DCIT (IT)3(2)(2), MUMBAI V. MIZUHO CORPORATE BANK LTD, MUMBAI

ITA 2484/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6831 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Assessment Year: 2009-2010
• Appeal Filed On: 06-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT SAMAIYA
• Keywords: Double taxation relief; Permanent establishment; Set aside
• Section: 143(3); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE JUSTICE SHRI P.P. BHATT, PRESIDENT AND SHRI G.S. PANNU, VICE PRESIDENT ITA NO. 2484 /MUM/2017 : A.Y : 20 09 - 10 DCIT (IT) - 3(2)(2), MUMBAI. (APPELLANT) VS. M/S. MIZUHO CORPORATE BANK LTD., MAKER CHAMBERS - III, 1 ST FLOOR, JAMNALAL BAJAJ ROAD, NARIMAN POINT, MUMBAI 400 021 . PAN : AAACA4216B (RESPONDENT) APPELLANT BY : SHRI NISHANT SAMAIYA RESPONDENT BY : MS. KOMAL MOTA DATE OF HEARING : 20 /1 2 /2018 DATE OF PRONOUNCEMENT : 28 /02/2019 O R D E R PER G.S. PANNU , VICE PRESIDENT : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 57 , MUMBAI DATED 3 0.1 2 .201 6 , PERTAINING TO THE ASSESSMENT YEAR 200 9 - 1 0 , WHICH IN TURN HAS ARISEN FROM THE ORDER DATED 17 .0 5 .20 13 PASSED BY THE ASSESSING OFFICER, MUMBAI UNDER SECTION 143(3) R.W.S 144C(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO. 2484/MUM/2017 M/S. MIZUHO CORPORATE BANK LTD. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS CORRECT IN HOLDING THAT THE ADDITION HAS BEEN WRONGLY MADE WITHOUT APPRECIATING THE FACT THAT THE PE IN INDIA HAS TO BE TREATED AS SEPARATE ENTITY AND THE INTEREST PAYABLE BY THE SAID PE IS TO BE TAXED IN INDIA IN THE HANDS OF PE AS INCOME. 2. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS CORRECT IN HOLDING THAT THE PROVISIONS OF SECTION 40(A)(I) DO NOT APPLY WITHOUT APPRECIATING THAT THE INTEREST WAS CHARGEABLE TO INCOME. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT PRAYS THAT THE APPEAL IS MAINTAINABLE IN THIS CASE IN VIEW OF CIRCULAR NO. 21/2015 DATED 10.12.2015 OF THE CBDT. 3 . A T THE TIME OF HEARING, IT WAS A COMMON GROUND BETWEEN THE PARTIES THAT THE SUBSTANTIVE DISPUTE INVOLVED IN THIS APPEAL IS FULLY COVERED BY THE PRECEDENTS IN ASSESSEES OWN CASE AND IN THIS REGARD, A COPY OF THE ORDER OF THE TRIBUNAL IN ITA NOS. 3282/MUM /2009 & 602/MUM/2013 DATED 26.03.2014 PERTAINING TO ASSESSMENT YEAR 2005 - 06 HAS BEEN PLACED ON RECORD. SO HOWEVER, IN ORDER TO IMPART COMPLETENESS AND ALSO TO UNDERSTAND THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL IN THEIR PROPER PERSPECTIVE, A BRIEF DISCUSSION IS NECESSARY, WHICH IS AS FOLLOWS. 4. THE RESPONDENT BEFORE US IS A BANK INCORPORATED IN JAPAN, HAVING ITS HEAD OFFICE AT TOKYO. IT CARRIES OUT BANKING OPERATIONS IN INDIA THROUGH 3 ITA NO. 2484/MUM/2017 M/S. MIZUHO CORPORATE BANK LTD. BRANCHES SITUATED AT MUMBAI AND DELHI. THE ASSESSING OFFICER OBSERVED THAT THE BRANCHES IN INDIA WERE PERMANENT ESTABLISHMENTS (PE) WITHIN THE MEANING OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND JAPAN. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE HEAD OFFICE OF THE BA NK IN JAPAN HAD RECEIVED INTEREST ON BORROWINGS MADE BY THE INDIAN BRANCHES AMOUNTING TO ` 6,82,65,645/ - NET OF TAX, ON WHICH TAX WAS DULY DEDUCTED AT SOURCE. IN PARA 6(A) OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER RECORDS THAT SINCE TAX HAS BEEN DEDUC TED FROM THE PAYMENT OF INTEREST MADE TO THE HEAD OFFICE, LON DON BRANCH AND SINGAPORE BRANCH, THE AFORESAID EXPENDITURE WAS AN ALLOWABLE EXPENDITURE. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT SINCE THE SOURCE OF INTEREST EARNINGS BY THE HEAD OFFICE WAS INDIA, THEN, IN TERMS OF SEC. 9(1)( V )(C) OF THE ACT, SUCH INTEREST INCOME RECEIVED BY THE HEAD OFFICE FROM BRANCHES IN INDIA WAS DEEMED TO ACCRUE OR ARISE IN INDIA. THE ASSESSING OFFICER FURTHER OBSERVED THAT IN SUCH CIRCUMSTANCES, THE BRANCHES AUTOMATIC ALLY BECOME REPRESENTATIVE ASSESSEE / AGENT AS PER SEC. 163(1)(C) OF THE ACT. IN THIS BACKGROUND, THE ASSESSING OFFICER REFERRED TO ARTICLE 11(2)(A) OF THE INDIA - JAPAN DTAA AND HELD THAT THE INTEREST INCOME OF ` 6,82,65,645/ - OF THE HEAD OFFICE WAS TAXABLE IN INDIA @ 10%. THE AFORESAID MATTER WAS CARRIED IN APPEAL BY THE ASSESSEE BEFORE THE CIT(A). THE CIT(A) REFERRED TO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 - 06 (SUPRA) AND HELD THAT INTEREST PAID BY THE INDIAN BRANCH OF THE ASSESSEE - BANK TO ITS OVERSEAS HEAD OFFICE IS NOT CHARGEABLE TO TAX IN INDIA. AGAINST SUCH A DECISION, REVENUE IS IN APPEAL BEFORE US. 5. INSOFAR AS GROUND OF APPEAL NO. 1 IS CONCERNED, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE PE OF THE 4 ITA NO. 2484/MUM/2017 M/S. MIZUHO CORPORATE BANK LTD. ASSESSEE IN INDIA IS A SEPARATE ENTITY AND INTEREST PAID BY THE BRANCH TO ITS HEAD OFFICE IS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE IN INDIA AS INCOME. THIS ASPECT OF THE MATTER HAS INDEED BEEN DEALT WITH BY THE TRIBUNAL VIDE ITS ORDER DATED 26.03.2014 (SUPRA) IN FAVOUR OF THE ASSESSEE AND SINCE THE ORDER OF THE TRIBUNAL CONTINUES TO HOLD THE FIELD, AS IT HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORIT Y , THE GROUND RAISED BY THE REVENUE IS LIABLE TO BE DISMISSED. WE HOLD SO. 6. INSOFAR AS GROUND OF APPEAL NO. 2 IS CONCERNED, THE SAME REFERS TO SEC. 40(A)(I) OF THE ACT. IN TERMS OF THE STATED GROUND, THE REVENUE SEEKS TO CANVASS THAT THE CIT(A) IS NOT CORRECT IN HOLDING THAT THE PROVISIONS OF SEC. 40(A)(I) OF TH E ACT DO NOT APPLY IN THE PRESENT CASE. IN THIS CONTEXT, IN OUR VIEW, THE SAID GROUND CANVASSED BY THE REVENUE IS MISCONCEIVED ON FACTS, AS IT DOES ARISE IN THE INSTANT YEAR . NOTABLY, IT IS NOT SEC. 40(A)(I) OF THE ACT WHICH HAS BEEN INVOKED BY THE ASSES SING OFFICER IN ORDER TO BRING TO TAX THE IMPUGNED INTEREST INCOME. PERTINENTLY, IN THIS YEAR, THE IMPUGNED INTEREST INCOME HAS BEEN BROUGHT TO TAX ON THE GROUND THAT IT ACCRUE S OR AR I SE S IN INDIA ON ACCOUNT OF ASSESSEES PE IN INDIA. IN CONTRAST, IN THE EARLIER YEAR, SEC. 40(A)(I) OF THE ACT WAS INVOKED TO DISALLOW THE EXPENDITURE REPRESENTED BY THE INTEREST PAID BY THE INDIAN BRANCH T O THE HEAD OFFICE ON THE GROUND OF NON - DEDUCTION OF TAX AT SOURCE, WHEREAS IN THE INSTANT YEAR THE SAID EXPENDITURE HAS B EEN EXPLICITLY ALLOWED BY THE ASSESSING OFFICER AFTER NOTICING THAT THE REQUISITE TAX HAS BEEN DEDUCTED AT SOURCE. WE ARE ONLY TRYING TO BRING OUT THE AFORESAID TO POINT OUT THAT THE GROUND OF APPEAL HAS BEEN RAISED BY THE REVENUE WITHOUT CONSIDERING THE RELEVANT FACTS OF THE 5 ITA NO. 2484/MUM/2017 M/S. MIZUHO CORPORATE BANK LTD. INSTANT YEAR. BE THAT AS IT MAY, THE AFORESAID GROUND IS LIABLE TO BE DISMISSED. WE HOLD SO. 7. RESULTANTLY, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 T H FEBRUARY, 2019. SD/ - SD/ - ( JUSTICE P.P. BHATT ) PRESIDENT ( G.S. PANNU ) VICE PRESIDENT MUMBAI, DATE : 2 8 T H FEBRUARY , 201 9 *SSL* C OPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, I BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI