M/s. Standard Chartered Grindlays Pty Limited, New Delhi V. DDIT, New Delhi

ITA 3459/DEL/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5008 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 1996-1997
• Appeal Filed On: 06-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K DHALL
• Assessee Lawyers: SHASHI M KAPILA P SHARMA
• Keywords: Permanent establishment
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI O.P.KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3459/DEL./2014 (ASSESSMENT YEAR : 1996-97) STANDARD CHARTERED GRINDLAYS VS. DDIT PTY LIMITED CIRCLE-2(2), INTERNATIONAL (FORMERLY KNOWN AS STANDARD TAXATION CHARTERED GRINDLAYS BANK LTD.) C/O. SHASHI M. KAPILA, (ADV.) 17, MAHATMA GHANDHI ROAD, LAJPAT NAGAR-IV NEW DELHI. NEW DELHI (PAN : AAACA1049A)) APPELLANT RESPONDENT ASSESSEE BY : SMT. SHASHI M, KAPILA, P. SHARMA, AD V. REVENUE BY : SHRI G.K.DHALL, CIT-DR DATE OF HEARING : 10.10.2018 DATE OF ORDER : 25.10.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, STANDARD CHARTERED GRINDLAYS PT Y LIMITED (HEREINAFTER REFERRED TO AS THE ASSESSEE), BY FIL ING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 13.03.2014 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XXV, NEW DELHI , AFFIRMING THE PENALTY ORDER DATED 30.11.201 2 PASSED U/S ITA NO.3459/DEL./2014 2 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT T HE ACT), QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUNDS INTER AL IA THAT :- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XXV, NEW DELHI [LD. CIT(A)] ERRED IN LAW AND FACTS BY SUSTAINING THE PENALTY IMPOSED ON THE APPELLANT VIDE ORDER DAT ED 30-3- 2009 PASSED UNDER SECTION 271(1)(C) OF THE INCOME T AX ACT, 1961 (THE ACT) FOR ASSESSMENT YEAR 1996-97 WITHOUT APPRECIATING THE FACTS THAT THE PENALTY ORDER IS BA RRED BY LIMITATION AS PER THE PROVISO TO SEC 275(1 )(A) OF THE ACT. HENCE, IMPUGNED ORDER IS VOID AB INITIO IN THE EYES OF LAW AND NEED TO BE STRUCK DOWN. 2. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW BY CONFI RMING THE IMPOSITION OF PENALTY OF RS. 20,39,73,947/- UNDER S ECTION 271(1)(C) OF THE ACT WITHOUT GIVING ANY REASONS FOR THE SAME AND IN ABSENCE OF ANY FINDING RECORDED BY ANY AUTHO RITY OF CONCEALMENT OF INCOME OR FURNISHING IN-ACCURATE PAR TICULARS BY THE APPELLANT COMPANY. THE CAPRICIOUS AND ARBITR ARY ORDER PASSED BY THE LD. CIT(A) FOR SUSTAINING THE PENALTY TANTAMOUNT TO ABUSE OF THE PROCESS OF LAW AND HENCE IT SHOULD BE STRUCK DOWN. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING PENALTY OF RS. 17,71,00,000/- FOR INTEREST PAID BY THE APPELLANT TO ITS OVERSEAS HEAD OFFICE ON ACCOUNT OF BORROWING FUNDS FOR ITS INDIAN BUSINESS. THE LD. CIT(A) HAS FAILED TO A PPRECIATE THAT IN CASE OF SUMITOMO MITSUI BANKING CORPORATION V. DCIT [136 ITD 66 (MUMBAI) (SB)], HONBLE TRIBUNAL HAS HE LD THAT INTEREST PAID TO OVERSEAS HEAD OFFICE IS ALLOWED AS TAX DEDUCTIBLE EXPENSES. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE IMPOSITION OF PENALTY OF RS. 2,68,73,947/- ON A CCOUNT OF ERRONEOUS INTERPRETATION OF THE PROVISION OF SEC. 3 6(I)(VIIA), WHICH NOW STANDS CLARIFIED BY THE SUPREME COURT IN CASE OF SOUTHERN TECHNOLOGIES REPORTED (320 ITR 577). 5. THE ORDER PASSED BY LD. CIT (A) FOR UPHOLDING TH E PENALTY IMPOSED BY THE ASSESSING OFFICER IS EX-FACIE BAD IN LAW AS THIS IS AGAINST THE SETTLED LAW THAT NO PENALTY IS IMPOSABL E ON ADDITIONS MADE ON DEBATABLE ISSUES WHICH IS EVIDENT FROM THE DECISIONS ITA NO.3459/DEL./2014 3 CITED ABOVE ON BOTH ISSUES. [CIT V. JASWINDER SINGH AHUJA 351 ITR 262 (DEL) ]. 6. THERE IS NO FINDING IN THE IMPUGNED ORDER AS TO WHETHER THIS IMPOSITION OF PENALTY IS WITH THE PRIOR APPROVAL OF DIT-RANGE 2, INTERNATIONAL TAXATION, NEW DELHI. SECTION 274(2 )(B) OF THE ACT, PROVIDES THAT SUCH APPROVAL IS MANDATORY FOR P ASSING ANY ORDER FOR IMPOSING PENALTY. AS SUCH APPROVAL DOES N OT APPEAR TO HAVE BEEN SOUGHT, HENCE THE ORDER PASSED BY LD. CIT(A) SUSTAINING PENALTY IS VOID AB INITIO AND INVALID IN THE EYES OF LAW AND HENCE SHOULD BE QUASHED. 7. THE LD.CIT(A) IS NOT JUSTIFIED IN SUSTAINING PEN ALTY U/S 274 READ WITH 271 FOR CONCEALMENT OF INCOME WITHOUT ASS IGNING ANY REASONS, WITHOUT APPLICATION OF MIND AND PURELY ON CONJECTURES AND SURMISES. 2. BRIEFLY STATED THAT FACTS NECESSARY FOR AD JUDICATION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS A NON-RESIDE NT BANKING COMPANY HAVING BRANCHES IN INDIA WHICH CONSTITUTE A PERMANENT ESTABLISHMENT (PE) OF THE ASSESSEE WITHIN THE MEANI NG OF ARTICLE 5 OF THE INDO-UK DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). ON THE BASIS OF COMPLETED ASSESSMENT U/S 143(3) AT THE INCOME OF RS. 2,05,53,28,410/- WHICH HAS BEEN CONFIRMED UP TO TRIBUNAL PENALTY PROCEEDINGS HAVE BEEN INITIATED AND THE ASS ESSING OFFICER HAS SOUGHT TO LEVY PENALTY ON THE BASIS OF TWO ADDI TIONS VIZ. ; ONE DISALLOWANCE OUT OF DEDUCTION CLAIMED U/S 36(I)(VII A) OF THE IT ACT, AND TWO DISALLOWANCE OF RS. 32,20,00,000/- A N ACCOUNT OF INTEREST PAID TO HEAD OFFICE. AO PROCEEDED TO HOLD THAT DISALLOWANCE OF RS. 4,88,61,772/- IN RESPECT OF DE DUCTION U/S ITA NO.3459/DEL./2014 4 36(I)(VIIA) CONFIRMED BY THE LD. CIT(A) AS WELL AS TRIBUNAL AMOUNTS TO FURNISHING OF INACCURATE PARTICULAR INCO ME. SIMILARLY DISALLOWANCE OF RS. 32,20,00,000/- ON ACCOUNT OF IN TEREST PAID TO HEAD OFFICE ALSO HELD TO BE FURNISHING INACCURATE P ARTICULARS OF INCOME AND THEREBY LEVIED THE PENALTY OF RS. 20,39, 73,947/-. 3. ASSESSEE CHALLENGED THE PENALTY ORDER BY WA Y OF AN APPEAL BEFORE THE LD. CIT(A) WHO HAS AFFIRMED THE PENALTY LEVIED BY THE AO ORDER BY DISMISSING THE APPEAL. FEELING AGGRIEVE D, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY CHALLENGING THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTA TIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. AT THE VERY OUTSET, THE LD. AR FOR THE ASS ESSEE CONTENDED THAT ISSUE AS TO DISALLOWANCE OF RS. 4,88,61,772/- OUT OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 36(I)(VIIA) AND DISALLO WANCE OF RS. 32,20,00,000/- ON ACCOUNT OF INTEREST PAID TO THE H EAD OFFICE MADE BY THE AO AND CONFIRMED BY LD. CIT(A) AS WELL AS TH E TRIBUNAL IS STILL DEBATABLE AS THE APPEAL IS PENDING BEFORE HON BLE DELHI HIGH ITA NO.3459/DEL./2014 5 COURT. ON THE OTHER HAND, THE LD. DR FOR THE REVENU E FILED COMPREHENSIVE SUBMISSIONS BY RELYING UPON DECISION RENDERED BY HONBLE SUPREME COURT AND HONBLE HIGH COURT OF DEL HI CITED AS : SOUTHERN TECHNOLOGIES (320 ITR 577), RELIANCE PETRO PRODUCTS (P.) LTD. 322 ITR 158 (SC), JASWINDER SINGH AHUJA [2013] 351 ITR 262 (DELHI), LIQUID INVESTMENT ITA NO. 240/2009 DATED 05.10.2010 DELHI (HC). LD. DR FURTHER RELIED UPON ORDER PASSED BY THE AO AS WELL AS LD. CIT(A). 6. UNDISPUTEDLY THE ISSUE AS TO ADDITION ON ACC OUNT OF DISALLOWANCES MADE BY THE REVENUE IN RELATION TO TH E ALLEGED INCORRECT CLAIM OF DEDUCTION U/S 36(I)(VIIA) OF TH E ACT AND DISALLOWANCE ON ACCOUNT OF ALLEGED INCORRECT CLAIM OF DEDUCTION OF INTEREST PAID BY THE ASSESSEE TO THE HEAD OFFICE IS STILL DEBATABLE HAVING BEEN PENDING BEFORE HONBLE HIGH COURT OF DE LHI VIDE ITA NO. 4988/DEL/2003 & 5010/DEL/2003 DT. 24.10.2008 A.Y. 1996- 97 IN WHICH FOLLOWING SUBSTANTIAL QUESTIONS OF LAW HAVE BEEN FRAMED :- (A) WHETHER THE LD. TRIBUNAL HAS ERRED IN LAW WITH RESPECT TO NRI EXPENSES BY IGNORING THE MATERIAL ON RECORD REGARDI NG FOREIGN CURRENCY DEPOSITS BROUGHT INTO INDIA BY ERRONEOUSLY OBSERVIN G THAT WE DO NOT FIND THAT A DEPOSITS RAISED AT DUBAI WERE BROUGHT I NTO INDIA AND UTILIZED IN RESPECT OF THE BUSINESS CARRIED ON IN INDIA? ITA NO.3459/DEL./2014 6 (B) WHETHER THE LD. TRIBUNAL HAS ERRED IN LAW BY HO LDING THAT THE PROVISION MADE AS PER SEC. 36(1) (VIIA) WAS ONLY NE T OF DEBIT & CREDIT ENTRIES AND CONSEQUENTLY DISALLOWED RS. 4,88,61,77 2/- OF THE PROVISION MADE U/S 36(1) (VIIA)? (C) WHETHER THE LD. TRIBUNAL WAS RIGHT IN LAW IN DI SALLOWING THE INTEREST PAID BY THE APPELLANT BANK TO HEAD OFFICE OF ANZ GR INDLAYS LONDON BY FOLLOWING THE SPECIAL BENCH ORDER IN THE CASE OF AB N AMRO BANK VS. CIT(A) REPORTED IN 97 ITD 89? (D) WHETHER THE LD. ITAT HAS ERRED IN OMITTING TO M AKE THE INTEREST PAID ON FOREIGN CURRENCY DEPOSIT WAS ..WITH THE APPRO VAL OF THE RBI AND HENCE WAS EXEMPT FROM TAX IN ACCORDANCE WITH THE PR OVISIONS OF SECTION ..(15)(IV)(FA) OF THE INCOME TAX ACT, 1961 AND HEN CE DID NOT ATTRACT TAX DEDUCTION AT SOURCE PROVISIONS ? 7. PERUSAL OF THE AFORESAID SUBSTANTIAL QUESTI ONS OF LAW FRAMED BY HONBLE HIGH COURT OF DELHI IN THE APPEAL AGAINS T THE ASSESSMENT ORDER ON THE BASIS OF WHICH THIS PENALT Y HAS BEEN LEVIED SHOWS THAT IT IS STILL DEBATABLE IF THE DIS ALLOWANCE OF RS. 4,88,61,772/- U/S 36(I)(VIIA) AND DISALLOWANCE OF T HE INTEREST PAYMENT MADE BY THE ASSESSEE TO ITS HEAD OFFICE BY FOLLOWING THE SPECIAL BENCH ORDER IN CASE OF ABN AMBRO BANK VS. ADIT343 ITR 81 (CAL) IS SUSTAINABLE OR NOT. SO WHEN THE ISS UE AS TO DISALLOWANCES IS STILL DEBATABLE NO PENALTY CAN BE LEVIED AND AS SUCH PENALTY IMPOSED IN THIS CASE IS LIABLE TO BE D ELETED ON THIS SCORE ONLY. ITA NO.3459/DEL./2014 7 8. EVEN ON MERIT WHEN WE EXAMINE THE ASSESSMEN T ORDER AS WELL AS PENALTY ORDER, THE REVENUE HAS NOT COME UP WITH ANY ALLEGATION THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING O F INACCURATE PARTICULARS OF INCOME RATHER SIMPLE ALLEGATION MAD E BY THE REVENUE IS THAT THE ASSESSEE HAS CLAIMED INCORRECT DEDUCTIO N U/S 36(I)(VIIA) OF THE ACT OUT OF WHICH RS. 4,88,61,722/- HAS BEEN DISALLOWED AND THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF INTEREST PAYMENT OF RS. 32,20,00,000/- PAID TO ITS HEAD OFFI CE WHICH HAS ALSO BEEN DISALLOWED. MERE CLAIMING OF DEDUCTIONS U NDER THE RELEVANT PROVISIONS OF LAW AND AS PER RBI GUIDELINE S DOES NOT AND CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICUL ARS OF INCOME. MORE OVER IT IS NOT CASE OF THE REVENUE THAT THE AS SESSEE HAS NOT CLAIMED THE DEDUCTIONS AS PER LAW NOR IT IS CLAIM O F THE REVENUE THAT THE ASSESSEE HAS MADE A DOUBLE CLAIM OF SUCH D EDUCTIONS. 10. HONBLE SUPREME COURT IN A CASE CITED AS CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 (SC) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. OPERATIVE PART OF WHICH IS REPRODUCED FOR READY REFERENCE AS UNDER :- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE I.T. ACT, 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT, TH ERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS ITA NO.3459/DEL./2014 8 USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAIL OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HEL D GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUN T TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULAR S ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATT RACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE , NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. W HERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSE E IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THE RE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RE TURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 11. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT PENALTY LEVIED BY AO AND CONFI RMED BY CIT(A) IS NOT SUSTAINABLE IN THE EYES OF LAW AS THE ISSUE AS TO THE DISALLOWANCES MADE BY THE AO IS STILL DEBATABLE BEF ORE HONBLE DELHI HIGH COURT AND EVEN ON MERIT THE REVENUE HAS FAILED TO PROVE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF INCOME WHILE CLAIMING THE AFORESAID DEDUCTIONS. CONSEQUENT LY THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH OCTOBER, 2018. SD/- SD/- (O.P.KANT) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25/10/ 2018 BR ITA NO.3459/DEL./2014 9 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI. DATE OF DICTATION 10 .10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 12.10.2018 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 25.10.2018 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 .10.2018 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 25.10.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 25 .10.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .10.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER