BANK OF AMERICA N.A, MUMBAI V. DCIT (IT) RG 1, MUMBAI

ITA 3343/MUM/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3006 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 16-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL K. JHA
• Assessee Lawyers: P.J. PARDIWALAVASANTI PATEL
• Keywords: Double taxation relief; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment; Non-deduction of tax; Difference of opinion; Assessment record; Change of opinion; Set aside
• Section: 263; 143(3); 195; 144C; 115A; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “I” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 3343/MUM/2019 Assessment Year: 2013-14 Bank of America National Association, Ground Floor, A wing, One BKC, G Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051. Vs. Commissioner of Income Tax (International Taxation), Range-1, 3 rd floor, Room No. 9, Mittal Court ‘B’ Wing, Nariman Point, Mumbai-400021. PAN No. AAACB 1537 G Appellant Respondent Assessee by : Mr. P.J. Pardiwala/Vasanti Patel Revenue by : Mr. Sunil K. Jha, CIT-DR Date of Hearing : 11/07/2022 Date of pronouncement : 26/08/2022 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against revision order dated 30/03/2019, passed by the Ld. Commissioner of Income-tax (International Taxation)-I, Mumbai [in short ‘the Ld. CIT’] for assessment year 2013-14, raising following grounds: 1. On the facts and circumstances of the case and in law, the learned CIT has:  erred in initiating proceedings under section 263 of the Act vide notice dated 20 March 2019;  erred in treating the order dated 22 February 2017 issued under section 144C read with section Commissioner of Income Mumbai (hereinafter referred to as the 'learned AO') [hereinafter referred to as the 'Assessment Order'] for AY 2013 and prejudicial to the inter  erred on facts in concluding that the learned AO has made no inquiry regarding the taxability/ deductibility of the interest paid by the Indian branches of the Appellant to its head office and overseas branches; and  erred in setting asi to the learned AO to make a fresh assessment and examine the taxability of interest paid by the Indian branches of the Appellant to its head office and overseas branches. 2. Without prejudice to Ground No. 1, considering the interest paid by the Indian branches of the Appellant to its head office and overseas branches as chargeable to tax under Article 11(2)(a) and Article 14(2) of the Double Taxation Avoidance Agreement between In treating the amendment in section 9(1)(v) of the Act as being retrospective thereby disregarding the Explanatory Note to Finance Act 2015 and Circular 19 of 2015. 3. Without prejudice to Ground No.1 and 2, the lear considering the amount of interest paid by the Indian branches of the Bank of America National Association and circumstances of the case and in law, the learned CIT erred in initiating proceedings under section 263 of the Act vide notice dated 20 March 2019; erred in treating the order dated 22 February 2017 issued under section 144C read with section 143(3) of the Act by the Deputy Commissioner of Income-tax (International Taxation) Mumbai (hereinafter referred to as the 'learned AO') [hereinafter referred to as the 'Assessment Order'] for AY 2013-14 as erroneous and prejudicial to the interest of the revenue; erred on facts in concluding that the learned AO has made no inquiry regarding the taxability/ deductibility of the interest paid by the Indian branches of the Appellant to its head office and overseas erred in setting aside the aforesaid Assessment Order with directions to the learned AO to make a fresh assessment and examine the taxability of interest paid by the Indian branches of the Appellant to its head office and overseas branches. Without prejudice to Ground No. 1, the learned CIT has erred in considering the interest paid by the Indian branches of the Appellant to its head office and overseas branches as chargeable to tax under Article 11(2)(a) and Article 14(2) of the Double Taxation Avoidance Agreement between India and the United States of America and by treating the amendment in section 9(1)(v) of the Act as being retrospective thereby disregarding the Explanatory Note to Finance Act 2015 and Circular 19 of 2015. Without prejudice to Ground No.1 and 2, the learned CIT has erred in considering the amount of interest paid by the Indian branches of the Bank of America National Association ITA No. 3343/M/2019 2 and circumstances of the case and in law, the learned CIT erred in initiating proceedings under section 263 of the Act vide erred in treating the order dated 22 February 2017 issued under 143(3) of the Act by the Deputy tax (International Taxation) - 1(2)(1), Mumbai (hereinafter referred to as the 'learned AO') [hereinafter 14 as erroneous erred on facts in concluding that the learned AO has made no inquiry regarding the taxability/ deductibility of the interest paid by the Indian branches of the Appellant to its head office and overseas de the aforesaid Assessment Order with directions to the learned AO to make a fresh assessment and examine the taxability of interest paid by the Indian branches of the Appellant to the learned CIT has erred in considering the interest paid by the Indian branches of the Appellant to its head office and overseas branches as chargeable to tax under Article 11(2)(a) and Article 14(2) of the Double Taxation Avoidance dia and the United States of America and by treating the amendment in section 9(1)(v) of the Act as being retrospective thereby disregarding the Explanatory Note to Finance ned CIT has erred in considering the amount of interest paid by the Indian branches of the Appellant to its head office and overseas branches as INR 1,86,06,181 as against INR 1,58,79,058. 2. Briefly stated facts of the case are that the assessee of America, is a resident of United States of America and carries on the business of banking through its branches located it various places across the world. During the year under consideration, the assessee had five branches in India namely Mumbai, New De Kolkata, Chennai and Bangalore. In India, the bank carries on its business of banking through its branches (i.e. Establishment). For the year under consideration, the assessee filed return of income on 25/11/2013 declaring total income of ₹817,13,21,220/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short with. The Assessing Officer 22/02/2017, wherein he proposed to the returned income. Bank of America National Association Appellant to its head office and overseas branches as INR 1,86,06,181 as against INR 1,58,79,058. stated facts of the case are that the assessee is a resident of United States of America and carries on the business of banking through its branches located it various places across the world. During the year under consideration, the assessee had five branches in India namely Mumbai, New De Kolkata, Chennai and Bangalore. In India, the bank carries on its king through its branches (i.e. . For the year under consideration, the assessee filed return of income on 25/11/2013 declaring total income of . The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the , 1961 (in short ‘the Act’) were issued and complied Assessing Officer issued a draft assessment order d wherein he proposed certain additions/disallowances income. Thereafter, the Ld. CIT called for the Bank of America National Association ITA No. 3343/M/2019 3 Appellant to its head office and overseas branches as INR 1,86,06,181 stated facts of the case are that the assessee M/s Bank is a resident of United States of America and carries on the business of banking through its branches located it various places across the world. During the year under consideration, the assessee had five branches in India namely Mumbai, New Delhi, Kolkata, Chennai and Bangalore. In India, the bank carries on its king through its branches (i.e. Permanent . For the year under consideration, the assessee filed return of income on 25/11/2013 declaring total income of . The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the ) were issued and complied issued a draft assessment order dated additions/disallowances he Ld. CIT called for the assessment record for the year under consideration for his inspection. On inspection of the record, the Ld. CIT was of the vi that impugned assessment order passed by the was erroneous insofar as prejudicial to the interest of the because of the reason that the interest income in the hand of the assessee, which was pai Indian branches to the head office of the bank or overseas branches. The Ld. CIT also held that assessment order was erroneous insofar as prejudicial to the interest of the did not carry out the inquiries, which he on taxability of interest income and therefore assessment order is deemed to be erroneous invoking 263 of the Act. After considering response to the show cause no explanation to section 9(1)(v)(c) 2015, with effect from 01/04/2016, is retrospective in nature, Bank of America National Association assessment record for the year under consideration for his inspection. On inspection of the record, the Ld. CIT was of the vi that impugned assessment order passed by the Assessing Officer was erroneous insofar as prejudicial to the interest of the eason that the Assessing Officer interest income in the hand of the assessee, which was pai Indian branches to the head office of the bank or overseas branches. The Ld. CIT also held that assessment order was erroneous insofar as prejudicial to the interest of the Revenue as the Assessing Officer did not carry out the inquiries, which he ought to have carried out on taxability of interest income and therefore assessment order is deemed to be erroneous invoking Explanation-1, below the section After considering the submission of the assessee in response to the show cause notice issued, the Ld. explanation to section 9(1)(v)(c) introduced by way of Finance with effect from 01/04/2016, is retrospective in nature, Bank of America National Association ITA No. 3343/M/2019 4 assessment record for the year under consideration for his inspection. On inspection of the record, the Ld. CIT was of the view Assessing Officer was erroneous insofar as prejudicial to the interest of the Revenue did not assess interest income in the hand of the assessee, which was paid by the Indian branches to the head office of the bank or overseas branches. The Ld. CIT also held that assessment order was erroneous insofar Assessing Officer ought to have carried out on taxability of interest income and therefore assessment order is 1, below the section the submission of the assessee in Ld. CIT held that by way of Finance Act with effect from 01/04/2016, is retrospective in nature, therefore, the interest income of head office/overseas branches is taxable in the hand of India. Accordingly, he set aside directed to make a fresh assessment order observing as under: “15. As in the instant case, the AO has failed to make any inquiry in relation to the is payment of interest by the Indian branch PE to HO/Overseas branches, which has been borne by the Indian branch PE as an expense, the assessment order is erroneous and prejudicial to the Revenue, within th evident that the interest paid by Indian branch PE to its HO/Overseas branches is taxable in India as income of the assessee @ 10% u/s 9(1)(v)(c) of the Act read with Article 11(2)(a) and 14(3) of the India-USA DTA. Therefore the assessment order made u/s 143(3) read with section 144C(3) of the Act by the AO is set aside and the assessing officer is directed to make a fresh assessment for AY 2013 14 and examine the taxability of the interest income of the a light of the discussion above in relation to the interest paid by the Indian branch PE of the assessee to its HO/Overseas branches which is also borne by the Indian branch PE as expense, after making due inquiries and allowing assessee.” 3. Aggrieved, the assessee is before the grounds as reproduced above. Bank of America National Association the interest income of head office/overseas branches is taxable in the hand of permanent establishment of the assessee . Accordingly, he set aside impugned assessment order and directed to make a fresh assessment order observing as under: As in the instant case, the AO has failed to make any inquiry in relation to the issue of income arising to the assessee on account of payment of interest by the Indian branch PE to HO/Overseas branches, which has been borne by the Indian branch PE as an expense, the assessment order is erroneous and prejudicial to the Revenue, within the meaning of section 263(1) of the Act. evident that the interest paid by Indian branch PE to its HO/Overseas branches is taxable in India as income of the assessee @ 10% u/s 9(1)(v)(c) of the Act read with Article 11(2)(a) and 14(3) of the USA DTA. Therefore the assessment order made u/s 143(3) read with section 144C(3) of the Act by the AO is set aside and the assessing officer is directed to make a fresh assessment for AY 2013 14 and examine the taxability of the interest income of the a light of the discussion above in relation to the interest paid by the Indian branch PE of the assessee to its HO/Overseas branches which is also borne by the Indian branch PE as expense, after making due inquiries and allowing adequate opportunities of being heard to the , the assessee is before the Tribunal by way of raising grounds as reproduced above. Bank of America National Association ITA No. 3343/M/2019 5 the interest income of head office/overseas branches is permanent establishment of the assessee in impugned assessment order and directed to make a fresh assessment order observing as under: As in the instant case, the AO has failed to make any inquiry in sue of income arising to the assessee on account of payment of interest by the Indian branch PE to HO/Overseas branches, which has been borne by the Indian branch PE as an expense, the assessment order is erroneous and prejudicial to the e meaning of section 263(1) of the Act. It is also evident that the interest paid by Indian branch PE to its HO/Overseas branches is taxable in India as income of the assessee @ 10% u/s 9(1)(v)(c) of the Act read with Article 11(2)(a) and 14(3) of the USA DTA. Therefore the assessment order made u/s 143(3) read with section 144C(3) of the Act by the AO is set aside and the assessing officer is directed to make a fresh assessment for AY 2013- 14 and examine the taxability of the interest income of the assessee in light of the discussion above in relation to the interest paid by the Indian branch PE of the assessee to its HO/Overseas branches which is also borne by the Indian branch PE as expense, after making due ties of being heard to the by way of raising 4. Before us, a paperbook containing pages 1 to 74 has been filed on behalf of the assessee. 5. The Ld. Senior counsel the Ld. CIT(A) and submitted that the Indian branches of Bank of America to its head office/overseas branches was before the 10 to 2012-13 and no addition has been made in those assessment years by the Assessing Officer bench of ITAT, in the case of DDIT (supra) and the consideration respectfully following a consistent approach with his predecessor chosen not to add the assessee. According to him the view after verification/enquiry submission of the assessee on the issue, thus the proposed revision tantamount to change of opinion, which is not permissible under the Bank of America National Association a paperbook containing pages 1 to 74 has been filed on behalf of the assessee. counsel referred to the submission made and submitted that the issue of interest paid by of Bank of America to its head office/overseas branches was before the Assessing Officer in assessment year 2009 13 and no addition has been made in those assessment Assessing Officer relying on the decision of the special bench of ITAT, in the case of Sumitomo Mitsui banking Corp Vs and the Assessing Officer in the year under consideration respectfully following a consistent approach with his predecessor chosen not to add said interest income in the hands of the assessee. According to him the Assessing Officer view after verification/enquiry of the old records and the submission of the assessee on the issue, thus the proposed revision tantamount to change of opinion, which is not permissible under the Bank of America National Association ITA No. 3343/M/2019 6 a paperbook containing pages 1 to 74 has been filed to the submission made before issue of interest paid by of Bank of America to its head office/overseas in assessment year 2009- 13 and no addition has been made in those assessment relying on the decision of the special Sumitomo Mitsui banking Corp Vs in the year under consideration respectfully following a consistent approach with his interest income in the hands of Assessing Officer has made this of the old records and the submission of the assessee on the issue, thus the proposed revision tantamount to change of opinion, which is not permissible under the provision of section 263 of the erroneous or prejudicial to 6. Further, he submitted that Ld. Assessing Officer Bench in the case of DCIT Vs BNP Parbas SA for assessment year 2012-13 in ITA No. 1689/Mum/ section 9(1)(v)(c) of the 6.1 Accordingly, he submitted that assessment order to be erroneous, is not fulfilled, the order of Ld. CIT need to be reversed/quashed. 7. The Ld. DR on the other and submitted that the Indian branches i.e. permanent establishment of the assessee of interest paid by the Indian branches to head branches, whereas for avoiding taxability of interest Bank of America National Association provision of section 263 of the Act as same cannot be regarded as erroneous or prejudicial to the interest of the revenue. he submitted that there is no error in the order of the Assessing Officer in view of the decision of ITAT, DCIT Vs BNP Parbas SA for assessment year No. 1689/Mum/2018, wherein the ) of the Act has been held to be prospective. he submitted that once the condition of assessment order to be erroneous, is not fulfilled, the order of reversed/quashed. DR on the other hand relied on the order of the and submitted that the Indian branches i.e. permanent establishment of the assessee, invoked DTAA for claiming deduction of interest paid by the Indian branches to head whereas for avoiding taxability of interest Bank of America National Association ITA No. 3343/M/2019 7 as same cannot be regarded as the interest of the revenue. there is no error in the order of the view of the decision of ITAT, Mumbai ‘I’ DCIT Vs BNP Parbas SA for assessment year , wherein the Explanation to has been held to be prospective. once the condition of assessment order to be erroneous, is not fulfilled, the order of the relied on the order of the Ld. CIT, and submitted that the Indian branches i.e. permanent DTAA for claiming deduction of interest paid by the Indian branches to head office/overseas whereas for avoiding taxability of interest received by the head office/overseas branches as income in the establishment, the assessee the Income-tax Act According to him, in respect of two legs of same transaction, the assessee is invoking DTAA and Income which should not be permitted in law. the Assessing Officer without making an enquiry is erroneous to that extent of not assessing the interest income under reference. 8. We have heard rival submission of the parties dispute and perused the relevant material on record. In the case, the Assessing Officer in the impugned assessment order dated 22/02/2017 has proposed addition of interest income of ₹207,05,49,598/- earned by the head office/overseas bran from the Indian clients on external commercial borrowing (ECB) issued as attributable to Indian branches in view of force of Bank of America National Association head office/overseas branches as income in the hands of establishment, the assessee is invoking mutuality principle Act, instead of following provisions of DTAA. According to him, in respect of two legs of same transaction, the invoking DTAA and Income-tax Act which should not be permitted in law. He submitted that Assessing Officer in accepting the version of the assessee without making an enquiry is erroneous to that extent of not assessing the interest income under reference. rd rival submission of the parties dispute and perused the relevant material on record. In the case, the in the impugned assessment order dated 22/02/2017 has proposed addition of interest income of earned by the head office/overseas bran from the Indian clients on external commercial borrowing (ECB) issued as attributable to Indian branches in view of force of Bank of America National Association ITA No. 3343/M/2019 8 hands of permanent s invoking mutuality principle under ng provisions of DTAA. According to him, in respect of two legs of same transaction, the Act simultaneously, He submitted that order of rsion of the assessee, without making an enquiry is erroneous to that extent of not rd rival submission of the parties on the issue in dispute and perused the relevant material on record. In the case, the in the impugned assessment order dated 22/02/2017 has proposed addition of interest income of earned by the head office/overseas branches from the Indian clients on external commercial borrowing (ECB) issued as attributable to Indian branches in view of force of attraction rules and proposed to tax at the rate of 20% along with applicable surcharge and cess under the provision of sectio of the Act read with Article 8.1 But the Ld. CIT after Form No. 3CEB of Income Indian branches, which are permanent establishment of the assessee in India, has made payments of to the head office/overseas branches but the not make any query for taxing of office/overseas branches as a separate item of income of the HO as distinct from the business profit of the branch PE in India. 8.2 According to the hands of the PE in India under the provisions of under the Income-tax income is not taxable in the hands of t Bank of America National Association attraction rules and proposed to tax at the rate of 20% along with applicable surcharge and cess under the provision of sectio Article 7(3) of DTAA. CIT after perusal of records observed Income-tax Rules, 1962 (in short Indian branches, which are permanent establishment of the ia, has made payments of ₹ 1,86,06,181/ to the head office/overseas branches but the Assessing Officer not make any query for taxing of said interest receipt of office/overseas branches as a separate item of income of the HO as distinct from the business profit of the branch PE in India. According to the Ld. CIT said interest income is taxable in the of the PE in India under the provisions of DTAA as well as tax Act, whereas according to the assessee, said income is not taxable in the hands of the PE in India under the Bank of America National Association ITA No. 3343/M/2019 9 attraction rules and proposed to tax at the rate of 20% along with applicable surcharge and cess under the provision of section 115A perusal of records observed that from in short ‘the Rules’) that Indian branches, which are permanent establishment of the 181/- as interest Assessing Officer did receipt of the head office/overseas branches as a separate item of income of the HO as distinct from the business profit of the branch PE in India. CIT said interest income is taxable in the DTAA as well as , whereas according to the assessee, said he PE in India under the Income-tax Act in view of the decision of the special Tribunal in the case of Sumitomo Mitsui 8.3 In the case of Sumitomo Mitsui banking Corp (supra), following two questions were raised before the Members: “1. Whether or not on the facts and in the circumstances of the case, the CIT(A) was justified in holding that interest payable by the Indian PE of the foreign bank to its HO and other Overseas Branches, deductible in computing its total income. 2. Whether or law, the ld. CIT(A) the Indian of a foreign to its HO and branch taken into account for the purpose of computing income HO li be taxed in India.” 8.4 The Special Bench of both side decided the questions as under: “88. Keeping in view all the facts of the case and the legal position emanating from the interpretation of the domestic law as wellias that of the treaty as discusse of the view that assessee bank by its Indian b Bank of America National Association in view of the decision of the special in the case of Sumitomo Mitsui Banking Corp (supra). In the case of Sumitomo Mitsui banking Corp (supra), following two questions were raised before the Special Bench Whether or not on the facts and in the circumstances of the case, the CIT(A) was justified in holding that interest payable by the Indian PE of the foreign bank to its HO and other Overseas Branches, deductible in computing its total income. not, on the facts and in the circumstances the case in law, the ld. CIT(A) erred in holding that interest income payable by the Indian of a foreign to its HO and branch offices abroad cannot be taken into account for the purpose of computing income HO li in India.” Bench of the Tribunal after considering arguments of both side decided the questions as under: 88. Keeping in view all the facts of the case and the legal position emanating from the interpretation of the relevant provisions of domestic law as wellias that of the treaty as discussed above. we are of the view that although interest paid to the head lkce of the bank by its Indian branch which constitutes Its PE in Bank of America National Association ITA No. 3343/M/2019 10 in view of the decision of the special Bench of Corp (supra). In the case of Sumitomo Mitsui banking Corp (supra), following Special Bench of Five Whether or not on the facts and in the circumstances of the case, the CIT(A) was justified in holding that interest payable by the Indian PE of the foreign bank to its HO and other Overseas Branches, not, on the facts and in the circumstances the case in holding that interest income payable by abroad cannot be taken into account for the purpose of computing income HO liable to after considering arguments 88. Keeping in view all the facts of the case and the legal position ant provisions of d above. we are although interest paid to the head lkce of the ranch which constitutes Its PE in India is not deductible as expenditure to self. the same attributable to the PE which is taxable in India as per the provisions of article 7(2) paragraph 8 of the protoc assessee. The said interest, however, cannot be taxed in India in the hands of assess which cannot give rise to income that is taxable in India as per the domestic law. Even in the relevant tax treaty which is contrary to the domestic India on this issue. This position applicable in the case of interest paid by Indian branch of a foreign good for the payment of interest made by the Indian branch of a foreign bank to its branch offices abroad as the same stands on the same footing as the payment of interest made to the the time of hearing before us, the learned re sides have also not made the matter specifically. Having held that the interest paid by the Indian branch of the assessee Bank to its head office and other branches outside India is not c that the provisions of section 195 would not be attracted and there being no failure to deduct interest made by the PE, the question of disallowance of the said interest by invoki Accordingly we answer question No.1 referred to in the negative i.e. in favour of the assessee and question No.2 in affirmative i.e. again in Bank of America National Association not deductible as expenditure under the domestic law being payment to self. the same is deductble while determining the profit attributable to the PE which is taxable in India as per the provisions of article 7(2) and 7(3) of the Indo-Japanese treaty read with paragraph 8 of the protocol which are more beneficial to the assessee. The said interest, however, cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the Even otherwise, there is no express provision contained in the relevant tax treaty which is contrary to the domestic India on this issue. This position applicable in the case of interest paid by Indian branch of a foreign bank to its Head Office equ good for the payment of interest made by the Indian branch of a bank to its branch offices abroad as the same stands on the same footing as the payment of interest made to the Head Office. At the time of hearing before us, the learned representatives of both the sides have also not made any separate submissions on this aspect of the matter specifically. Having held that the interest paid by the Indian branch of the assessee Bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of section 195 would not be attracted and there being no failure to deduct tax at source from the said payment of interest made by the PE, the question of disallowance of the said by invoking the provisions of section 40(a)j) does not arise. Accordingly we answer question No.1 referred to this Special Bench in the negative i.e. in favour of the assessee and question No.2 in affirmative i.e. again in favour of the assessee.” Bank of America National Association ITA No. 3343/M/2019 11 under the domestic law being payment while determining the profit attributable to the PE which is taxable in India as per the provisions Japanese treaty read with ol which are more beneficial to the assessee. The said interest, however, cannot be taxed in India in the being payment to self which cannot give rise to income that is taxable in India as per the otherwise, there is no express provision contained in the relevant tax treaty which is contrary to the domestic law in India on this issue. This position applicable in the case of interest paid bank to its Head Office equally holds good for the payment of interest made by the Indian branch of a bank to its branch offices abroad as the same stands on the Head Office. At presentatives of both the any separate submissions on this aspect of the matter specifically. Having held that the interest paid by the Indian branch of the assessee Bank to its head office and other India, it follows that the provisions of section 195 would not be attracted and there tax at source from the said payment of interest made by the PE, the question of disallowance of the said ng the provisions of section 40(a)j) does not arise. this Special Bench in the negative i.e. in favour of the assessee and question No.2 in 8.5 The issue relat branches to head office/overseas branches has been decided in question No. 2 above. The paid by the domestic b taxed in the hand of Foreign Enterprise the principle of mutuality. 8.6 As the assessee before us has option to choose beneficial provisions out of the domestic law vis whether said interest income is taxable in the hands bank under the provisions of the not taxable under the domestic law as held in the case of Sumitomo Mitsue banking Corp (supra). 8.7 Further the Ld. CIT has held that the domestic law has been amended by way of Finance been introduced to section 9(1)( interest payable by the PE in India of a non Bank of America National Association ating treatment of interest paid by domestic branches to head office/overseas branches has been decided in above. The Tribunal (supra) has held that interest paid by the domestic branches of a foreign enterprise of Foreign Enterprise under the domestic law the principle of mutuality. As the assessee before us has option to choose beneficial provisions out of the domestic law vis-à-vis DTAA, irrespective whether said interest income is taxable in the hands bank under the provisions of the DTAA between India and USA, it is not taxable under the domestic law as held in the case of Sumitomo Mitsue banking Corp (supra). Further the Ld. CIT has held that the domestic law has been of Finance Act, 2015 wherein an Explanation been introduced to section 9(1)(v)(c) of the Act which says that interest payable by the PE in India of a non-resident bank to the Bank of America National Association ITA No. 3343/M/2019 12 ing treatment of interest paid by domestic branches to head office/overseas branches has been decided in has held that interest ranches of a foreign enterprise, cannot be under the domestic law on As the assessee before us has option to choose beneficial vis DTAA, irrespective whether said interest income is taxable in the hands of the PE of DTAA between India and USA, it is not taxable under the domestic law as held in the case of Sumitomo Further the Ld. CIT has held that the domestic law has been Explanation has which says that resident bank to the head office or any other perman same shall be deemed to accrue or arise in India and shall be chargeable to tax in the hands of PE in India. According to the Ld CIT said amendment being retrospectively and therefore mutuality principle will not apply in the case of the assessee. 8.8 But we find that SA in ITA No. 1689/Mum/2018 held that operation of explanation introduced by the Finance 2015 is prospective. The relevant finding o reproduced as under: “21. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Undisputedly, the issue relating to the taxability of interest paid by the Indian Branch to the Head Office is a recurr between the assessee and the Revenue from preceding assessment years. While deciding the issue in the preceding assessment years, the Tribunal following the Special Bench decision in case of Sumitomo Mitsui Banking Corporation (supra) has consi Bank of America National Association head office or any other permanent establishment outside India, deemed to accrue or arise in India and shall be chargeable to tax in the hands of PE in India. According to the Ld CIT said amendment being clarificatory in nature, it is applicable retrospectively and therefore mutuality principle will not apply in case of the assessee. But we find that Tribunal in the case of DCIT Vs BNP Paribas SA in ITA No. 1689/Mum/2018 for assessment year 2012 held that operation of explanation introduced by the Finance 2015 is prospective. The relevant finding of the Tribunal reproduced as under: 21. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Undisputedly, the issue relating to the taxability of interest paid by the Indian Branch to the Head Office is a recurr between the assessee and the Revenue from preceding assessment years. While deciding the issue in the preceding assessment years, the Tribunal following the Special Bench decision in case of Sumitomo Mitsui Banking Corporation (supra) has consistently held that Bank of America National Association ITA No. 3343/M/2019 13 ent establishment outside India, deemed to accrue or arise in India and shall be chargeable to tax in the hands of PE in India. According to the Ld. in nature, it is applicable retrospectively and therefore mutuality principle will not apply in DCIT Vs BNP Paribas for assessment year 2012-13 has held that operation of explanation introduced by the Finance Act Tribunal (supra) is 21. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Undisputedly, the issue relating to the taxability of interest paid by the Indian Branch to the Head Office is a recurring dispute between the assessee and the Revenue from preceding assessment years. While deciding the issue in the preceding assessment years, the Tribunal following the Special Bench decision in case of Sumitomo stently held that interest paid by the Indian Branch to the Head Office being a payment made to self is governed by the principles of mutuality, hence, not taxable. In the latest order passed by the Tribunal in assessee’s own case in assessment year 2011 no.444/Mum./2017, dated 29th August 2018, the Tribunal again reiterated the same view. Thus, as could be seen from the facts on record, the issue has been consistently decided by the Tribunal in favour of the assessee up to the assessment year the contention of the Department that as per the provision contained under section 9(1)(v)(c) of the Act interest income is taxable in India and the applicability of such provision has been ignored by the appellate authority, we must ob to the applicability of section 9(1)(v)(c) of the Act was also under consideration of the Special Bench in case of Sumitomo Mitsui Banking Corporation (supra) and the Special Bench clearly and categorically held that Branch to the Head Office is a payment to self, it cannot be brought to tax by relying upon the provision of section 9(1)(v)(c) of the Act. Therefore, insofar as the applicability of the aforesaid provision is concerned, it stands settled in favour of the assessee by the decision of the Tribunal, Special Bench, referred to above. Moreover, by virtue of explanation to section 9(1)(v)(c) of the Act, it is provided that in case of non–resident engaged in banking busines the PE in India to the Head Office would be chargeable to tax in India. However, the aforesaid explanation has been inserted by Finance Act, 2015, w.e.f. 1st April 2016. From the notes and memorandum as well as CBDT Circular expla such explanation, it is evident that such explanation was introduced to overcome the effect and implication of the Special Bench decision Bank of America National Association interest paid by the Indian Branch to the Head Office being a payment made to self is governed by the principles of mutuality, hence, not taxable. In the latest order passed by the Tribunal in assessee’s own case in assessment year 2011–12, vide ITA no.444/Mum./2017, dated 29th August 2018, the Tribunal again reiterated the same view. Thus, as could be seen from the facts on record, the issue has been consistently decided by the Tribunal in favour of the assessee up to the assessment year 2011–12. As regards the contention of the Department that as per the provision contained under section 9(1)(v)(c) of the Act interest income is taxable in India and the applicability of such provision has been ignored by the appellate authority, we must observe, this particular aspect relating to the applicability of section 9(1)(v)(c) of the Act was also under consideration of the Special Bench in case of Sumitomo Mitsui Banking Corporation (supra) and the Special Bench clearly and categorically held that since the interest payable by the Indian Branch to the Head Office is a payment to self, it cannot be brought to tax by relying upon the provision of section 9(1)(v)(c) of the Act. Therefore, insofar as the applicability of the aforesaid provision is rned, it stands settled in favour of the assessee by the decision of the Tribunal, Special Bench, referred to above. Moreover, by virtue of explanation to section 9(1)(v)(c) of the Act, it is provided that in case resident engaged in banking business any interest payable by the PE in India to the Head Office would be chargeable to tax in India. However, the aforesaid explanation has been inserted by Finance Act, 2015, w.e.f. 1st April 2016. From the notes and memorandum as well as CBDT Circular explaining the object and purport of introducing such explanation, it is evident that such explanation was introduced to overcome the effect and implication of the Special Bench decision Bank of America National Association ITA No. 3343/M/2019 14 interest paid by the Indian Branch to the Head Office being a payment made to self is governed by the principles of mutuality, hence, not taxable. In the latest order passed by the Tribunal in 2, vide ITA no.444/Mum./2017, dated 29th August 2018, the Tribunal again reiterated the same view. Thus, as could be seen from the facts on record, the issue has been consistently decided by the Tribunal in 12. As regards the contention of the Department that as per the provision contained under section 9(1)(v)(c) of the Act interest income is taxable in India and the applicability of such provision has been ignored by the serve, this particular aspect relating to the applicability of section 9(1)(v)(c) of the Act was also under consideration of the Special Bench in case of Sumitomo Mitsui Banking Corporation (supra) and the Special Bench clearly and since the interest payable by the Indian Branch to the Head Office is a payment to self, it cannot be brought to tax by relying upon the provision of section 9(1)(v)(c) of the Act. Therefore, insofar as the applicability of the aforesaid provision is rned, it stands settled in favour of the assessee by the decision of the Tribunal, Special Bench, referred to above. Moreover, by virtue of explanation to section 9(1)(v)(c) of the Act, it is provided that in case s any interest payable by the PE in India to the Head Office would be chargeable to tax in India. However, the aforesaid explanation has been inserted by Finance Act, 2015, w.e.f. 1st April 2016. From the notes and memorandum as well ining the object and purport of introducing such explanation, it is evident that such explanation was introduced to overcome the effect and implication of the Special Bench decision of the Tribunal in case of Sumitomo Mitsui Banking Corporation (supra). However, it has been made clear by the CBDT that such amendment by way of explanation will apply from the assessment year 2016–17 onwards. That being the case, as per the relevant statutory provisions applicable to the impugned assessment year and as per the ratio laid down by the Tribunal, Special Bench in case of Sumitomo Mitsui Banking Corporation (supra), which is applicable to the impugned assessment year, the interest income received by the assessee from its Indian Branch being a payment made to self, i taxable at the hands of the assessee. Therefore, respectfully following the Special Bench decision of the Tribunal, Mumbai Bench, in Sumitomo Mitsui Banking Corporation (supra) and the decisions of the Co–ordinate Bench in assessee’s own case in the assessment years, which we are bound to follow adhering to the norms of judicial discipline in the absence of any material difference in facts, we have no hesitation in upholding the decision of the learned Commissioner (Appeals) on the issue. Gr 8.9 Moreover, the Ld. in view of an amendment introduced retrospectively available to the Assessing Officer assessment order. Thus Assessing Officer is not erroneous as far as the issue of assessing interest payment in the hands of the assessee Bank of America National Association of the Tribunal in case of Sumitomo Mitsui Banking Corporation wever, it has been made clear by the CBDT that such amendment by way of explanation will apply from the assessment 17 onwards. That being the case, as per the relevant statutory provisions applicable to the impugned assessment year and ratio laid down by the Tribunal, Special Bench in case of Sumitomo Mitsui Banking Corporation (supra), which is applicable to the impugned assessment year, the interest income received by the assessee from its Indian Branch being a payment made to self, i taxable at the hands of the assessee. Therefore, respectfully following the Special Bench decision of the Tribunal, Mumbai Bench, in Sumitomo Mitsui Banking Corporation (supra) and the decisions of ordinate Bench in assessee’s own case in the assessment years, which we are bound to follow adhering to the norms of judicial discipline in the absence of any material difference in facts, we have no hesitation in upholding the decision of the learned Commissioner (Appeals) on the issue. Grounds are dismissed. Ld. CIT cannot hold the said order ment introduced retrospectively Assessing Officer at the time of pa Thus in our view the order passed by the is not erroneous as far as the issue of assessing interest payment in the hands of the assessee, is concerned. Bank of America National Association ITA No. 3343/M/2019 15 of the Tribunal in case of Sumitomo Mitsui Banking Corporation wever, it has been made clear by the CBDT that such amendment by way of explanation will apply from the assessment 17 onwards. That being the case, as per the relevant statutory provisions applicable to the impugned assessment year and ratio laid down by the Tribunal, Special Bench in case of Sumitomo Mitsui Banking Corporation (supra), which is applicable to the impugned assessment year, the interest income received by the assessee from its Indian Branch being a payment made to self, is not taxable at the hands of the assessee. Therefore, respectfully following the Special Bench decision of the Tribunal, Mumbai Bench, in Sumitomo Mitsui Banking Corporation (supra) and the decisions of ordinate Bench in assessee’s own case in the preceding assessment years, which we are bound to follow adhering to the norms of judicial discipline in the absence of any material difference in facts, we have no hesitation in upholding the decision of the ounds are dismissed.” CIT cannot hold the said order as erroneous ment introduced retrospectively, which was not at the time of passing of the e order passed by the is not erroneous as far as the issue of assessing , is concerned. 8.10 Regarding the claim of the Ld made by the Assessing Officer Assessing Officer has followed no income has been added in the hands of assessee payment by the domestic branches to the head office/overseas branches. The said assessment available with the Assessing Officer submission making its claim that said interest received was not taxable in the hands of the PE in India in view of the precedents. In background of such facts and circumstances, in our opinion, the Assessing Officer further enquiry on the issue in dispute, therefore the finding of the Ld. CIT that no enquiry has been carried out by on the issue in dispute is without any basis and fallacious. explanation below section 263 of the the facts of the case. The said explanation, prescribe that the Bank of America National Association Regarding the claim of the Ld. CIT that no enquiry has been Assessing Officer on the issue in dispute, we find that has followed finding of his predecessors wherein income has been added in the hands of assessee payment by the domestic branches to the head office/overseas . The said assessment records of the earlier years were Assessing Officer and further assessee also made submission making its claim that said interest received was not taxable in the hands of the PE in India in view of the precedents. In background of such facts and circumstances, in our Assessing Officer was not ought to further enquiry on the issue in dispute, therefore the finding of the Ld. CIT that no enquiry has been carried out by the Assessing Officer on the issue in dispute is without any basis and fallacious. explanation below section 263 of the Act is also not applicable the facts of the case. The said explanation, prescribe that the Bank of America National Association ITA No. 3343/M/2019 16 CIT that no enquiry has been sue in dispute, we find that finding of his predecessors wherein income has been added in the hands of assessee for interest payment by the domestic branches to the head office/overseas of the earlier years were and further assessee also made submission making its claim that said interest received was not taxable in the hands of the PE in India in view of the judicial precedents. In background of such facts and circumstances, in our to have carry out further enquiry on the issue in dispute, therefore the finding of the Assessing Officer on the issue in dispute is without any basis and fallacious. The is also not applicable over the facts of the case. The said explanation, prescribe that the assessment order is deemed to be er to the interest of the revenue if the out the inquiries which ought to have been carried out in the facts of the case. In the case submission of the as out further inquiries on the issue 8.11 The Tribunal in the case of No.3747/Mum/2013 circumstances quashed the order under section 263 passed by the CIT. The relevant finding of the “4. We have considered rival submissions and perused the material on record. We have upon. Undisputedly, learned CIT has exercised his power of revision conferred under section 263 of the Act on the issue of taxability of interest paid by the Indian Branch to the Head Office and other overseas branches. As could be seen from the facts on record, in the returns of income filed for the respective assessment years, the assessee had appended notes stating in detail the reasons for which the interest paid to the Head Office/overseas branches are not taxable at the hands of the assessee in India. On a perusal of the said Bank of America National Association assessment order is deemed to be erroneous insofar as prejudicial to the interest of the revenue if the Assessing Officer out the inquiries which ought to have been carried out in the facts of the case. In the case, in background of the earlier years and submission of the assessee, there was no requirement of carrying inquiries on the issue-in-dispute. in the case of JP Morgan chase Bank NA in ITA Mum/2013 for assessment year 2012- circumstances quashed the order under section 263 passed by the CIT. The relevant finding of the Tribunal is reproduced as under: 4. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Undisputedly, learned CIT has exercised his power of revision conferred under section 263 of the Act on the issue of taxability of interest paid by the Indian Branch to the Head Office and other branches. As could be seen from the facts on record, in the returns of income filed for the respective assessment years, the assessee had appended notes stating in detail the reasons for which the interest paid to the Head Office/overseas branches are not taxable at the hands of the assessee in India. On a perusal of the said Bank of America National Association ITA No. 3343/M/2019 17 roneous insofar as prejudicial Assessing Officer has not carried out the inquiries which ought to have been carried out in the facts of in background of the earlier years and was no requirement of carrying an chase Bank NA in ITA -13 in identical circumstances quashed the order under section 263 passed by the is reproduced as under: 4. We have considered rival submissions and perused the material also applied our mind to the decisions relied upon. Undisputedly, learned CIT has exercised his power of revision conferred under section 263 of the Act on the issue of taxability of interest paid by the Indian Branch to the Head Office and other branches. As could be seen from the facts on record, in the returns of income filed for the respective assessment years, the assessee had appended notes stating in detail the reasons for which the interest paid to the Head Office/overseas branches are not taxable at the hands of the assessee in India. On a perusal of the said note, it appears that during the relevant assessment years, Indian branch had received interest from Head Office/overseas branches and had also paid interest to them. In the course of proceedings, the Assessing Officer has issued notice under section 142(1) of the Act raising specific query regarding the interest received from the Indian Branches. In response to the query raised by the Assessing Officer, the assessee has als stating the reasons why the interest received from Indian Branches is not taxable. In support of its claim, the assessee has relied upon certain judicial precedents. The Assessing Officer after considering the submissions of the assessments excluding from taxation the interest income received from Indian Branch. As could be seen from the impugned orders of learned CIT, the primary reason on which he considers the assessment orders to be errone Revenue is, interest received from the Indian Branch is taxable in India as per Article 14(6) of the India learned CIT, the provisions of Tax Treaty will prevail over the provisions of the Explanation (a) to section 9(1)(v)(c) of the Act, has also held that the interest income is taxable even under the provisions of the Act. The issue relating to the taxability of the interest paid by Indian B to the Head Office/other overseas branches of non Company came up for consideration before the Special Bench of the Tribunal in Sumitomo Mitsui Banking Corporation (supra). The Special Bench after considering all the aspects of the i the interplay between the provisions of the Act and the Tax Treaty, held that since the interest paid by Indian Branch to foreign Head Office/overseas branches is in the nature of payment made to self, it Bank of America National Association note, it appears that during the relevant assessment years, Indian branch had received interest from Head Office/overseas branches and had also paid interest to them. In the course of proceedings, the Assessing Officer has issued notice under section 142(1) of the Act raising specific query regarding the interest received from the Indian Branches. In response to the query raised by the Assessing Officer, the assessee has also furnished detailed reply stating the reasons why the interest received from Indian Branches is not taxable. In support of its claim, the assessee has relied upon certain judicial precedents. The Assessing Officer after considering the submissions of the assessee has ultimately concluded the assessments excluding from taxation the interest income received from Indian Branch. As could be seen from the impugned orders of learned CIT, the primary reason on which he considers the assessment orders to be erroneous and prejudicial to the interest of Revenue is, interest received from the Indian Branch is taxable in India as per Article 14(6) of the India–USA Tax Treaty. According to learned CIT, the provisions of Tax Treaty will prevail over the provisions of the Act. Of course, learned CIT by referring to the Explanation (a) to section 9(1)(v)(c) of the Act, has also held that the interest income is taxable even under the provisions of the Act. The issue relating to the taxability of the interest paid by Indian B to the Head Office/other overseas branches of non-resident Banking Company came up for consideration before the Special Bench of the Tribunal in Sumitomo Mitsui Banking Corporation (supra). The Special Bench after considering all the aspects of the issue, including the interplay between the provisions of the Act and the Tax Treaty, held that since the interest paid by Indian Branch to foreign Head Office/overseas branches is in the nature of payment made to self, it Bank of America National Association ITA No. 3343/M/2019 18 note, it appears that during the relevant assessment years, Indian branch had received interest from Head Office/overseas branches and had also paid interest to them. In the course of assessment proceedings, the Assessing Officer has issued notice under section 142(1) of the Act raising specific query regarding the interest received from the Indian Branches. In response to the query raised by o furnished detailed reply stating the reasons why the interest received from Indian Branches is not taxable. In support of its claim, the assessee has relied upon certain judicial precedents. The Assessing Officer after considering assessee has ultimately concluded the assessments excluding from taxation the interest income received from Indian Branch. As could be seen from the impugned orders of learned CIT, the primary reason on which he considers the ous and prejudicial to the interest of Revenue is, interest received from the Indian Branch is taxable in USA Tax Treaty. According to learned CIT, the provisions of Tax Treaty will prevail over the Act. Of course, learned CIT by referring to the Explanation (a) to section 9(1)(v)(c) of the Act, has also held that the interest income is taxable even under the provisions of the Act. The issue relating to the taxability of the interest paid by Indian Branch resident Banking Company came up for consideration before the Special Bench of the Tribunal in Sumitomo Mitsui Banking Corporation (supra). The ssue, including the interplay between the provisions of the Act and the Tax Treaty, held that since the interest paid by Indian Branch to foreign Head Office/overseas branches is in the nature of payment made to self, it will be governed by the principle o taxable under the provisions of the Act. The Special Bench observed, that since the provisions of the Act are more beneficial to the assessee qua the interest income, it will prevail over the provisions of the Tax Treaty. In this context, the Special Bench decision also referred to the CBDT Circular no.740, dated 17th April 1996, and held that if the interest income is not chargeable to tax under the provisions of domestic law, it cannot be brought to tax by way of a Board C The ratio laid down by the Special Bench in the decision referred to above, squarely applies to the facts of the present case. Inasmuch as, the issue of taxability of interest received by a foreign bank from its Indian branch, in our considered op aforesaid decision of the Special Bench and we are bound by such decision. Therefore, according to us, the interest received from the Indian Branch being a payment received from self is governed by the principle of mutuali Act. Further, since the provisions of the Act are more beneficial to the assessee, it will prevail over the provisions of the Tax Treaty as per section 90(2) of the Act, as held by the special Bench. After decision of the special Bench in Sumitomo Mitsui Banking Corporation (supra), the legislature, though, had thought it prudent to make amendment to the provisions of section 9(1)(v)(c) of the Act to nullify the effect of the Special Bench decision. Acc amendment was made to the aforesaid provision by introducing Explanation (a) and (b) by Finance Act, 2015, w.e.f. 1st April 2016. As per Explanation (a) to section 9(1)(v)(c) of the Act, it was clarified that the interest paid by an Indian Branch company shall be deemed to be accruing or arising in India and shall be chargeable to tax in addition to any income attributable to the PE Bank of America National Association will be governed by the principle of mutuality, hence, would not be taxable under the provisions of the Act. The Special Bench observed, that since the provisions of the Act are more beneficial to the assessee qua the interest income, it will prevail over the provisions of the Tax n this context, the Special Bench decision also referred to the CBDT Circular no.740, dated 17th April 1996, and held that if the interest income is not chargeable to tax under the provisions of domestic law, it cannot be brought to tax by way of a Board C The ratio laid down by the Special Bench in the decision referred to above, squarely applies to the facts of the present case. Inasmuch as, the issue of taxability of interest received by a foreign bank from its Indian branch, in our considered opinion, is squarely covered by the aforesaid decision of the Special Bench and we are bound by such decision. Therefore, according to us, the interest received from the Indian Branch being a payment received from self is governed by the principle of mutuality, hence, not taxable under the provisions of the Act. Further, since the provisions of the Act are more beneficial to the assessee, it will prevail over the provisions of the Tax Treaty as per section 90(2) of the Act, as held by the special Bench. After decision of the special Bench in Sumitomo Mitsui Banking Corporation (supra), the legislature, though, had thought it prudent to make amendment to the provisions of section 9(1)(v)(c) of the Act to nullify the effect of the Special Bench decision. Acc amendment was made to the aforesaid provision by introducing Explanation (a) and (b) by Finance Act, 2015, w.e.f. 1st April 2016. As per Explanation (a) to section 9(1)(v)(c) of the Act, it was clarified that the interest paid by an Indian Branch of a non–resident banking company shall be deemed to be accruing or arising in India and shall be chargeable to tax in addition to any income attributable to the PE Bank of America National Association ITA No. 3343/M/2019 19 f mutuality, hence, would not be taxable under the provisions of the Act. The Special Bench observed, that since the provisions of the Act are more beneficial to the assessee qua the interest income, it will prevail over the provisions of the Tax n this context, the Special Bench decision also referred to the CBDT Circular no.740, dated 17th April 1996, and held that if the interest income is not chargeable to tax under the provisions of domestic law, it cannot be brought to tax by way of a Board Circular. The ratio laid down by the Special Bench in the decision referred to above, squarely applies to the facts of the present case. Inasmuch as, the issue of taxability of interest received by a foreign bank from its inion, is squarely covered by the aforesaid decision of the Special Bench and we are bound by such decision. Therefore, according to us, the interest received from the Indian Branch being a payment received from self is governed by the ty, hence, not taxable under the provisions of the Act. Further, since the provisions of the Act are more beneficial to the assessee, it will prevail over the provisions of the Tax Treaty as per section 90(2) of the Act, as held by the special Bench. After the decision of the special Bench in Sumitomo Mitsui Banking Corporation (supra), the legislature, though, had thought it prudent to make amendment to the provisions of section 9(1)(v)(c) of the Act to nullify the effect of the Special Bench decision. Accordingly, amendment was made to the aforesaid provision by introducing Explanation (a) and (b) by Finance Act, 2015, w.e.f. 1st April 2016. As per Explanation (a) to section 9(1)(v)(c) of the Act, it was clarified resident banking company shall be deemed to be accruing or arising in India and shall be chargeable to tax in addition to any income attributable to the PE in India. It further says that the PE in India shall be deemed to be a person separate and view, the aforesaid provision would apply prospectively from 1st April 2016 and not prior to that. The aforesaid view has been expressed by the Co (supra). Therefor cannot be pressed into action for bringing to tax the interest income in the impugned assessment years. In any case of the matter, the issue, whether or not interest received by the Head Office/overseas Branches from the Indian Branch is taxable in India is a highly debatable issue and the position of law prevailing at the time of completion of assessments as per the available judicial precedents on the issue, clearly held that the interest income was not governed by the principle of mutuality. Therefore, it cannot be said that it is not a possible view. Rather, the assessment orders would have been erroneous had the Assessing Officer taxed the interest income received from the Indian Branc the Special Bench in case of Sumitomo Mitsui Banking Corporation, which was available at the time of completion of assessments. Even, assuming for the sake of argument that Explanation (a) to section 9(1)(v)(c) of the Act will under section 263 of the Act cannot be initiated on the basis of such retrospective amendment as the Assessing Officer has to proceed on the basis of law prevailing as on the date of assessments. Thus, looked at from any angle, the assessment orders cannot be considered to be erroneous and prejudicial to the interests of Revenue for not bringing to tax the interest received from the Indian Branch. Accordingly, we hold that the impugned orders of learned CIT passe 263 of the Act are unsustainable in law, hence, have to be quashed. Bank of America National Association in India. It further says that the PE in India shall be deemed to be a person separate and independent of the non–resident person. In our view, the aforesaid provision would apply prospectively from 1st April 2016 and not prior to that. The aforesaid view has been expressed by the Co–ordinate Bench in DCIT v/s BNP Paribas S.A. (supra). Therefore, Explanation (a) to section 9(1)(v)(c) of the Act cannot be pressed into action for bringing to tax the interest income in the impugned assessment years. In any case of the matter, the issue, whether or not interest received by the Head Office/overseas ranches from the Indian Branch is taxable in India is a highly debatable issue and the position of law prevailing at the time of completion of assessments as per the available judicial precedents on the issue, clearly held that the interest income was not taxable as it is governed by the principle of mutuality. Therefore, it cannot be said that it is not a possible view. Rather, the assessment orders would have been erroneous had the Assessing Officer taxed the interest income received from the Indian Branch overlooking the decision of the Special Bench in case of Sumitomo Mitsui Banking Corporation, which was available at the time of completion of assessments. Even, assuming for the sake of argument that Explanation (a) to section 9(1)(v)(c) of the Act will apply retrospectively, however, proceedings under section 263 of the Act cannot be initiated on the basis of such retrospective amendment as the Assessing Officer has to proceed on the basis of law prevailing as on the date of assessments. Thus, looked from any angle, the assessment orders cannot be considered to be erroneous and prejudicial to the interests of Revenue for not bringing to tax the interest received from the Indian Branch. Accordingly, we hold that the impugned orders of learned CIT passed under section 263 of the Act are unsustainable in law, hence, have to be quashed. Bank of America National Association ITA No. 3343/M/2019 20 in India. It further says that the PE in India shall be deemed to be a resident person. In our view, the aforesaid provision would apply prospectively from 1st April 2016 and not prior to that. The aforesaid view has been ordinate Bench in DCIT v/s BNP Paribas S.A. e, Explanation (a) to section 9(1)(v)(c) of the Act cannot be pressed into action for bringing to tax the interest income in the impugned assessment years. In any case of the matter, the issue, whether or not interest received by the Head Office/overseas ranches from the Indian Branch is taxable in India is a highly debatable issue and the position of law prevailing at the time of completion of assessments as per the available judicial precedents on taxable as it is governed by the principle of mutuality. Therefore, it cannot be said that it is not a possible view. Rather, the assessment orders would have been erroneous had the Assessing Officer taxed the interest h overlooking the decision of the Special Bench in case of Sumitomo Mitsui Banking Corporation, which was available at the time of completion of assessments. Even, assuming for the sake of argument that Explanation (a) to section apply retrospectively, however, proceedings under section 263 of the Act cannot be initiated on the basis of such retrospective amendment as the Assessing Officer has to proceed on the basis of law prevailing as on the date of assessments. Thus, looked from any angle, the assessment orders cannot be considered to be erroneous and prejudicial to the interests of Revenue for not bringing to tax the interest received from the Indian Branch. Accordingly, we d under section 263 of the Act are unsustainable in law, hence, have to be quashed. Accordingly, we quash the orders passed under section 263 of the Act and restore the assessment orders passed by the Assessing Officer for the impugned assessment years. Gr 8.12 In view of the discussion above finding of the Tribunal the impugned order passed by the L the condition of order being erroneo Accordingly, we quash the order passed under 263 of the restore the assessment order passed by the grounds of the appeal of the assessee 9. In the result, the appeal filed Order pronounced in the open Court in Sd/- (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 26/08/2022 Dragon Legal/Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT Bank of America National Association Accordingly, we quash the orders passed under section 263 of the Act and restore the assessment orders passed by the Assessing Officer for the impugned assessment years. Grounds are allowed.” In view of the discussion above, respectfully following the Tribunal in the case of JP Morgan Chase NA (supra), the impugned order passed by the Ld. CIT is unsustainable in law a the condition of order being erroneous has not been fulfilled. quash the order passed under 263 of the restore the assessment order passed by the Assessing Officer of the appeal of the assessee are accordingly allowed. In the result, the appeal filed by the assessee is allowed. ounced in the open Court in 26/08/2022. Sd/ RAHUL CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT Copy of the Order forwarded to : Bank of America National Association ITA No. 3343/M/2019 21 Accordingly, we quash the orders passed under section 263 of the Act and restore the assessment orders passed by the Assessing Officer for espectfully following the in the case of JP Morgan Chase NA (supra), d. CIT is unsustainable in law as us has not been fulfilled. quash the order passed under 263 of the Act and Assessing Officer. The accordingly allowed. by the assessee is allowed. /08/2022. Sd/- OM PRAKASH KANT) MEMBER 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// Bank of America National Association BY ORDER, (Sr. Private Secretary ITAT, Mumbai Bank of America National Association ITA No. 3343/M/2019 22 Sr. Private Secretary) ITAT, Mumbai