DDIT (IT) -2(1), MUMBAI V. M/s. SUMITO MITSUI BANKING CORPORATION, MUMBAI

ITA 2865/MUM/2006

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8696 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 09-10-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 08-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R MURLIDHAR
• Keywords: Invalid notice; Double taxation relief; Reassessment proceedings
• Section: 143(3); 234B; 147; 27; 148; 139

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI .. , ! '# , $ !, % BEFORE SHRI R.S.SYAL, AM AND SHRI VIJAY PAL RAO, JM ./ ITA NOS.2720, 2721 & 2722/MUM/2006 ( $' ( $' ( $' ( $' ( / / / / ASST.YEARS : 1997-98, 1998-99 & 1999-2000) M/S.SUMITOMO MITSUI BANKING CORPORATION, C/O BSR & CO., CAS KPMG HOUSE, KAMALA MILLS COMPOUND SENAPATI BAPAT MARG, LOWER PAREL MUMBAI 400 013. PAN : AAACT5369G. THE DY.COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION) RANGE 2(1) MUMBAI. ( )* / // / APPELLANT) ' ' ' ' / VS. ( +,)*/ RESPONDENT) ./ ITA NOS.2865, 2866, 2864 & 6495/MUM/2006 ( $' ( $' ( $' ( $' ( / / / / A.YRS : 1997-98, 1998-99, 1999-2000 & 2000-2001) THE DY.COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION) RANGE 2(1), MUMBAI. M/S.SUMITOMO MITSUI BANKING CORPORATION, C/O BSR & CO., CAS MUMBAI 400 013. ( )* / // / APPELLANT) ' ' ' ' / VS. ( +,)*/ RESPONDENT) )* - -- - . . . . / REVENUE BY : SHRI MAHESH KUMAR (CIT-DR) +,)* - . - . - . - . / ASSESSEE BY : SHRI R.MURLIDHAR ' - / / / / / DATE OF HEARING : 09.10.2012 01( - / / DATE OF PRONOUNCEMENT : 12.10.2012 !2 !2 !2 !2 / / / / O R D E R PER BENCH : THIS BATCH OF SEVEN APPEALS COMPRISES OF CROSS APPE ALS FOR ASSESSMENT YEARS 1997-98, 1998-1999 AND 1999-2000 A LONG WITH ONE APPEAL BY THE REVENUE AGAINST THE DELETION OF PENAL TY U/S 271(1)(C) IN RELATION TO ASSESSMENT YEAR 2000-2001. SINCE SOME C OMMON ISSUES ARE RAISED IN THESE APPEALS, WE ARE THEREFORE, PROC EEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 2 ASSESSMENT YEAR 1997-98 2. FIRST GROUND OF THE ASSESSEES APPEAL IS AGAINST THE VALIDITY OF REASSESSMENT PROCEEDINGS. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN ON 28.11.1997 DECLARING TOTAL INCOME OF ` 45.71 CRORE. THE ASSESSMENT WAS REOPENED BY NOTICE U/S 148 DATED 31. 03.2004, RECORDING THE FOLLOWING REASONS :- THE CIT(A) IN HIS ORDER IN APPEAL NO.CIT(A)XXXI/ DDIT(IT)2(1)/IT-94/03-04 DATED 12/12/2003 FOR A.Y.2000-01 HAS CONFIRMED THE ADDITION OF AO IN TAX ING THE INTEREST PAID TO ITS HEAD OFFICE AND OVERSEAS BRANCHES AMOUNTING TO ` 14,92,62,998/-. SIMILARLY FOR A.Y.2001-02, THE AMOUNT OF ` 21,46,12,294/- HAS BEEN BROUGHT TO TAX ON ACCOUNT OF INTEREST PAID TO THE H EAD OFFICE AND OVERSEAS BRANCHES BY THE ASSESSEE. THE ASSESSEE HAS PAID SUCH INTEREST TO ITS HO AND OTHER OVERSEAS BRANCHES FOR EARLIER YEARS ALSO INCLUDING A.Y. 1997-98, THOUGH THE DETAILS OF SUCH INTEREST PAID A RE NOT AVAILABLE ON RECORDS. HOWEVER, CONSIDERING THE QUAN TUM OF INTEREST PAID TO HO AND OTHER OVERSEAS BRANCHES, WHICH RUNS INTO CRORES OF RUPEES FOR A.Y. 2000-01 A ND 2001-02, THE QUANTUM OF SUCH INTEREST PAID MUST BE ABOVE ` 1,00,000/- IN A.Y. 1997-98, WHICH HAS NOT BEEN BROUGHT TO TAX. I, THEREFORE, HAVE REASON TO BELIEV E THAT INCOME EXCEEDING ` 1,00,000/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF THE PROVISIONS OF SECTION 147 OF THE I.T.ACT, 1961. 4. THE ASSESSEE RAISED OBJECTIONS TO THE INITIATION OF REASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. SUCH OBJE CTIONS WERE ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 3 REPELLED. THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME AT ` 85.42 CRORE. THE ASSESSEE REMAINED UNSUCCESSFUL BEFORE TH E LEARNED CIT(A) ON THE QUESTION OF INITIATION OF THE REASSESSMENT P ROCEEDINGS, AGAINST WHICH IT HAS RAISED GROUND NO. 1. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT PUR SUANT TO THE RETURN FILED BY THE ASSESSEE, THE AO FINALIZED THE ASSESSM ENT U/S 143(3), WHICH FACT IS EVIDENT FROM THE ASSESSMENT ORDER ITS ELF. NOTICE U/S 148 DATED 31.3.2004 WAS ISSUED AND SERVED ON THE ASSES SEE. OBVIOUSLY A PERIOD OF MORE THAN 4 YEARS ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR TILL THE ISSUANCE OF NOTICE U/S 148 . PROVISO TO SECTION 147 PROVIDES THAT WHERE AN ASSESSMENT HAS BEEN COMP LETED U/S 143(3), NO ACTION SHALL BE TAKEN U/S 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS AN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT OF SUCH AS SESSMENT YEAR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO MA KE A RETURN U/S 139 ETC OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR REASSESSMENT FOR THAT ASSESSMENT YEAR. 6. A BARE PERUSAL OF THIS PROVISION INDICATES T HAT WHERE AN ASSESSMENT HAS BEEN COMPLETED U/S 143(3), NO ACTION CAN BE TAKEN BY ISSUE OF NOTICE U/S 148 AFTER THE EXPIRY OF FOUR YE ARS FROM THE END OF RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEAB LE TO TAX ESCAPED ASSESSMENT BY REASON OF THE ASSESSEES FAILURE TO D ISCLOSE ALL MATERIAL FACTS FULLY AND TRULY. IN OTHER WORDS, IF THE ASSE SSEE DISCLOSED ALL ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 4 MATERIAL FACTS FULLY AND TRULY AND THE ASSESSMENT W AS FRAMED U/S 143(3), THEN NO ACTION CAN BE TAKEN U/S 147 AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 7. THE INSTANT CASE IS THE ONE WHERE ORIGIN AL ASSESSMENT WAS MADE U/S 143(3). NOW, FROM THE REASONS RECORDED B Y THE ASSESSING OFFICER, WE NEED TO EXAMINE AS TO WHETHER THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY. IT IS NOTICED THAT THE ASSESSING OFFICER INITIATED REASSE SSMENT PROCEEDINGS ON THE STRENGTH OF THE ORDER PASSED BY THE FIRST AP PELLATE AUTHORITY FOR ASSESSMENT YEAR 2000-2001 CONFIRMING THE ADDITION M ADE BY THE A.O. BY DISALLOWING THE INTEREST PAID TO ITS HEAD OFFICE AND OTHER OVERSEAS BRANCHES. THERE CAN BE NO DISPUTE FOR THE PROPOSITI ON THAT A SUBSEQUENT DECISION RENDERED BY A SUPERIOR AUTHORIT Y ON A PARTICULAR ISSUE CAN BE A GOOD REASON TO INITIATE REASSESSMENT PROCEEDINGS FOR THE EARLIER YEARS IN WHICH A CONTRARY VIEW HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. IN THE CURRENT YEAR, THE ASSESSE E CLAIMED DEDUCTION ON ACCOUNT OF SUCH INTEREST, WHICH CAME TO BE GRANT ED BY THE AO IN THE ORDER PASSED U/S 143(3). AS IT SUBSEQUENTLY TU RNED OUT FROM THE ORDER OF THE CIT(A) FOR A LATER YEAR THAT SUCH A DE DUCTION IS NOT PERMISSIBLE, IN OUR OPINION NO FAULT CAN BE FOUND W ITH THE AO IN INITIATING REASSESSMENT PROCEEDINGS ON THIS SCORE. THIS PROPOSITION WOULD HAVE CORRECTLY APPLIED TO VALIDATE THE INITIA TION OF REASSESSMENT PROCEEDINGS IF THERE HAD BEEN NO ORIGINAL ASSESSMEN T U/S 143(3) AND FURTHER, A PERIOD OF FOUR YEARS HAD NOT EXPIRED IN ISSUING NOTICE. ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 5 8. ONCE A CASE FALLS WITHIN THE PROVISO TO SECTION 147, ONE NEEDS TO CONCENTRATE ON THE FACT AS TO WHETHER THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR REASSESSMENT WHERE THE ORIGINAL ASSES SMENT WAS COMPLETED U/S 143(3) AND A PERIOD OF FOUR YEARS HAS EXPIRED FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE EXAMINATIO N OF SUCH CONDITION IS DE HORS ALL OTHER RELEVANT CRITERION, SUCH AS THE VIEW TAKEN IN SUBSEQUENT YEARS. 9. ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS OBSERVED THAT THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDING S ON THE GROUND THAT THE ASSESSEE CLAIMED DEDUCTION TOWARDS INTERES T PAID TO HEAD OFFICE AND OVERSEAS BRANCHES. THERE IS NOTHING IN T HE REASONS TO INDICATE, EVEN REMOTELY, THAT THE ASSESSEE DID NOT DISCLOSE THIS NECESSARY FACT IN ITS RETURN OR ACCOMPANYING DOCUME NTS. IT CAN NATURALLY NOT BE SO BECAUSE THE DEDUCTION ON ACCOUN T OF INTEREST PAID TO HEAD OFFICE AND OVERSEAS BRANCHES CAN ONLY BE CL AIMED BY WAY OF A DEBIT TO THE PROFIT AND LOSS ACCOUNT WHICH IS ALWAY S A PART AND PARCEL OF THE DOCUMENTS ACCOMPANYING THE RETURN OF INCOME. ONCE THE ASSESSEE DISCLOSED THE FACT OF CLAIM OF DEDUCTION O N ACCOUNT OF INTEREST PAID TO HEAD OFFICE OR OTHER OVERSEAS BRAN CHES AND THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ACCEPT ING SUCH CLAIM, THERE CAN BE NO QUESTION OF INITIATION OF REASSESSM ENT PROCEEDINGS AFTER A GAP OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. ALL ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 6 THE NECESSARY CONDITIONS ABOUT THE APPLICABILITY OF PROVISO TO SECTION 147 ARE DULY SATISFIED. FIRST, THE ASSESSEE FILED ITS RETURN CLAIMING DEDUCTION ON ACCOUNT OF INTEREST PAID TO HEAD OFFIC E / OTHER OVERSEAS BRANCHES. SECOND, THE ASSESSMENT WAS COMPLETED U/S 143(3). THIRD, NOTICE U/S 148 WAS ISSUED BEYOND A PERIOD OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. AND LAST, SINCE THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS ON THE QUESTION OF DEDUCTION CLAIMED FOR INTEREST PAID TO HEAD OFFICE AND OTHER OVERSEAS BRANCHES, IN OUR CONSIDERED OPINION, THE INITIATION OF REASSESSMENT PROCEEDINGS CANNOT BE DECLARED AS VALI D. WE, THEREFORE, STRIKE DOWN THE NOTICE ISSUED U/S 148 AND THE RESUL TANT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER FLOWING OUT O F SUCH INVALID NOTICE ISSUED BY THE A.O. IN VIEW OF OUR DECISION O N THE QUASHING OF THE REASSESSMENT ORDER, THERE IS NO NEED TO ADJUDIC ATE UPON THE GROUNDS TAKEN BY BOTH THE SIDES IN THEIR RESPECTIVE APPEALS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. ASSESSMENT YEAR 1998-99 11. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES FOR THIS YEAR, BEING DISCLOSURE BY THE ASSESSEE OF CLAIM OF DEDUCTION FOR INTEREST PAID TO HEAD OFFICE AND OTHER OVERSEAS BRANCHES; THE COMPLETION OF ASSESSMENT U/S 143(3); INITIATION OF REASSESSMENT PROCEEDINGS AFTER FOUR YEARS FROM THE END OF THE RE LEVANT ASSESSMENT ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 7 YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR ASSESSMENT YEAR 1997- 98. FOLLOWING THE VIEW TAKEN HEREINABOVE WE HOLD TH AT THE ASSESSMENT WAS WRONGLY REOPENED. THE ASSESSMENT ORD ER PURSUANT TO NOTICE U/S 148 IS SET ASIDE. RESULTANTLY THERE IS N O NEED TO ADJUDICATE THE OTHER GROUNDS TAKEN BY BOTH THE SIDES. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. ASSESSMENT YEAR 1999-2000 13. FIRST GROUND OF THE ASSESSEESS APPEAL IS AGAIN ST THE INITIATION OF REASSESSMENT PROCEEDINGS. HERE IT IS RELEVANT TO ME NTION THAT THE REASONS RECORDED BY THE ASSESSING OFFICER CONTINUE TO REMAIN THE SAME AS WERE THERE IN PRECEDING TWO YEARS. ONE RELE VANT FACTOR WHICH HAS CHANGED THE COMPLEXION OF THE CASE FOR THE CURR ENT YEAR VIS--VIS THE PRECEDING YEARS, IS THAT THE ISSUANCE OF NOTI CE U/S 148 IS WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR. IN SUCH A CASE PROVISO TO SECTION 147 CANNOT APPLY. WHI LE DEALING WITH THE INITIATION OF REASSESSMENT FOR THE AY 1997-98 W E HAVE HELD THAT AN ORDER PASSED BY A HIGHER AUTHORITY FOR A SUBSEQ UENT YEAR CONTRARY TO WHAT WAS ACCEPTED BY THE ASSESSING OFFICER FOR T HE YEAR IN RESPECT OF WHICH INITIATION OF REASSESSMENT IS SOUGHT, IS A GOOD AND VALID REASON. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MULTISCREEN MEDIA PRIVATE LIMITED V. UNION OF INDIA [(2010) 324 ITR 54 (BOM.) ] , IN WHICH IT HAS BEEN HELD BY THE HONBLE JURISDICTIONAL HIGH CO URT THAT THE ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 8 REOPENING ON THE BASIS OF FINDING IN AN ORDER OF AS SESSMENT PASSED FOR A SUBSEQUENT ASSESSMENT YEAR, WHERE ADDITIONAL MATE RIAL HAS EMERGED BEFORE THE A.O. TO LEAD TO THE FORMATION OF BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED TAX, IS SUSTAINABLE. THE FACTS OF THE INSTANT CASE STAND ON A RATHER STRONGER FOOTING BEC AUSE HERE THE REASSESSMENT IS ON THE BASIS OF THE CIT(A)S ORDER FOR A SUBSEQUENT YEAR. FINDING NO MERIT IN THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE, WE HOLD THAT THE INITIATION OF REASSESSM ENT PROCEEDINGS FOR THE CURRENT YEAR IS IN ORDER AND NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND IS NOT AL LOWED. 14. GROUND NO.2 OF THE ASSESSEES APPEAL IS AGAINST THE DISALLOWANCE OF INTEREST PAYABLE BY THE ASSESSEE TO ITS HEAD OFF ICE AND OTHER OVERSEAS BRANCHES. THE ASSESSING OFFICER DID NOT AL LOW DEDUCTION TOWARDS INTEREST PAID TO HEAD OFFICE AND OTHER OVER SEAS BRANCHES ON THE GROUND THAT THERE WAS FAILURE ON THE PART OF TH E ASSESSEE TO DEDUCT TAX AT SOURCE. THUS THE DISALLOWANCE WAS MADE U/S 4 0(A)(I) ON THE PREMISE THAT THE SAID AMOUNT OF INTEREST RECEIVED B Y HEAD OFFICE AND OTHER OVERSEAS BRANCHES WAS TAXABLE IN THEIR HANDS. THE ASSESSING OFFICER SUMMED UP HIS VIEW BY HOLDING THAT FIRSTLY, THE INTEREST INCOME IN THE HANDS OF HEAD OFFICE IS LIABLE TO TAX AND FURTHER NO DEDUCTION CAN BE ALLOWED TO THE INDIAN BRANCH TOWAR DS INTEREST PAID TO HEAD OFFICE BECAUSE OF THE APPLICATION OF SECTIO N 40(A)(I). THE LEARNED CIT(A) UPHELD THE DISALLOWANCE OF INTEREST PAID BY THE ASSESSEE ON THE GROUND OF MUTUALITY AND ALSO DIRECT ED THAT THE INTEREST ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 9 INCOME CANNOT BE CHARGED TO TAX IN THE HANDS OF THE HEAD OFFICE BECAUSE OF MUTUALITY. THE REVENUE IS ALSO AGGRIEVED AGAINST THE FINDING GIVEN BY THE LEARNED CIT(A) IN THIS REGARD THROUGH GROUND NO.1 OF ITS APPEAL. 15. BEFORE TAKING UP THE GROUNDS TAKEN BY BOTH THE SIDES, IT IS RELEVANT TO MENTION THAT A SPECIAL BENCH IN ASSESSE ES OWN CASE HAS DECIDED THESE ASPECTS IN SUMITOMO MITSUI BANKING CORPORATION V. DDIT [(147 TTJ 649 (MUM.)] IN RELATION TO ASSESSMENT YEAR 2003- 2004. THE FINDING OF THE SPECIAL BENCH CAN BE SUMMA RIZED AS UNDER:- (I) PRINCIPLE OF MUTUALITY APPLIES UNDER THE ACT. AS SU CH, THERE CAN BE NO DEDUCTION OF INTEREST PAID BY INDIA N BRANCH TO HEAD OFFICE / OTHER OVERSEAS BRANCHES; (II) HOWEVER, THE ASSESSEE IS ENTITLED TO DEDUCTION OF INTEREST PAID TO HEAD OFFICE / OTHER OVERSEAS BRANCHES AS PE R THE TERMS OF THE DTAA. (III) MUTUALITY APPLIES IN RELATION TO INCOME EARNED BY T HE INDIAN BRANCH FROM HEAD OFFICE / OTHER OVERSEAS BRA NCHES. AS SUCH THE INTEREST INCOME SO EARNED CANNOT BE CHA RGED TO TAX. (IV) CONSEQUENTLY, THE PROVISIONS OF SECTION 40(A)(I) CA NNOT APPLY. 16. IN VIEW OF THE RATIO OF THE ABOVE DISCUSSED SPECIAL BENCH DECISION, IT BECOMES MANIFEST THAT THE ASSESSEE IS ENTITLED TO DEDUCTION ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 10 OF INTEREST PAID TO ITS HEAD OFFICE AND OTHER OVERS EAS BRANCHES. ACCORDINGLY GROUND NO.2 OF THE ASSESSEES APPEAL IS ALLOWED. SINCE THE AMOUNT CANNOT BE CHARGED TO TAX IN THE HANDS OF THE HEAD OFFICE BY REASON OF PRINCIPLE OF MUTUALITY, THE GROUND TAK EN BY THE REVENUE IS DISMISSED. 17. THE ONLY OTHER GROUND TAKEN BY THE ASSESSEE IN ITS APPEAL IS AGAINST THE DISALLOWANCE OF INTER OFFICE COMMISSION PAID / PAYABLE BY THE ASSESSEE TO HEAD OFFICE AND OTHER OVERSEAS BRAN CHES. 18. FROM THE AFORESAID ORDER PASSED BY THE SPECIAL BENCH IN ASSESSEES OWN CASE IT IS NOTICED THAT THE PRINCIPL E OF MUTUALITY HAS BEEN HELD TO BE APPLICABLE UNDER DOMESTIC LAW AS A RESULT OF WHICH NO DEDUCTION CAN BE ALLOWED IN RESPECT OF PAYMENTS MAD E BY INDIAN BRANCH TO ITS HEAD OFFICE AND OTHER OVERSEAS BRANCH ES. IT IS ONLY BY VIRTUE OF THE PROVISIONS OF DTAA READ WITH THE RELE VANT CLAUSES OF THE PROTOCOL THAT THE ASSESSEE BECAME ENTITLED TO D EDUCTION OF INTEREST PAID TO ITS HEAD OFFICE AND OTHER OVERSEAS BRANCHES . IT HAS BEEN FAIRLY ADMITTED BY THE LEARNED AR THAT COMMISSION PAID BY THE ASSESSEE TO ITS HEAD OFFICE AND OTHER OVERSEAS BRANCHES IS NOT COVERED ALONG WITH THE DEDUCTIBILITY OF INTEREST AS PER THE PROVISIONS OF THE RELEVANT CLAUSES OF THE DTAA. RESULTANTLY, THE DEDUCTIBILIT Y OF COMMISSION BY THE ASSESSEE TO ITS HEAD OFFICE AND OTHER OVERSE AS BRANCHES WOULD COME FOR CONSIDERATION UNDER THE DOMESTIC LAW ALONE . SINCE THE PRINCIPLE OF MUTUALITY IS APPLICABLE ON TRANSACTION S BETWEEN INDIAN ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 11 BRANCH AND HEAD OFFICE AND OTHER OVERSEAS BRANCHES, THERE CANNOT BE ANY INCOME OR ANY EXPENDITURE DUE TO SUCH INTERNAL TRANSACTIONS. AS THE INTER OFFICE COMMISSION HAS BEEN PAID BY THE AS SESSEE TO ITS HEAD OFFICE AND OTHER OVERSEAS BRANCHES, IT IS OBVIOUSLY A TRANSACTION WITH THE SELF. ACCORDINGLY THE RULE OF MUTUALITY APPLIE S AND THE ASSESSEE CANNOT BE ALLOWED ANY DEDUCTION IN THIS REGARD. THE VIEW TAKEN BY THE LEARNED CIT(A) ON THIS ISSUE IS UPHELD. THIS GR OUND IS NOT ALLOWED. 19. GROUND NO.2 OF THE REVENUES APPEAL IS AGAINST THE DIRECTION OF THE LEARNED CIT(A) FOR NOT TAXING INTER OFFICE COMM ISSION PAID / PAYABLE TO THE HEAD OFFICE. FOLLOWING THE VIEW TAKE N IN THE PRECEDING PARA ON THE GROUND OF THE ASSESSEES APPEAL, THIS GROUND TAKEN BY THE REVENUE IS ALSO LIABLE TO BE DISMISSED BECAUSE OF T HE PRINCIPLE OF MUTUALITY. NEITHER THERE CAN BE ANY DEDUCTION TOWAR DS INTER OFFICE COMMISSION PAID / PAYABLE TO THE HEAD OFFICE NOR TH ERE CAN BE ANY INCOME ON ACCOUNT OF INTER OFFICE COMMISSION PAID / PAYABLE IN THE HANDS OF THE HEAD OFFICE. THIS GROUND IS NOT ALLOWE D. 20. NEXT GROUND OF THE REVENUES APPEAL IS AGA INST THE DIRECTION OF THE LD. CIT(A) FOR NOT CHARGING OF INTEREST U/S 234 B. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE ISSUE OF CHARGING OF INTEREST U/S 234B IN THE PRESENT CASE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) V. NGC NETWORK ASIA LLC [( 2009) 313 ITR ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 12 187 (BOM.)] IN WHICH IT HAS BEEN HELD THAT WHEN THE DUTY IS CAS T ON THE PAYER TO DEDUCT TAX AT SOURCE, ON FAILURE OF TH E PAYER TO DO SO, NO INTEREST CAN BE CHARGED FROM THE PAYEE ASSESSEE U/S 234B. THE SAME VIEW HAS BEEN REITERATED IN DIT (IT) V. KRUPP UDHE GMBH[(2010) 38 DTR (BOM.) 251]. AS THE ASSESSEE BEFORE US IS A NON-RESIDENT, NATURALLY ANY AMOUNT PAYABLE TO IT WHICH IS CHARGEA BLE TO TAX UNDER THE ACT, IS OTHERWISE LIABLE FOR DEDUCTION OF TAX A T SOURCE. IN THAT VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE HOLD THAT NO INTEREST CAN BE CHARGED UNDER SECTIONS 234B AND 234C OF THE ACT. THIS GROUND IS, THEREFORE, NOT ALLOWED. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ASSESSMENT YEAR 2000-2001 22. THIS APPEAL BY THE REVENUE IS AGAINST THE DELET ION OF PENALTY OF ` 8,56,72,539 IMPOSED BY THE ASSESSING OFFICER U/S 27 1(1)(C) OF THE ACT. 23. SHORN OF UNNECESSARY DETAILS IT IS OBSERVED THA T THE ASSESSING OFFICER IMPOSED PENALTY IN RESPECT OF TWO DISALLOWA NCES, VIZ., FIRST, U/S 40(A)(I) TO THE TUNE OF ` 14.92 CRORE AND SECOND, INCOME OF THE HEAD OFFICE / FOREIGN BRANCHES AT ` 14.92 CRORE. WHEN THE MATTER CAME UP BEFORE THE TRIBUNAL IN QUANTUM PROCEEDINGS, BOTH THE ADDITIONS SO MADE BY THE ASSESSING OFFICER WERE FINALLY DELETED BY FOLLOWING THE SPECIAL BENCH ORDER PASSED IN ASSESSEES OWN CASE. WHEN THE ITA NO.2720/MUM/2006 & ORS. M/S.SUMITOMO MITSUI BANKING CORPORATION. 13 ADDITIONS MADE IN THE ASSESSMENT ORDER HAVE BEEN DE LETED, OBVIOUSLY THERE CANNOT BE ANY FOUNDATION FOR IMPOSITION OF PE NALTY QUA SUCH ADDITIONS. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER IN DELETING THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE AC T. 24. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 12 TH DAY OF OCTOBER, 2012. !2 - 01( 3!'4 1 - 5 SD/- SD/- (VIJAY PAL RAO) (R.S.SYAL) $ ! $ ! $ ! $ ! / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI ; 3!' DATED : 12 TH OCTOBER, 2012. DEVDAS* !2 - +$/6' 7'(/ !2 - +$/6' 7'(/ !2 - +$/6' 7'(/ !2 - +$/6' 7'(// COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. 8 () / THE CIT(A)-VI, MUMBAI. 4. 8 / CIT 5. ';5 +$/$' , , / DR, ITAT, MUMBAI 6. 5< = / GUARD FILE. !2' !2' !2' !2' / BY ORDER, ,'/ +$/ //TRUE COPY// > > > >/ // /? # ? # ? # ? # ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI