DOHA BANK , INDIA BRANCHES, MUMBAI V. DCIT (IT)4(2), MUMBAI

ITA 3684/MUM/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3720 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 27-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL JHA; AKHTAR HUSSAIN ANSARI
• Keywords: Transfer pricing; International transaction; Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 143(1); 201; 143(2); 13; 92CA; 28

Judgement Text

ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 1 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER IT (TP) A NO S.3684 & 3685/MUM/2016 (ASSESSMENT YEARS: 2009 - 10 & 2010 - 11) DOHA BANK QSC, INDIA BRANCHES, (SUCCESSORS TO HSBC BANK OMAN S.A.O.G. INDIA BRANCHES) SAKHAR BHAVAN, GROUND FLOOR, PLOT NO. - 230, BLOCK NO.III, BACKBAY RECLAMATION, NARIMAN POINT, MUMBAI - 400021 VS. THE DEPUTY COMMISSIONER OF INCOME TAX , (INTERNATIONAL TAXATION) - 2(2)(2), 17 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021 PAN AAFCD3506L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NIRAJ SHETH , A.R RESPONDENT BY: SHRI AKHTAR HUSSAIN ANSARI & SHRI SUNIL JHA, D.R S DATE OF HEARING: 20 .10.2020 DATE OF PRONOU NCEMENT: 06 . 11 .2020 O R D E R PER RAVISH SOOD, JM THE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS PASSED BY THE CIT(A) - 56, MUMBAI, DATED 26.02.2016 FOR A.Y. 2009 - 10 AND A.Y. 2010 - 11. AS THE ISSUE S INVOLVED IN THE CAPTIONED APPEALS ARE INEXTRICABLY INTERLINKED OR IN F ACT INTERWOVEN, THE SAME ARE THEREFORE BEING TAKEN UP AND DISPOSED OFF BY WAY OF A CONSOLIDATED ORDER. WE ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 2 SHALL FIRST TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2009 - 10 WHEREIN THE IMPUGNED ORDER HAS BEEN ASSAILED ON THE FOLLOW ING GROUNDS OF APPEAL BEFORE US : RE. RELIEF NO. 1 1. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 56, MUMBAI [HEREINAFTER REFERRED TO AS 'THE CIT(A)'] ERRED IN HOLDING THAT PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') ARE APPLICABLE WITH RESPECT TO INTERES T RECEIV ED BY THE BRANCH OF THE APPELLANTS FROM ITS HO RAVING FAILED TO APPRECIATE THAT INTEREST RECEIVED FROM HO IS NOT EXEMPT INCOME. 2. WITHOUT PREJUDICE TO (1) ABOVE, THE CIT(A) ERRED IN NOT APPRECIATING THAT SINCE THE B A NK HAD NOT INC URRED ANY EXPENDITURE FOR THE PURPOSE OF EARNING THE INTEREST AMOUNT, PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. 3. WITHOUT PREJUDICE TO GROUND NOS. 1 AND 2, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF AO OF APPLYING THE PROVISIONS OF SECTION 14A R.W. RUL E 8D OF THE ACT NOT APPRECIATING THAT THE SAID PROVISIONS CAN BE INVOKED ONLY IF THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANTS IN RESPECT OF SUCH EXPENDITURE IN RELATION TO SUCH INCOME. RE. RELIEF NO. 2 4. THE CIT(A) ERRED IN U PHOLDING THE ACTION OF THE AO OF DENYING THE APPELLANT'S CLAIM FOR DEDUCTION UNDER 44C OF THE ACT. RE. RELIEF NO.3 5. THE CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE AO THAT TRANSFER PRICING PROVISIONS ARE APPLICABLE FOR TRANSACTIONS BETWEEN THE BRANCH AND ITS HO/OVERSEAS BRANCHES HA VING FAILED TO APPRECIATE THAT INDIAN BRANCH AND THE HEAD OFFICE ARE ONE AND THE SAME PERSONS AND NOT SEPARATE INDEPENDENT ENTERPRISES. RE. RELIEF NO. 4 6. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O ACCEPTING THE ADJUSTME NT OF RS.11 ,823 MADE BY THE TPO ON INTERES T RECEIVED FROM THE HO HAVING FAILED TO APPRECIATE THE FA CT THAT TRANSACTION ENTERED INTO BY THE APPELLANTS WITH ITS HO ARE AT ARM S LENGTH. RE. RELIEF NO. 5 7. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ACCEPTING THE ADJUSTMENT OF RS. 16,13,103 MADE BY THE TPO ON INTEREST PAID BY THE INDIAN BRANCH TO ITS HO HAVING FAI LED TO APPRECIATE THE FACT THAT TRANSACTION ENTERED INTO BY THE APPELLANTS WITH ITS HO ARE AT ARM'S LENGTH. YOUR APPELLANTS CRAVE LEAVE TO ADD TO, ALTER, AMEND, VARY, OMIT OR SUBSTITUTE THE AFORESAID GROUND OF APPEAL OR ADD A NEW GROUND OR GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL AS THEY MAY BE ADVISED. ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 3 2. BRIEFLY STATED, THE ASSESSEE DOHA BANK QSC , INDIAN BRANCH ES , ( S UCCESSOR S TO HSBC BANK, OMAN S.A.O.G) IS A BRANCH OF OMAN INTERNATIONAL BANK SAOG , WHICH IS A FOREIGN COMPANY REGISTERED IN OMAN. THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR A.Y 2009 - 10 ON 30.09.2009, DECLARING A TOTAL INCOME OF RS.NIL. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. 3. OBSERVING, THAT THE ASSESSEE HA D CARRIED OUT INTERNATIONAL TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION, THE A.O MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (FOR SHORT TPO) UNDER SEC . 92CA(1) FOR BENCHMARKING THE SAID TRANSACTIONS . A S THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.96,28,769/ - AS INTEREST PAID ON BORROWING S RAISED FROM ITS H EAD O FFICE (FOR SHORT H.O) , THE TPO VIDE HIS ORDER DETERMINED THE ARMS LENGTH VALUE (FOR SHORT ALV) OF THE INTEREST SO PAID AT RS.80,15,666/ - AND WORKED OUT AN ADJUSTMENT OF RS.16,13,103/ - IN THE HANDS OF THE ASSESSEE . AS THE ASSESSEE TAKING COGNIZANCE OF THE FACT THAT INTEREST PAID TO ITS H.O WAS IN FACT A PAYMENT TO SELF HAD ALREADY DISALLOWED THE SAME IN ITS COMPUTATION OF INCOME , THEREFORE, NO ALP A DJUSTMENT WAS MADE BY THE A.O. ON THE OTHER HAND , IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE IN ITS COMPUTATION OF INCOME HAD R EDUCED FROM ITS INCOME THE AMOUNT OF INTEREST RECEIVED FROM ITS H.O ON THE GROUND THAT THE SAME WAS AN INCOME RECEIVED FROM SELF. AFTER DELIBERATING ON THE AFORESAID FACT S, THE A.O CALLED UPON THE ASSESSEE TO EXPLAIN THAT NOW WHEN THE H.O AND THE BRANCH OF FICE WERE SEPARATE ENTITIES, THEN WHY THE AFORESAID INTEREST INCOME OF RS.3,49,939/ - RECEIVED BY IT FROM THE H.O MAY NOT BE CONSIDERED AS PART OF ITS TAXABLE INCOME . IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ITAT VIDE ITS ORDER DATED 29.06.2012 I N ITS OWN CASE FOR A.Y 1996 - 9 7 AND A.Y 1997 - 98 , HAD HELD , THAT THE INTEREST RECEIVED BY THE INDIAN B RANCH FROM ITS H.O COULD NOT BE TREATED AS THE INCOME OF THE INDIAN BRANCH S INCE IT WAS RECEIVED FROM SELF . ALTHOUGH, THE ITAT, MUMBAI AS WELL AS THE HONBLE HIGH COURT IN THE ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 4 ASSESSEES OWN CASE FOR THE EARLIER YEARS , HAD HELD , THAT INTEREST RECEIVED BY THE ASSESSEE I.E THE INDIA BRANCH FROM ITS H.O WOULD NOT BE TAXABLE IN THE HANDS OF THE ASSESSEE, THE A.O HOWEVER TAKING NOTE OF THE FACT THAT THE DEPA RTMENT HAD NOT ACCEPTED THE AFORESAID DECISIONS AND HAD CARRIED THE SAME FURTHER IN APPEAL , DECLINED TO ACCEPT THE ASSESSEES CLAIM THAT THE INTEREST OF RS.3,61,762/ - (AS PER THE ORDER OF THE TPO) RECEIVED FROM THE H.O WAS NOT TAXABLE IN ITS HANDS AND ADDE D THE SAME TO THE RETURNED INCOME OF THE ASSESSEE. ALTERNATIVELY, IT WAS OBSERVED BY THE A.O, THAT IN CASE THE INTEREST INCOME RECEIVED BY THE ASSESSEE FROM ITS H.O WAS HELD AS NOT TAXABLE, THEN , THE PROVISION S OF SEC. 14A WOULD BE APPLICABLE. O N THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O WORKED OUT THE DISALLOWANCE UNDER SEC. 14A R.W. RULE 8D AT AN AMOUN T OF RS.64,605/ - , AS UNDER : A AVERAGE VALUE OF INVESTMENT INTEREST PAID X AVERAGE VALUE OF ASSETS 24,68,054 52,265 8,24,92,231 X 389,54,34,000 (385,92,88,000 + 393,15,80,000) B. AN AMOUNT EQUAL TO ONE - HALF PER CENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LST DAY OF THE PREVIOUS YEAR. AVERAGE VALUE OF INVESTMENT CLOSING BALANCE OF INVESTMENT AS PER BALANCE SHEET 31.03.2008 52,51,177 CLOSING BALANCE OF INVESTMENT AS PER BALANCE SHEET 31.03.2009 (315069) TOTAL 4936108 AVERAGE OF TWO YEARS INVESTMENTS 24,68,054 THEREFORE, AVERAGE OF VALUE OF INVESTMENT 24,68,054 0.5% OF AVERAGE VALUE OF INVESTMENT OF RS./ - 12,340 TOTAL A & B [] 64,605 4. ON A PERUSAL OF THE ASSESSEES FINANCIAL STATEMENTS, IT WAS FURTHER OBSERVED BY THE A.O THAT THE ASSESSEE HAD REDUCED A SUM OF RS. 25,25,634/ - BEING 5% OF THE ADJUSTED TOTAL INCOME UNDER SEC. 44C OF THE ACT. IT WAS OBSERVED BY THE A.O THAT FROM THE DETAILS FILED BY THE ASSESSEE IT WAS NOT CLEAR AS TO WHETHER THE EXPENSES INCURRED BY THE H.O WERE IN RESPECT OF THE INDIAN BRANCH I.E THE ASSESSEE, THE LIABILITY IN RESPECT OF WHICH WAS BORNE BY ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 5 THE H.O . IN THE BACKDROP OF HIS AFORESAID OBSERVATION THE A.O DISALLOWED THE ASSESSEES CLAIM FOR DEDUCTION UNDER SEC. 4 4C ON THE FOLLOWING GROUNDS: I. THE APPELLANTS HAVE NOT SHOWN ANY EXPENSE UNDER THE HEAD HEAD OFFICE EXPENSE. THE AUDIT REPORT OR THE NOTES TO ACCOUNTS ALSO DOES NOT SAY ANYTHING ABOUT THE HEAD OFFICE EXPENSE. II. THE QUANTUM AND NATURE OF THE EXPENSE IS NOT KNOWN, IN ORDER TO CLAIM DEDUCTION UNDER SECTION 44C OF THE ACT THERE HAS TO BE AN EXPENSE AND SECTION 44C IS NOT A BLANKET DEDUCTION PROVISION FOR 5% OF ALP. ACCORDINGLY, THE A.O WORKED OUT THE DISALLOWANCE UNDER SEC. 44C AT AN AMOUNT OF RS. 42,33,512/ - . IN THE BACKDROP OF HIS AFORESAID DELIBERATIONS THE A.O ASSESS ED THE INCOME OF THE ASSESSEE AT RS.49,77,142/ - , VIDE HIS ORDER PASSED UNDER SEC. 143(3) R.W.S 92CA OF THE ACT, DATED 17.05.2013. 5. AGGRIEVED, THE ASSESSEE ASSAILED THE ASSESSMENT FRAMED BY THE A.O BEFORE THE CI T(A). HOWEVER, THE CIT(A) NOT FINDING FAVOUR WITH THE CLAIM OF THE ASSESSEE INSOFAR THE AFORESAID ISSUE S WERE CONCERNED, VIZ. (I) DISALLOWANCE UNDER SEC. 14A; AND (II) DECLINING OF THE ASSESSEES CLAIM FOR DEDUCTION UNDER SEC. 44C , THEREIN UPHELD THE SAME. 6. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. AT THE VERY OUTSET OF THE HEARING OF THE APPEAL THE LD. A.R TOOK US THROUGH THE FACTS RELEVANT FOR DISPOSAL OF THE SAME . IT WAS SUBMITTED BY THE LD. A .R THAT THE HONBLE HIGH COURT OF BOMBAY IN THE ASSESSEES OWN CASE FOR A.YS 1996 - 97 TO 1999 - 2000 HAD UPHELD THE ORDER OF THE TRIBUNAL AND HAD APPROVED THE ASSESSEES CLAIM FOR DEDUCTION OF INTEREST RECEIVED BY ITS INDIAN BRANCH FROM ITS H.O . I T WAS SUBMIT TED BY THE LD. A.R THAT BOTH THE TRIBUNAL AND THE HONBLE HIGH COURT HAD IN THE ASSESSEES OWN CASE HELD THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE S INDIAN BRANCH FROM ITS H . O WAS NOT TO BE SUBJECTED TO TAX. IN ORDER TO BUTTRESS HIS AFORESAID CLAIM, THE LD. A.R HAD DR AWN OUR ATTENTION TO THE ORDER PASSED BY THE TRIBUNAL IN ITS OWN CASE FOR THE AFOREMENTIONED PRECEDING YEARS. AT THE SAME TIME, IT WAS FAIRLY STATED BY THE LD. A.R THAT THE TRIBUNAL HAD IN ITS AFORESAID ORDERS OBSERV ING THAT THE PROVISION OF SEC. 14A WOULD BE APPLICABLE TO THE EXEMPT ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 6 INTEREST INCOME EARNED BY THE ASSESSEE FROM ITS H.O /OVERSEAS BRANCH HAD THUS RESTORED THE MATTER BACK TO THE FILE OF THE A.O FOR QUANTIFICATION. ADVERTING TO THE DISALLOWANCE MADE BY THE A.O UNDER SEC.14A, IT WAS SUBMITTED BY THE LD. A.R THAT AS THE A.O HAD FAILED TO RECORD HIS SATISFACTION BEFORE WORKING OUT THE DISALLOWANCE UNDER SEC.14A R.W. RULE 8D, THEREFORE, THE SAME WAS LIABLE TO BE VACATED ON THE SAID COUNT ITSELF. HOWEVER, THE LD. A.R FAIRLY ADMITTED THAT THE ISSUE AS REGARDS RECORDING OF SATISFACTION BY THE A.O , IN THE BACKDROP OF IDENTICAL FACTS HAD BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE WHILE DISPOSING OFF ITS APPEAL FOR A.Y 2011 - 12. (COPY PLACED ON RECORD). IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE DISALLOWANCE OF THE INTEREST EXPENDITURE UNDER SEC. 14A R.W RULE 8D(2)(II) WAS TO BE CARRIED OUT AFTER NETTING OF THE INTEREST INCOME AND THE INTEREST EXPENDITURE. AS REGARDS THE DISALLOWANCE PERTAINING TO THE ADMINISTRAT IVE EXPENSES WORKED OUT BY THE A.O UNDER SEC. 14A R.W RULE 8D(2)(III), IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE HAD NOT MADE ANY INVESTMENT FOR EARNING OF THE INTEREST INCOME FROM ITS HEAD OFFICE, THUS, NO DISALLOWANCE OF ANY PART OF THE ADMINISTRATIVE EXPENSES WAS CALLED FOR IN ITS HANDS . ASSAILING THE DISALLOWANCE OF THE ASSESSEES CLAIM FOR DEDUCTION UNDER SEC. 44C, IT WAS SUBMITTED BY THE LD. A.R THAT THE SAME WAS BASED ON MISINTERPRETATION OF THE SAID STATUTORY PROV ISION BY THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEES CLAIM FOR DEDUCTION OF RS. 25,25,634/ - I.E 5% OF THE ADJUSTED TOTAL INCOME , BEING LOWER THAN THE PROPORTIONATE AMOUNT OF THE H.O EXPENDITURE THAT WAS ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE IN INDIA, WAS RIGHTLY CLAIMED BY THE ASSESSEE. IN ORDER TO BUTTRESS HIS AFORESAID CLAIM THE LD. A.R TOOK US THROUGH THE AFORESAID STATUTORY PROVISION. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT IN THE SUBSEQUENT YEARS I.E A.Y 201 0 - 11 AND A.Y 2011 - 12 THE ASSESSEES CLAIM FOR DEDUCTION UNDER SEC. 44C HAD BEEN ACCEPTED BY THE DEPARTMENT. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) HAD RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. INSOFAR THE NETTING OF THE INTEREST INCOME AND INTEREST EXPENDITURE FOR THE PURPOSE OF WORKING OUT THE ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 7 DISALLOWANCE UNDER SEC. 14A R.W RULE 8D(2)(II) WAS CONCERNED, THE LD. D.R FAIRLY ACCEPTED THE CLAIM OF THE COUNSEL FOR THE ASSESSEE. AS REGARDS THE DISALLOWANCE MADE BY THE A . O UND ER SEC. 44C OF THE ACT, IT WAS SUBMITTED BY THE LD. D.R THAT AS THERE WAS NO MENTION OF ANY H.O EXPENSES ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSE E IN INDIA, EITHER IN THE NOTES TO ACCOUNTS OR THE AUDIT REPORT OF THE ASSESSEES INDIA BRANCH , THEREFORE, T HE LOWER AUTHORITIES HAD BY RIGHTLY DRAWING SUPPORT FROM SUB - SECTION (C) OF SEC. 44C , THEREIN CONCLUDED, THAT IN THE ABSENCE OF ANY SUCH H.O EXPENDITURE ATTRIBUTABLE TO THE ASSESSEES BUSINESS IN INDIA , THE CLAIM OF THE ASSESSEE UNDER SEC. 44C WAS LIABLE TO BE REJECTED. 8. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS THE JUDICIAL PRONOUNCE MENTS THAT HAVE BEEN PRESSED INTO SERVICE BY THEM. AS REGARDS THE INTEREST INCOME RECEIVED BY THE ASSESSEE FR OM ITS H.O IS CONCERNED, WE FIND, THAT IT IS MATTER OF FACT BORNE FROM THE RECORDS THAT THE TRIBUNAL AND ALSO THE HONBLE HIGH COURT OF BOMBAY HAD I N THE ASSESSEES OWN CASE FOR A.YS. 1996 - 97 TO 1999 - 2000 HELD, THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE FROM ITS H . O COULD NOT BE BROUGHT TO TAX IN ITS HANDS, FOR THE REASON, THAT ONE CANNOT EARN INCOME FROM SELF. BUT THEN, AT THE SAME TIME, WE F IND THAT THE TRIBUNAL WHILE DISPOSING OFF THE APPEALS OF THE ASSESSEE FOR THE AFORESAID PRECEDING YEARS WAS OF THE VIEW THAT AS THE PROVISION S OF SEC.14A WOULD BE APPLICABLE TO THE EXEMPT INTEREST INCOME EARNED BY THE ASSESSEE FROM ITS H . O/ O VERSEAS BRANCHE S , HAD THUS, RESTORED THE MATTER TO THE FILE OF THE A.O FOR QUANTIFICATION . ADMITTEDLY, THE AFORESAID FACTS ARE NOT IN DISPUTE BEFORE US. INSOFAR, THE CLAIM OF THE LD. A.R THAT THE DISALLOWANCE MADE BY THE A.O UNDER SEC.14A WAS LIABLE TO BE VACATED, FOR TH E REASON, THAT HE HAD FAILED TO RECORD HIS SATISFACTION PRIOR TO WORKING OUT OF THE AFORESAID DISALLOWANCE, WE FIND, THAT THE SAID ISSUE AS FAIRLY ADMITTED BY THE LD. A.R HAD BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL WHILE DISPOSING OFF ITS APPEAL FOR A.Y.2011 - 12 , WHEREIN IDENTICAL FACTS ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 8 WERE INVOLVED . ACCORDINGLY, FINDING NO REASON TO TAKE A DIFFERENT VIEW, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A.Y 2011 - 12 AND REJECT THE AFORESAID CLAIM OF THE ASSESSEE. AS REGARDS THE CLAIM OF THE LD . A.R THAT THE DISALLOWANCE OF THE INTEREST EXPENDITURE UNDER SEC. 14A R.W RULE 8D(2)(II) WAS TO BE WORKED OUT BY THE A.O AFTER NETTING OF THE INTEREST INCOME RECEIVED AND INTEREST EXPENDITURE INCURRED, WE FIND SUBSTANTIAL FORCE IN THE SAME. ADMITTEDLY, THE DISALLOWANCE OF THE INTEREST EXPENDITURE UNDER SEC. 14A R.W RULE 8D(2)(II) HAS TO BE CARRIED OUT AFTER NETTING OF THE INTERES T INCOME AND INTEREST EXPENDITURE. OUR AFORESAID VIEW IS FORTIFIED BY THE ORDER OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT, CENTRAL - III VS. JU BILIANT ENTERPRISE S PVT. LTD. [ITA NO. 1512 OF 2014, DATED 28.02.2017] . I N THE SAID CASE, THE HONBLE HIGH COURT APPROVING THE VIEW TAKEN BY THE TRIBUNAL THAT THE DISALLOWANCE MADE UNDER SEC.14A R.W RULE 8D WAS TO BE CARRIED OUT ON THE BASIS OF NETTING OF THE INTEREST EXPENDITURE HAD DISMISSED THE APPEAL OF THE REVENUE. ALSO, A SIMILAR VIEW HAD BEEN TAKEN BY THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF PCIT - 3, VS. NIRMA CREDIT AND CAPITAL (P. LTD.) (2018) 300 CTR 286 (GUJ) . I T WAS OBSERVED BY THE HONBLE HIGH COURT THAT FOR THE PURPOSE OF WORKING OUT THE DISALLOWANCE UNDER RULE 8D(2)(II) THE AMOUNT OF EXPENDITURE BY WAY OF INTEREST WOULD BE INTEREST PAID BY THE ASSESSEE ON BORROWINGS MINUS TAXABLE INTEREST EARNED DURING THE YEAR. IN TERMS OF OUR AFORESAID OBSERVATIONS , WE FIND OURSELVES TO BE IN AGREEMENT WITH THE CLAIM OF THE LD. A.R THAT THE DISALLOWANCE UNDER SEC. 14A R.W RULE 8D(2)(II) AS REGARDS THE INTEREST EXPENDITURE HAS TO BE CARRIED OUT AFTER NETTING OF THE INTEREST PAID BY THE ASSESSEE ON BORROWINGS AND THE TAXA BLE INTEREST INCOME EARNED DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, WE DIRECT THE A.O TO RECOMPUTE THE DISALLOWANCE UNDER SEC. 14A R.W RULE 8D(2)(II) IN TERMS OF OUR AFORESAID OBSERVATIONS. WE SHALL NO W ADVERT TO THE CLAIM OF THE LD. A.R THAT AS T HE ASSESSEE HAD NOT MADE ANY INVESTMENT FOR EARNING OF THE INTEREST INCOME FROM ITS H . O, THEREFORE, NO DISALLOWANCE OF ANY PART OF THE ADMINISTRATIVE EXPENSES WAS CALLED FOR UNDER SEC. 14A R.W RULE 8D(2)(III). WE FIND THAT A SOMEWHAT SIMILAR CLAIM WAS RAIS ED BY THE ASSESSEE IN ITS APPEAL BEFORE THE ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 9 TRIBUNAL FOR A.Y. 2011 - 12, WHICH , HOWEVER, WAS REJECTED BY THE TRIBUNAL. IN ITS CASE FOR THE AFOREMENTIONED PRECEDING YEARS, IT WAS THE CLAIM OF THE ASSESSEE THAT THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(III) MAY BE RESTRICTED TO THE EXTENT OF 1% TO 2% OF ITS EXEMPT INCOME. HOWEVER, THE TRIBUNAL TAKING COGNIZANCE OF THE FACT THAT FROM A.Y. 2008 - 09 ONWARDS DISALLOWANCE UNDER SEC. 14A WAS TO BE COMPUTED IN ACCORDANCE WITH RULE 8D, HAD THUS , REJEC TED THE AFORESAID CLAIM OF THE ASSESSEE. IN OUR CONSIDERED VIEW AS THERE IS NO SUBSTANCE IN THE CLAIM OF THE ASSESSEE THAT DE HORS ANY INVESTMENT MADE FOR EARNING OF THE INTEREST INCOME FROM ITS H . O NO DISALLOWANCE WAS CALLED FOR UNDER SEC. 14A R.W. RULE 8 D(2)(III), WE DECLINE TO ACCEPT THE SAME. 10. WE SHALL NOW ADVERT TO THE CLAIM OF THE ASSESSEE THAT THE LOWER AUTHORITIES HAD ERRED IN DISALLOWING ITS CLAIM FOR DEDUCTION UNDER SEC. 44C OF THE ACT. BEFORE DEALING WITH THE SAID ISSUE, WE SHALL BRIEFLY CULL OUT THE FACT S LEADING TO THE CONTROVERSY IN HAND. ON A PERUSAL OF THE RECORDS, WE FIND , THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 17,60,878/ - ON ACCOUNT OF EXPENSES THAT WERE INCURRED IN RESPECT OF MS LAILA ALI OBAID AL - MUJAI N I, EMPLOYEE OF THE ASSESSEE BANK WHO WAS DEPUTED TO INDIA. B EING OF THE VIEW THAT THE AFORESAID EXPENDITURE WAS IN THE NATURE OF A H . O EXPENSE , THE A.O DISALLOWED THE SAME ON THE GROUND THAT THE SAME WOULD BE SUBJECT TO THE CEILING OF THE DEDUCTION CONTEMPLATED IN SEC. 44C O F THE ACT. IT WAS FURTHER OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS. 25,25,634/ - BEING 5% OF THE ADJUSTED TOTAL INCOME UNDER SEC.44C OF THE ACT. OBSERVING, THAT THE ASSESSEE HAD NOT SHOWN ANY EXPENSE UNDER THE HEAD HEAD OFFICE EXPENSES EITHER IN ITS AUDIT REPORT OR THE NOTES TO ACCOUNTS, THE A.O WAS OF THE VIEW THAT NO PART OF THE H.O EXPENSE S WAS ATTRIBUTABLE TO THE BUSINESS OF ASSESSEE IN INDIA. APART FROM THAT, THE A.O WAS OF THE VIEW THAT AS THE QUANTUM AND NATURE OF THE EX PENSES WERE NOT KNOWN, THEREFORE, FOR THE SAID REASON ALSO THE ASSESSEE WAS NOT ENTITLED FOR CLAIM OF DEDUCTION UNDER SEC.44C OF THE ACT. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 10 DISALLOWED THE AFORESAID CLAIM OF EXPENDITURE BY THE ASSESSEE AGGRE GATING TO AN AMOUNT OF RS. 42,33,512/ - [RS.17,07,878/ - (+) RS.25,25,634/ - ]. ON APPEAL, THE CIT(A) FINDING NO INFIRMITY IN THE VIEW TAKEN BY THE A.O UPHELD THE AFORESAID DISALLOWANCE MADE BY HIM. 11. BEFORE US, IT IS THE CLAIM OF THE LD. A.R THAT BOTH THE LOWER AUTHORITIES HAD MISCONCEIVED OR IN FACT M ISINTERPRETED THE SCOPE OF SEC. 44C OF THE ACT. ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND , THAT THE A.O HAD PRIMARILY EMPHASISED ON SUB - SECTION ( C) OF SEC.44C, TO CONCLUDE , THAT AS NO PART OF THE H.O EXPENDITURE WAS ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE IN INDIA, THEREFORE, THE ASSESSEES CLAIM FOR DEDUCTION UNDER SEC. 44C WORKED OUT TO AN AMOUNT OF RS.NIL. 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID ISSUE AND FIND SUBSTANTIAL FORCE IN THE CLAIM OF THE LD. A.R THAT THE LOWER AUTHORITIES HAD FAILED TO APPRECIATE THE SCOPE AND GAMUT OF SEC. 44C IN THE RIGHT PERSPECTIVE. FOR A FAIR APPRECIATION OF THE ISSUE UNDER CONSIDERATION WE SHALL BRIEFLY CULL OUT SE C.44C OF THE ACT , WHICH READS AS UNDER (RELEVANT EXTRACT) : 44C. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 28 TO 43A, IN THE CASE OF AN ASSESSEE, BEING A NON - RESIDENT, NO ALLOWANCE SHALL BE MADE, IN COMPUTING THE INCOME CHARGEABLE UNDE R THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, IN RESPECT OF SO MUCH OF THE EXPENDITURE IN THE NATURE OF HEAD OFFICE EXPENDITURE AS IS IN EXCESS OF THE AMOUNT COMPUTED AS HEREUNDER, NAMELY: - (A) AN AMOUNT EQUAL TO FIVE PERCENT OF THE ADJUSTED TOTAL INCOME; OR (B) [****] (C) THE AMOUNT OF SO MUCH OF THE EXPENDITURE IN THE NATURE OF HEAD OFFICE EXPENDITURE INCURRED BY THE ASSESSEE AS IS ATTRIBUTABLE TO THE BUSINESS OR PROFESSION OF THE ASSESSEE IN INDIA, WHICHEVER IS THE LEAST. FURTHER, THE TERM H EAD OFFICE EXPENDITURE AS CONTEMPLATED IN SEC. 44C HAD BEEN DEFINED IN EXPLANATION (IV) TO SEC . 44C, WHICH READS AS UNDER: (IV) HEAD OFFICE EXPENDITURE' MEANS EXECUTIVE AND GENERAL ADMINISTRA TION EXPENDITURE INCURRED BY THE ASSESSEE OUTSIDE INDIA, INCLU DING EXP ENDITURE INCURRED IN RESPECT OF: - (A) RENT, RATES, TAXES, REPAIRS OR INSURANCE OF ANY PREMISES OUTSIDE INDIA USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION; ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 11 (B) SALARY, WAGES, ANNUITY, PENSION, FEES, BONUS, COMMISSION, GRA TUITY, PERQUISITES OR PRO FITS IN LIEU OF OR IN ADDITION TO SALARY. WHETHER PAID OR ALLOWED TO ANY EMPLOYEE OR OTHER PERSON EM PLOYED IN, OR MANAGING THE AFFAIRS OF, ANY OFFICE OUTSIDE INDIA; (C) TRAVELLING BY ANY EMPLOYEE OR OTHER PERSON EMPLOYED IN, OR MANAGING THE AFFAIRS OF, ANY OFFICE OUTSIDE INDIA; AND (D) SUCH OTHER MATTERS CONNECTED WITH EXECUTIVE AND GENERAL ADMINISTRATION AS MAY BE PRESCRIBED.] ON A PERUSAL OF SEC. 44C, WE FIND , THAT THE SAME THEREIN CONTEMPLATES A CEILING ON THE ALLOWABILITY OF THE HEAD OFFICE EXPENDITURE INS OFAR THE SAME IS ATTRIBUTABLE TO THE BUSINESS IN INDIA, WHILE COMPUTING THE INCOME OF AN ASSESSEE, BEING A NON - RESIDENT , UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. UNDER THE SAID STATUTORY PROVISION THE ALLOWABILITY OF THE EXPENDITURE IS T O BE RESTRICTED TO VIZ. (I) AN AMOUNT EQUAL TO FIVE PERCENT OF THE ADJUSTED TOTAL INCOME; OR (II) THE AMOUNT OF SO MUCH OF THE EXPENDITURE IN THE NATURE OF HEAD OFFICE EXPENDITURE INCURRED BY THE ASSESSEE AS IS ATTRIBUTABLE TO THE BUSINESS OR PROFESSION OF THE ASSESSEE IN INDIA; WHICHEVER IS LE SS . AS OBSERVED BY US HEREINABOVE, THE LOWER AUTHORITIES HELD A CONVICTION THAT FROM THE DETAILS FILED BY THE ASSESSEE IT WAS NOT CLEAR AS TO WHETHER OR NOT THE EXPENSES INCURRED BY THE ASSESSEE WERE IN RESPECT OF ITS INDIAN BRANCH . ACCORDINGLY, DRAWING SUPPORT FROM SUB - SECTION (C) TO SEC.44C, THE A.O HAD CONCLUDED THAT NO AMOUNT OF EXPENDITURE WAS ALLOWABLE AS DEDUCTION TO THE ASSESSEE UNDER THE SAID STATUTORY PROVISION. ON THE CONTRARY, IT WAS THE CLAIM OF THE ASSESS EE THAT WORKING OF THE C ENTRAL A DMINISTRATIVE E XPENDITURE ATTRIBUTABLE TO THE INDIAN BRANCH ON THE BASIS OF THE REVENUE OF THE INDIAN BRANCH IN PROPORTION TO THE REVENUE OF THE BANK AS A WHOLE, THEREIN REVEAL ED, THAT THE CLAIM OF DEDUCTION RAISED BY THE AS SESSEE @ 5% OF THE ADJUSTED TOTAL INCOME WAS SUBSTANTIALLY LOWER THAN THE ACTUAL AMOUNT OF H.O EXPENDITURE INCURRED BY THE ASSESSEE AS WAS ATTRIBUTABLE TO ITS BUSINESS IN INDIA. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID ISSUE BEFORE US, A ND ARE PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE LD. A.R THAT THE EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNTS WOULD NOT BE DECISIVE OR CONCLUSIVE TO DETERMINE THE ASSESSEES CLAIM FOR DEDUCTION INSOFAR SEC.44C OF ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 12 THE ACT IS CONCERNED. IN FACT , WE ARE OF A STRONG CONVICTION THAT THE DEDUCTION OF H . O EXPENDITURE (ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE IN INDIA) IS ALLOWABLE IN ACCORDANCE WITH PROVISIONS OF SEC. 44C , IRRESPECTIVE OF THE FACT, WHETHER OR NOT ANY AMOUNT IS DEBITED IN THE BOOK S OF ACCOUNTS. IN THIS CONTEXT, IT WOULD BE RELEVANT TO POINT OUT THAT SEC. 44C OF THE ACT WAS INTRODUCED BY THE F INANCE ACT, 1976, W.E.F 01.06.1976 WHEREIN THE PURPOSE OF INSERTION OF THE SAID STATUTORY PROVISION WAS EXPLAIN ED BY THE CBDT CIRCULAR NO. 2002 , WHICH READ S AS UNDER: 25.1. NON - RESIDENTS CARRYING ON ANY BUSINESS OR PROFESSION IN INDIA THROUGH THEIR BRANCHES ARE ENTITLED TO A DEDUCTION, IN COMPUTING THE TAXABLE PROFITS, IN RESPECT OF GENERAL ADMINISTRATIVE EXPENSES INCURRED BY THE FOREIGN HE AD OFFICES IN SO FAR AS SUCH EXPENSES CAN BE RELATED TO THEIR BUSINESS OR PROFESSION IN INDIA. IT IS EXTREMELY DIFFICULT TO SCRUTINIZE AND VERIFY CLAIMS IN RESPECT OF SUCH EXPENSES, PARTICULARLY IN THE ABSENCE OF ACCOUNT BOOKS OF THE HEAD OFFICE, WHICH ARE KEPT OUTSIDE INDIA. FOREIGN COMPANIES OPERATING THROUGH BRANCHES IN INDIA SOMETIMES TRY TO REDUCE THE INCIDENCE OF TAX IN INDIA BY INFLATING THEIR CLAIMS IN RESPECT OF HEAD OFFICE EXPENSES. WITH A VIEW OF GETTING OVER THESE DIFFICULTIES, THE FINANCE ACT HAS INSERTED A NEW SECTION 44C IN THE INCOME - TAX ACT LAYING DOWN CERTAIN CEILING LIMITS FOR THE DEDUCTION OF HEAD OFFICE EXPENSES IN COMPUTING THE TAXABLE PROFITS IN THE CASE OF NON - RESIDENT TAXPAYERS. ACCORDINGLY , WE ARE OF THE CONSIDERED VIEW , THAT THE LEGISLATURE IN ALL ITS WISDOM HAD PROVIDED A BASIS FOR ATTRIBUTING A PART OF THE HEAD OFFICE EXPENSES INCURRED BY AN ASSESSEE, A NON - RESIDENT , TO THE BUSINESS OF THE ASSESSEE IN INDIA. ON A P ERUSAL OF THE PURPOSE FOR MA KING AVAILABLE OF THE AFORESAID STATUTORY PROVISION I.E SEC. 44C ON THE STATUTE , WE FIND, THAT THE SAME WAS BACKED BY THE REASON THAT IT WAS EXTREMELY DIFFICULT TO SCRUTINISE AND VERIFY THE VERACITY OF THE CLAIMS OF THE NON - RESIDENT ASSESSEE S CARRYING ON ANY BUSINESS OR PROFESSION IN INDIA, AS REGARDS THEIR HEAD OFFICE EXPENSES ATTRIBUTABLE TO SUCH BUSINESS OR PROFESSION IN INDIA . WE ARE UNABLE TO CONCUR WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE ABSENCE OF THE HEAD OFFICE EXPENSES ATTRIBUTABLE TO ITS BUSINESS IN INDIA, IN THE AUDIT REPORT OR THE NOTES TO ACCOUNTS OF THE INDIAN BRANCH WOULD THEREIN RENDER IT INELIGIBLE TO CLAIM THE DEDUCTION UNDER SEC. 44C OF THE ACT. IN OUR CONSIDERED VIEW THE ASSESSEE HAD RIGHTLY CLAIMED DEDUCTION OF 5% OF THE ADJUSTED TOTAL INCOME , AS THE SAME IS LOWER ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 13 THAN THE AMOUNT OF THE HEAD OFFICE EXPENDITURE INCURRED BY THE ASSESSEE AS IS ATTRIBUTABLE TO ITS BUSINESS IN INDIA . WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS NOT FI NDING FAVOUR WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES, THEREIN SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A.O TO ALLOW THE ASSESSEES CLAIM FOR DEDUCTION UNDER SEC. 44C OF THE ACT. 13 . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OU R AFORESAID OBSERVATIONS. ITA NO.3685/MUM/2016 A.Y. 2010 - 11 14 . WE SHALL NOW TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2010 - 11. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US: RE. RELIEF NO. 1 1. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 56, MUMBAI [HEREINAFTER REFERRED TO AS 'THE CIT(A)'] ERRED IN HOLDING THAT PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') ARE APPLICABLE WITH RESPECT TO INTEREST RECEIVE D BY THE BRANCH OF THE APPELLANTS FROM ITS HO HAVING FAILED TO APPRECIATE THAT INTEREST RECEIVED FROM HO IS NOT EXEMPT INCOME. 2. WITHOUT PREJUDICE TO (1) ABOVE, THE CIT(A) ERRED IN NOT APPRECIATING THAT SINCE THE BANK HAD NOT INCURRED ANY EXPENDITURE FOR THE PURPOSE OF EARNING THE INTEREST AMOUNT, PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. 3. WI THOUT PREJUDICE TO GROUND NOS. 1 AND 2, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF AO OF APPLYING THE PROVISIONS OF SECT ION 14A R.W. RULE 8D OF THE ACT NOT APPRECIATING THAT THE SAID PROVISIONS CAN BE INVOKED ONLY IF THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANTS IN RESPECT OF SUCH EXPENDITURE IN RELATION TO SUCH INCOME. RE. RELIEF NO. 2 4. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO THAT TRANSFER PRICING PROVISIONS ARE APPLICABLE FOR TRANSACTIONS BETWEEN THE BRANCH AND ITS HO/OVERSEAS BRANCHES HAVING FAILED TO APPRECIATE THAT INDIAN BRANCH AND THE HEAD OFFICE ARE ONE AND THE SAME PERS ONS AND NOT SEPARATE INDEPENDENT ENTERPRISES . RE . RELIEF NO. 3 5. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ACCEPTING THE ADJUSTMENT OF RS.29 , 52,919 MADE BY THE TPO ON INTEREST PAID BY THE INDIAN BRANCH TO ITS HO HAVING FAILED TO APPRECIATE THE FACT THAT TRANSACTION ENTERED INTO BY THE APPELLANTS WITH ITS HO ARE AT ARM'S LENGTH. ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 14 YOUR APPELLANTS CRAVE LEAVE TO ADD TO, ALTER, AMEND, VARY, OMIT OR SUBSTITUTE THE AFORESAID GROUND OF APPEAL OR ADD A NEW GROUND OR GROUN DS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL AS THEY MAY BE ADVISED. AT THE VERY OUTSET OF THE HEARING OF THE APPEAL, IT WAS SUBMITTED BY THE LD. A. R THAT AS THE AMOUNT OF INTEREST INCOME RECEIVED BY THE ASSESSEE FROM ITS H.O DURING THE YEAR UNDER CONSIDERATION WAS A MINISCULE AMOUNT OF RS.3,866/ - , THEREFORE, IN ALL FAIRNESS THE DISALLOWANCE UNDER SEC. 14A MAY BE RESTRICTED TO THE SAID EXTENT. IT WAS AVERRED BY THE LD. A.R, THAT AS INSTRUCTED , IN CASE THE DISALLOWANCE IS RESTR ICTED TO THE AFORESAID AMOUNT OF EXEMPT INCOME, THEN THE REMAINING GROUND S OF APPEAL WOULD NOT TO BE PRESSED. 15 . PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) DID NOT OBJECT TO THE AFORESAID CLAIM OF THE COUNSEL FOR THE ASSESSEE. 16 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID ISSUE BEFORE US , AND FIND SUBSTANTIAL FORCE IN THE CLAIM OF THE LD. A.R THAT THE AMOUNT OF THE DISALLOWANCE UNDER SEC. 14A IS LIABLE TO BE RESTRICTED TO THE EXTENT OF THE EXEMPT INTEREST INCOME. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT S OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF JCIT VS. JOINT INVESTMENTS PVT.LTD. (2015) 372 ITR 694 (DEL) AND CHEM I NVEST LD. VS. CIT 378 ITR 33 (DEL) . ACCORDINGLY, IN TERMS OF OUR AFORESAID OBSERVATION S, THE A.O IS DIRECTED TO RESTRICT THE DISALLOWANCE UNDER SEC.14A TO THE EXTENT OF THE AMOUNT OF THE EXEMPT INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. BEFORE PARTING, WE MAY HEREIN OBSERVE THAT THE CONCESSION ON THE PART OF THE ASSESSEE FOR N OT PRESSING THE OTHER GROUNDS OF APPEAL IS SOLELY ON THE BASIS OF THE MINISCULE AMOUNT OF THE EXEMPT INTEREST INCOME RECEIVED BY THE ASSESSEE FROM ITS H.O DURING THE YEAR UNDER CONSIDERATION, WHICH THUS , SHALL IN NO WAY PREJUDICE ITS ALTERNATIVE CLAIMS WHI CH ARE NOT BEING ADVERTED TO AND THEREIN BEING ADJUDICATED UPON IN PURSUANCE TO THE AFORESAID CONCESSION OF THE LD. A.R. ITA NOS.3684 & 3685/MUM/2016 A.YS. 2009 - 10 & 2010 - 11 DOHA BANK QSC VS. THE DCIT (IT) - 2(2)(2) 15 17 . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 18 . RESULTANTLY, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRO NOUNCED IN THE OPEN COURT ON 06 . 11.2020 SD/ - SD/ - PRAMOD KUMAR RAVISH SOOD ( VICE PRESIDENT ) ( JUDICIAL MEMBER) MUMBAI, DATE: 06 .11 .2020 PS: ROHIT COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI