ICICI BANK LIMITED (LNDIAN BANK) IS NOT LIABLE FOR TDS U/ S 195 OR U/S I94A AND HENCE PLEADED TO ALLOW THE APPEAL. 4. PER CONTRA, THE LD. DR SUBMITTED THAT THE TAX EFFECT INVOLVED FROM THE APPELLATE ORDERS OF ASSESSMENT YEARS 2012-13, 2013-14 AND 2014- 15 APPEARED TO BE BELOW THE MONETARY LIMIT PRESC RIBED FOR APPEALS. SINCE THE MATERIAL COPIES RELIED ON BY THE LD. AR DO NOT INDICATE AS TO WHETHER THE SOURCES OF HONG KONG BANK INCOME WAS IN CLUDED IN THE FINANCIALS OF ICICI BANK, THE LD. DR PRAYED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICE R FOR DUE EXAMINATION. 5. WE HEARD THE RIVAL SUBMISSIONS. THE ASSESSEE PLE ADED THAT HONG KONG BANK IS A BRANCH OF ICICI BANK INDIA, FROM W HICH IT OBTAINED LOAN IS CLEARLY AN EXTENSION OF OPERATION OF OVERSEAS, IT DOES NOT HAVE SEPARATE NAME, ITS INCOME WAS INCLUDED IN THE INCOM E OF THE ICICI BANK 5 ITA NO.1151/CHNY/2018 FINANCIALS ETC. THEREFORE, THE INTEREST PAID TO HO NG KONG BANK BRANCH (FOREIGN BRANCH) OF ICICI BANK (INDIAN BANK BRANCH) WAS NOT LIABLE FOR TDS UNDER SECTION 195 OR 194A . SINCE THE IMPUGNED MATERIAL RELIED ON BY THE ASSESSEE WAS NOT PLACED BEFORE THE ASSESSING OFFICER AND THE ASSOCIATED FACTS WERE NOT EXAMINED, WE DEEM IT FIT TO REMIT THE ISSUES BACK TO THE FILE OF THE ASSESSING OFFICER FOR PROP ER EXAMINATION AND DUE DECISION IN ACCORDANCE WITH LAW. THEREFORE, THE GRO UNDS OF APPEAL OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PUR POSES . 6. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 12 TH FEBRUARY, 2019 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) (S.JAYARAMAN) ( ! / JUDICIAL MEMBER) ( ! / ACCOUNTANT MEMBER) /CHENNAI, $ /DATED 12 TH FEBRUARY, 2019 SOMU () *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + () /CIT(A) 4. + /CIT 5. ) / /DR 6. 2 /GF