Sundaram Clayton Limited, CHENNAI V. DCIT Corporate Circle 6(2), CHENNAI

ITA 3398/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4111 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Double taxation relief; Earning of tax free income; TDS; Rule 8D
• Section: 14A; 40(a)(ia)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ! ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 3398/CHNY/2018 / ASSESSMENT YEAR : 2012-13 M/S. SUNDARAM CLAYTON LIMITED, NO 29, JAYALAKSHMI ESTATES, HADDOWS ROAD, CHENNAI 600 006. [PAN: AAACS 4920J] VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -6(2), CHENNAI 600034. ( / APPELLANT) ( #$%& /RESPONDENT ) %& ' ( / APPELLANT BY : SHRI. VIKRAM VIJAYARAGHAVAN, ADVOCATE #$%& ' ( / RESPONDENT BY : SHRI. AR V SREENIVASAN, JCIT * '+! /DATE OF HEARING : 19.11.2019 ,-. '+! /DATE OF PRONOUNCEMENT : 12.02.2020 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-15, CHENNAI IN ITA NO. 155/2015-16/CIT(A)-15 DATED 26.09.2018 FOR ASSESSME NT YEAR 2012-13. 2. M/S. SUNDARAM CLAYTON LTD., THE ASSESSEE, IS CAR RYING ON MANUFACTURE OF AUTOMOTIVE COMPONENTS AND APPLICATIO N. WHILE MAKING :-2-: ITA NO.3398/CHNY/2018 THE ASSESSMENT FOR ASSESSMENT YEAR 2012-13, THE ASS ESSING OFFICER, INTER ALIA, MADE DISALLOWANCE U/S. 14A R.W.R. 8D AN D DISALLOWED CERTAIN FOREIGN REMITTANCES WHICH HE CONSIDERED THAT THEY F ALL UNDER THE CATEGORY OF FEES FOR TECHNICAL AND PROFESSIONAL SER VICES, OF WHICH THE ASSESSEE HAS NOT DEDUCTED TDS. THEREFORE, HE DISAL LOWED THEM. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT (A). THE LD. CIT(A) CONFIRMED THE DISALLOWANCES. AGGRIEVED AGAINST THE ORDER OF THE LD. CIT(A), THE ASSESSEE FILED THIS APPEAL. 3. THE LD. AR SUBMITTED THAT THE LD. CIT(A) ERRED I N NOT APPRECIATING THAT THE ASSESSEE HAS SUFFICIENT OWN F UNDS/INTERNAL ACCRUAL TO COVER THE ENTIRE INVESTMENTS MADE AND THAT NO PA RT OF THE BORROWED FUNDS WERE USED BY THE ASSESSEE TO MAKE THE INVESTM ENTS. SINCE NO PART OF THE BORROWED FUNDS COULD BE ATTRIBUTED FOR MAKING THE INVESTMENTS, NO PART OF THE INTEREST EXPENDITURE CO ULD BE DISALLOWED BY INVOKING SECTION 14A R.W.R. 8D2(II). IN THIS REGAR D, THE LD. AR RELIED ON THE ORDER OF THIS TRIBUNALS DECISION IN THE ASSESS EES OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 2612/MDS/2014 & CO NO. 137/MDS/2014 DATED 19.08.2015 FOR ASSESSMENT YEAR 2 010-11, WHEREIN ACCEPTING THE ASSESSEES STAND, THE LD. CIT(A) DIRE CTED THE AO TO DELETE THE INTEREST DISALLOWANCE U/S. 14A WHICH WAS UPHELD BY THE ITAT. :-3-: ITA NO.3398/CHNY/2018 4. WE HEARD THE RIVAL SUBMISSIONS. THE RELEVANT PO RTION OF THE ORDER IS AS UNDER: 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES. THE ISSUE IN APPEAL HAS BEEN ELABORATELY CONSIDERED BY THE COMMI SSIONER OF INCOME TAX (APPEALS) WITH REFERENCE TO THE SUBMISSIONS MAD E BY THE ASSESSEE AND THE OBSERVATIONS OF THE ASSESSING OFFICER AND P ARTLY SUSTAINED THE DISALLOWANCE 4 ITA NO.2612/MDS/2014 & C.O. NO.137/M DS/2014 TO THE EXTENT OF ` 35,18,000/- AND DELETING THE INTEREST C OMPONENT OF ` 2,66,89,000/- OBSERVING AS UNDER:- 5.2.2 THE AR OF THE APPELLANT ALSO DRAWN TO MY ATTENTION THE ORDER PASSED BY CIT(A) IN ITA NO.39 & 394/2011-12 DATED 28.03.2013 FOR THE A.Y. 2009-10 I N THE APPELLANT'S OWN CASE WHEREIN THE DISALLOWANCE OF INTEREST EXPEN SE UNDER RULE 8D(II) WAS DELETED BY MY PREDECESSOR ON THE GROUND THAT OW N FUNDS WERE DEPLOYED FOR MAKING INVESTMENTS. I HAVE CONSIDERED THE FINDINGS OF THE AO AS WELL AS THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT ON THIS ISSUE CAREFULLY. I HAVE ALSO GONE THROUGH THE COMMI SSIONER (APPEALS) ORDER FOR THE ASST. YEAR 2009- 10 IN ITA NOS 39&394 /2011-12 DATED 28.03.2013 RELIED ON BY THE APPELLANT. I FIND THAT THERE IS CONSIDERABLE FORCE IN THE SUBMISSIONS OF THE APPELLANT. THE APPE LLANT SUBMITTED THAT NONE OF THE BORROWED FUNDS HAVE BEEN USED DIRECTLY OR INDIRECTLY FOR MAKING THE INVESTMENTS. THE APPELLANT ALSO SUBMITTE D THAT FOR ALL THE INVESTMENTS MADE IN EARLIER YEARS, THE COMPANY HAS SUFFICIENT OWN FUNDS FOR MAKING THE INVESTMENTS. THE APPELLANT HAS CLEAR LY ESTABLISHED WITH THE FINANCIAL STATEMENTS FOR THE PERIOD FROM 2001-0 2 TO 2009-10 THAT (A) IT HAD SUFFICIENT FUNDS TO MAKE THE INVESTMENTS (B) IT HAD SUFFICIENT PROFITS IN THE EARLIER YEARS WHEN THE INVESTMENTS WERE MADE (C) AND IN ALL THE YEARS THE BORROWED FUNDS WERE UTILIZED FOR THE PURP OSE OF THE BUSINESS AND (D)THE BORROWED FUNDS WERE ACTUALLY REDUCED TO RS.28869.44 LAKHS AS ON 31.03.2010 COMPARED TO RS.33929.88 LAKHS AS O N 31.03.2009. 5 ITA NO.2612/MDS/2014 & C.O. NO.137/MDS/2014 ON THE OTHER HAND, THE AO ESTIMATED THE DISALLOWANCE OF INTEREST AMOUNT WI THOUT ANY MATERIAL PLACING ON THE RECORD. THE HON'BLE HIGH COURT OF BO MBAY IN THE CASE OF HDFC BANK LTD. CITED (SUPRA) EXPLAINED THE LEGAL PO SITION OF LAW IN PARA 5 :-4-: ITA NO.3398/CHNY/2018 OF THE ORDER DATED 27.03.2014 AS UNDER: 'WE FIND TH AT FACTS OF THE PRESENT CASE ARE SQUARELY COVERED BY THE JUDGEMENT IN THE C ASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA). THE FINDING OF TH E FACT GIVEN BY THE ITAT IN THE PRESENT CASE IS THAT THE ASSESEE'S OWN FUNDS AND OTHER NON-INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN TAX FREE SECURITIES. THIS FACTUAL POSITION IS NOT ONE THAT IS DISPUTED. IN TH E PRESENT CASE, UNDISPUTEDLY THE ASSESEE'S CAPITAL, PROFIT AND RESE RVE, SURPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER THAN THE INVESTMENT IN THE TAX FREE SECURITIES. IN VIEW OF THIS FACTUAL POSITION, AS PE R THE JUDGEMENT OF THIS COURT IN THE CASE OF RELIANCE UTILITIES AND POWER L TD.(SUPRA), IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASS ESSEE WOULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESEE.' APPLYING THE ABOVE PRINCIPLES TO THE FACTS OF THE CASE, IT IS PRESUMED THAT THE APPELLANT HAD MADE INVESTMENTS ONLY OUT OF THE SURPLUS FUNDS AVAI LABLE FROM THE EARLIER YEARS. RESPECTFULLY FOLLOWING THE DECISION OF THE H IGH COURT OF BOMBAY IN THE CASE OF HDFC BANK LTD. CITED (SUPRA), DECISION OF THE LEARNED CIT(APPEALS) IN THE APPELLANT'S OWN CASE FOR THE A. Y. 2009-10, I AM FULLY CONVINCED THAT THE AO HAS LEGALLY ERRED IN MAKING D ISALLOWANCE ON THE COMPONENT OF INTEREST. UNDER THE FACTS AND CIRCUMST ANCES OF THE CASE AND LEGAL POSITION, I AM OF THE CONSIDERATE VIEW 6 ITA NO.2612/MDS/2014 & C.O. NO.137/MDS/2014 THAT THERE CAN BE NO DISALLOWA NCE IN SO FAR AS INTEREST OF BORROWINGS IS CONCERNED U/S 14A. THE AO , THEREFORE, IS DIRECTED TO DELETE THE INTEREST AMOUNT OF RS.2,66,8 9,000/- OUT OF THE TOTAL AMOUNT OF RS.3,02,07,000/-. HENCE, THIS GROUND OF A PPEAL IS ALLOWED. 5.2.3 DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE AR OF THE APPELLANT WAS REQUIRED TO GIVE EXPLANATION AS TO BASIS OF ALL OCATION OF EXPENSE OF RS.27,87,500/- IN RELATION TO EXEMPT INCOME. TO THI S QUERY, THE AR OF THE APPELLANT FAILED TO GIVE BASIS FOR ALLOCATION OF TH E EXPENSE. HOWEVER, IN THE ANNUAL ACCOUNTS, THE APPELLANT CLAIMED HUGE EXP ENSE FOR EARNING EXEMPT INCOME AND NON-EXEMPT INCOME. NO SEPARATE AC COUNTS ARE MAINTAINED FOR EARNING EXEMPT INCOME. THE SIZE OF T HE INVESTMENT PORTFOLIO WAS RS.73.43 CRORES WHICH IS HUGE. I AM O F THE VIEW THAT THE AO HAS CORRECTLY APPLIED THE PROVISIONS OF SEC.14A REA D WITH RULE 8D AND APPLIED 0.5% OF AVERAGE INVESTMENTS WHICH WORK OUT TO RS.35,18,000/- WHICH IS REASONABLE AND JUSTIFIABLE. THIS GROUND OF APPEAL, AS IT RELATES TO :-5-: ITA NO.3398/CHNY/2018 DISALLOWANCE OF 0.5% OF AVERAGE INVESTMENTS AS EXPE NDITURE IS CONFIRMED. THE TOTAL DISALLOWANCE U/S 14A IS RESTRI CTED TO RS.35,18,000/-. HENCE GROUND NO.2 OF THE APPEAL RELATING TO DISALLO WANCE OF EXPENDITURE FOR EARNING THE EXEMPT INCOME U/S 14A IS TREATED AS PARTLY ALLOWED. 7. ON GOING THROUGH THE ABOVE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS), WE DO NOT FIND ANY VALID REASON TO INTER FERE WITH HIS FINDINGS IN PARTLY DELETING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. THE REVENUE ALSO DID NOT REBUT THE FINDINGS OF THE COMM ISSIONER OF INCOME TAX (APPEALS) WITH EVIDENCES. THUS, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. THEREFORE, FOLLOWING THE ABOVE ORDER, THE AO IS DIR ECTED NOT TO MAKE ANY DISALLOWANCE U/S. 14A R.W.R 8D(2)(II). THUS, T HE CORRESPONDING GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED. 5. FURTHER, THE LD. AR SUBMITTED THAT THE LD. CIT(A ) OUGHT TO HAVE APPRECIATED THAT ONLY THOSE INVESTMENT THAT HAD YIE LDED EXEMPT INCOME DURING THE YEAR UNDER THE CONSIDERATION OUGHT TO HA VE BEEN CONSIDERED FOR COMPUTING THE DISALLOWANCE U/S. 14A R.W.R. 8D(2 )(III). IN THIS REGARD, THE LD. AR RELIED ON THIS SPECIAL BENCH DECISION IN THE CASE OF ACIT, CIRCLE-17, NEW DELHI VS VIREET INVESTMENT PVT. LTD. , ITA NO. 502/DEL/2012 & CO NO. 68/DEL/2014 FOR ASSESSMENT YE AR 2008-09 DATED 16.06.2017. :-6-: ITA NO.3398/CHNY/2018 6. WE HEARD THE RIVAL SUBMISSIONS. FOLLOWING THE S PECIAL BENCH DECISION, SUPRA, WE DIRECT THE AO TO COMPUTE DISALL OWANCE U/S. 14A R.W.R. 8D(2)(III) BY CONSIDERING ONLY THOSE INVESTM ENTS WHICH YIELDED EXEMPT INCOME DURING THE YEAR FOR THE PURPOSE OF CO MPUTING AVERAGE VALUE OF INVESTMENT AND ACCORDINGLY, RECOMPUTE THE DISALLOWANCE U/S. 14A R.W.R. 8D(2)(III). 7. WITH REGARD TO THE DISALLOWANCE U/S. 40(A)(IA) I N THE CASE OF MR. JOHN LYONS THE AR SUBMITTED THAT THE PAYMENT TO MR. JOHN LYONS IS MADE TOWARDS THE FEES FOR CONSULTANCY SERVICES REND ERED BY HIM. THIS IS COVERED BY ARTICLE 14 INDEPENDENT PERSONAL SER VICES OF THE DTAA BETWEEN INDIA AND IRELAND, ACCORDING TO WHICH, THE INCOME IS TAXABLE IN INDIA, ONLY (I) THE CONSULTANT HAS STAYED FOR A PER IOD OF 183 DAYS OR MORE IN INDIA AND THE INCOME IS ATTRIBUTABLE TO THE ACTIVITIES CARRIED OUT BY HIM IN INDIA, OR (II) THE CONSULTANT HAS A FIXED BASE IN INDIA AND THE INCOME IS ATTRIBUTABLE TO THAT FIXED BASE. SINCE T HE PERIOD OF HIS STAY IN INDIA DURING THE FY IS LESS THAN 183 DAYS AND HE DO ES NOT HAVE A FIXED BASE IN INDIA, THE SAME IS NOT TAXABLE IN INDIA. H ENCE, NO TAX HAS BEEN DEDUCTED ON THE SAME. IN THIS REGARD, HE INVITED OU R ATTENTION TO THE COPY OF THE SAMPLE INVOICE AND DAA ARE ENCLOSED IN THE PAPER BOOK. :-7-: ITA NO.3398/CHNY/2018 7.1 IN THE CASE OF MR. WALTER STURMER, THE AR SUBMI TTED THAT THE PAYMENT TO MR. WALTER STURMER IS MADE TOWARDS THE F EES FOR CONSULTANCY SERVICES RENDERED BY HIM. THIS IS COVE RED BY ARTICLE 14- INDEPENDENT PERSONAL SERVICES OF THE DTAA BETWEEN I NDIA AND AUSTRIA, ACCORDING TO WHICH, THE INCOME IS TAXABLE IN INDIA, ONLY (I) THE CONSULTANT HAS STAYED FOR A PERIOD OF 183 DAYS OR M ORE IN INDIA AND THE INCOME IS ATTRIBUTABLE TO THE ACTIVITIES CARRIED O UT BY HIM IN INDIA, OR (II) THE CONSULTANT HAS A FIXED BASE IN INDIA AND THE IN COME IS ATTRIBUTABLE TO THAT FIXED BASE. SINCE THE PERIOD OF HIS STAY I N INDIA DURING THE FY IS LESS THAN 183 DAYS AND HE DOES NOT HAVE A FIXED BAS E IN INDIA, THE SAME IS NOT TAXABLE IN INDIA. HENCE, NO TAX HAS BE EN DEDUCTED ON THE SAME. IN THIS REGARD, HE INVITED OUR ATTENTION TO T HE COPY OF THE SAMPLE INVOICE, DECLARATION OF PERIOD OF STAY FROM THE CON SULTANT AND DAA ARE ENCLOSED IN THE PAPER BOOK. 7.2 IN THE CASE OF MR. DETLEF HASENFUSS, THE AR SUB MITTED THAT THE PAYMENT TO MR. DETLEF HASENFUSS IS MADE TOWARDS THE FEES FOR CONSULTANCY SERVICES RENDERED BY HIM. THIS IS COVE RED BY ARTICLE 14 INDEPENDENT PERSONAL SERVICES OF THE DTAA BETWEEN I NDIA AND GERMANY, ACCORDING TO WHICH, THE INCOME IS TAXABLE IN INDIA, ONLY (I) THE CONSULTANT HAS STAYED FOR A PERIOD OF 183 DAYS OR M ORE IN INDIA AND THE INCOME IS ATTRIBUTABLE TO THE ACTIVITIES CARRIED O UT BY HIM IN INDIA, OR (II) :-8-: ITA NO.3398/CHNY/2018 THE CONSULTANT HAS A FIXED BASE IN INDIA AND THE IN COME IS ATTRIBUTABLE TO THAT FIXED BASE. SINCE THE PERIOD OF HIS STAY I N INDIA DURING THE FY IS LESS THAN 183 DAYS AND HE DOES NOT HAVE A FIXED BAS E IN INDIA, THE SAME IS NOT TAXABLE IN INDIA. HENCE, NO TAX HAS BE EN DEDUCTED ON THE SAME. IN THIS REGARD, HE INVITED OUR ATTENTION TO T HE COPY OF THE SAMPLE INVOICE, DECLARATION OF PERIOD OF STAY FROM THE CON SULTANT AND DAA ARE ENCLOSED IN THE PAPER BOOK. 7.3 PER CONTRA, THE LD. DR INVITED OUR ATTENTION TO THE ORDER OF THE CIT(A) AND SUBMITTED THAT WITH REGARD TO THE ABOVE THREE PAYMENTS, THE LD. CIT(A) CALLED FOR THE COPIES OF AGREEMENT W ITH FOREIGN AGENTS. INSPITE OF THE REASONABLE OPPORTUNITIES MADE BY THE LD. CIT(A), THE ASSESSEE COULD NOT SUBMIT THE COPY OF THE AGREEMENT S. THE ASSESSEE COULD NOT EVEN SUBMIT THE CORRESPONDENCE WITH REGAR D TO THE NATURE OF SERVICES RENDERED BY THE FOREIGN AGENTS. WITH REGA RD TO THE STAY OF FOREIGN AGENTS, THE LD. CIT(A) ASKED THE ASSESSEE T O GIVEN DOCUMENTS RELATED TO STAY OF FOREIGN AGENT IN INDIA SUCH AS P ASSPORT AND VISA, BUT THE ASSESSEE COULD NOT FURNISH THEM. IN THE CIRCUM STANCES, THE LD. CIT(A) CONFIRMED THE ABOVE DISALLOWANCES MADE BY TH E AO. EVEN BEFORE THE HONBLE ITAT, THE ASSESSEE HAS NOT FURNI SHED ANY EVIDENCES WITH REGARD TO THE SERVICES RENDERED AND THE STAY O F FOREIGN AGENTS IN :-9-: ITA NO.3398/CHNY/2018 INDIA. IN THE CIRCUMSTANCES, THE LD. DR PLEADED TH AT THE ASSESSEES PLEA MAY NOT BE CONSIDERED. 8. IN THE CASE OF HSBC (MAURITIUS) LTD, THE LD. AR SUBMITTED THAT THE PAYMENT MADE TO HSBC (MAURITIUS) LTD IS TOWARDS THE INTEREST ON BUYERS CREDIT. THIS IS COVERED BY ARTICLE 11 IN TEREST OF THE DTAA BETWEEN INDIA AND MAURITIUS, ACCORDING TO WHICH, IN TEREST ARISING FROM A CONTRACTING STATE SHALL BE EXEMPT FROM TAX IN THAT STATE, IF IT IS DERIVED AND BENEFICIALLY OWNED BY ANY BANK CARRYING ON A BO NAFIDE BUSINESS WHICH IS A RESIDENT OF THE OTHER CONTRACTING STATE. IN THE INSTANT CASE, INTEREST IS PAID TO HSBC (MAURITIUS) LTD, WHICH IS A BANK CARRYING ON A BONAFIDE BANKING BUSINESS IN MAURITIUS AND HENCE IS EXEMPT FROM TAX IN INDIA AS PER THE DTAA PROVISIONS. HENCE NO TAX HAS BEEN DEDUCTED ON THE SAME. IN THIS REGARD, HE INVITED OUR ATTENTION TO THE COPY OF THE BUYERS CREDIT AGREEMENT, PAYMENT ADVICE AND DTAA A RE ENCLOSED IN THE PAPER BOOK. PER CONTRA, THE LD DR SUPPORTED THE ORD ERS OF THE LOWER AUTHORITIES. 9. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. ON THE DISALLOWANCES MADE TOWARDS THE PAY MENTS MADE TO MR. JOHN LYONS, MR. WALTER STURMER & MR. DETLEF HAS ENFUSS, SINCE THE RELEVANT MATERIALS WERE NOT PLACED BEFORE THE LOWER AUTHORITIES, WE :-10-: ITA NO.3398/CHNY/2018 DEEM IT FIT TO REMIT THESE ISSUES BACK TO THE AO FO R A FRESH EXAMINATION. THE ASSESSEE SHALL LAY RELEVANT MATERIALS IN SUPP ORT OF ITS CONTENTION BEFORE THE AO AND COMPLY WITH THE REQUIREMENTS OF THE AO IN ACCORDANCE WITH LAW. THE AO IS FREE TO CONDUCT APPR OPRIATE ENQUIRY AS DEEMED FIT, BUT HE SHALL FURNISH ADEQUATE OPPORTUN ITY TO THE ASSESSSEE ON THE MATERIAL ETC TO BE USED AGAINST IT AND DECI DE THE MATTER IN ACCORDANCE WITH LAW. 9.1 WITH REGARD TO THE PAYMENT TO HSBC, WE FIND MER IT IN THE SUBMISSIONS MADE BY THE LD. AR FOR THE REASON THAT THIS ISSUE IS COVERED BY ARTICLE 11(3), WHICH IS REPRODUCED AS UN DER: 3. INTEREST ARISING IN A CONTRACTING STATE SHALL BE EXEMPT FROM TAX IN THAT STATE PROVIDED IT IS DERIVED AND BENEFI CIALLY OWNED BY: A. THE GOVERNMENT OR A LOCAL AUTHORITY OF THE OTHER CO NTRACTING STATE. B. ANY AGENCY OR ENTITY CREATED OR ORGANISED BY THE GO VERNMENT OF THE OTHER CONTRACTING STATE; OR C. ANY BANK CARRYING ON A BONAFIDE BANKING BUSINESS WH ICH IS A RESIDENT OF THE OTHER CONTRACTING STATE. SINCE, THE ASSESSEE HAS MADE OUT OF A CASE UNDER IT EM (C) OF ARTICLE 11(3), SUPRA, THE CORRESPONDING GROUNDS OF THE ASSE SSEE ARE ALLOWED. :-11-: ITA NO.3398/CHNY/2018 10. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, 12 TH FEBRUARY, 2020 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ! ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, / /DATED: 12 TH FEBRUARY, 2020 JPV '#+0121.+ /COPY TO: 1. %& / APPELLANT 2. #$%& /RESPONDENT 3. * 3+ ) ( /CIT(A) 4. * 3+ /CIT 5. 14#+ /DR 6. 567 /GF