ANTWERP DIAMOND BANK NV, MUMBAI V. ADIT (T) RG 1(1), MUMBAI

ITA 5857/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92277 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Assessee
• Bench Allotted: L
• Next Hearing Date: 11-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-07-2010
• Court: TRIBUNAL
• Department Lawyers: S D SHRIVASTAVA
• Keywords: Double taxation relief; Question of law; Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL L , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ./ ITA NO. 5857 / MUM/20 1 0 ( / ASSESSMENT YEAR : 200 6 - 07 ) ANTWERP DIAMOND BANK NV, 510, 5 TH FLOOR, TRADE CENTRE, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 51 VS. ADIT(INTERNATIONAL TAXATION) - 1(1), MUMBAI ./ ./ PAN/GIR NO. : A A DC A 2713 J ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI NITESH JOSHI /REVENUE BY : SHRI S.D.SHRIVASTAVA / DATE OF HEARING : 07/04/2015 / DATE OF PRONO UNCEMENT 10 / 04 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S.143(3) R.W.S.144C( 13 ) OF THE IT ACT. 2. THE DISPUTE OF ASSESSEE RELATES TO ADDITION MADE ON ACCOUNT OF DATA PROCESSING COST, DEDUCTION U/S.44C, INTEREST TO HEAD OFFICE. 3. AT THE OUTSET, LD. AR PLACED ON RECORD ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004 - 05, DATED 14 - 3 - 2014, WHEREIN EXACTLY SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THE PRECISE OBSERVATION OF THE TRIBUNAL WITH REGARD TO ADDITION MADE ON ACCOUNT OF DATA PROCESSING COST WAS AS UNDER : - ITA NO. 5857 / 1 0 2 15. NOW, COMING TO THE MAIN ISSUE I.E., WHETHER THE REIMBURSEMENT OF DATA PROCESSING COST OF ` 34,03,734, AMOUNTS TO R OYALTY OR NOT, WE FIND FROM THE RECORD THAT THE ASSESSEE IS ENGAGED IN THE BANKING BUSINESS AND OPERATES IN INDIA THROUGH BRANCH IN MUMBAI. IT HAS ACQUIRED A BANKING APPLICATION SOFTWARE NAMED AS FLEXCUBE FROM AN INDIAN SOFTWARE COMPANY WHICH IS EXCLUSIV ELY USED FOR THE BANKING PURPOSE BY THE ASSESSEE ALL OVER THE WORLD. WHEN THE MUMBAI BRANCH WAS SET UP, THE BRANCH WAS ALLOWED TO USE THE SAID SOFTWARE BY MAKING IT ASSESSABLE THROUGH SERVERS LOCATED AT BELGIUM. THE BRANCH SENDS ITS DATA TO THE BELGIUM SER VER FROM WHERE THE DATA GETS PROCESSED AS PER THE REQUIREMENT OF THE BANKING OPERATIONS. AS PER THE TERMS OF AGREEMENT BETWEEN THE BRANCH AND THE HEAD OFFICE FOR THE USAGE OF SOFTWARE BY THE BRANCH, WHICH HAS BEEN INCORPORATED ABOVE, IT IS EVIDENT THAT THE HEAD OFFICE ONLY HAS THE NON EXCLUSIVE NON TRANSFERRABLE RIGHTS TO USE THE COMPUTER SOFTWARE BROUGHT FOR PERSONAL USE AND CLAUSE 16 OF THE SAID AGREEMENT SPECIFICALLY PROVIDES THAT THE HEAD OFFICE DOES NOT HAVE ANY RIGHT TO ASSIGN, SUB LICENSE OR OTHERWIS E TRANSFER THE LICENSE OF THIS AGREEMENT. THUS, THE PAYMENT BY THE BRANCH FOR USE OF COMPUTER SOFTWARE IS NOT THE RIGHT IN THE COPY RIGHT BUT ONLY FOR DOING THE WORK FROM THE SAID SOFTWARE WHICH SUBSIST IN THE COPY RIGHT OF THE SOFTWARE. THE BRANCH IS USIN G THE COMPUTER SOFTWARE AND THE I.T. RESOURCES INSTALLED AT BELGIUM FOR WHICH THE PAYMENT IS MADE BY THE HEAD OFFICE TOWARDS THE USE OF SUCH SOFTWARE LICENSE. SINCE THE BRANCH IS USING THE SAME SOFTWARE FOR THE PURPOSE OF BUSINESS OPERATIONS, THE HEAD OFFI CE ALLOCATES THE SAID EXPENDITURE ON A PRORATA BASIS FOR THE USE OF THE SAID RESOURCES WHICH IS BEING REIMBURSED BY THE BRANCH TO THE HEAD OFICE. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS SOUGHT THE BENEFIT OF TREATY BETWEEN INDIA AND BELGIUM AND HAD SPEC IFICALLY RELIED UPON THE DEFINITION OF ROYALTY AS GIVEN IN THE ARTICLE 12. CLAUSE (A) OF PARA 3 OF ARTICLE 12, WHICH DEFINES THE TERM ROYALTY IN THE FOLLOWING MANNER: 3(A) THE TERM ROYALTIES AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIV ED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTR IAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. 16. THE ABOVE DEFINITION OF ROYALTY THUS PROVIDES THAT, WHEN THE PAYMENT OF ANY KIND IS RECEIVED AS A CONSIDERATION FOR USE OF OR THE RIGHT TO USE OF ANY OF THE COPY RIGHT OF ANY ITEM OR FOR VARIOUS TERMS US ED IN THE SAID ARTICLE, THEN ONLY IT CAN BE HELD TO BE FOR THE PURPOSE OF ROYALTY. THE SAID DEFINITION OF ROYALTY IS EXHAUSTIVE AND NOT INCLUSIVE AND, THEREFORE, IT HAS TO BE GIVEN THE MEANING AS CONTAINED IN THE ARTICLE ITSELF AND NO OTHER MEANING SHO ULD BE LOOKED UPON. IF THE ASSESSEE IS CLAIMING THE APPLICATION OF THE DTAA, THEN THE DEFINITION AND SCOPE OF ROYALTY GIVEN IN THE DOMESTIC LAW, IN THE PRESENT CASE, SECTION 9(1)(VI) SHOULD NOT BE READ INTO OR LOOKED UPON. THE CHARACTER OF PAYMENT TOWARD S ROYALTY DEPENDS UPON THE INDEPENDENT USE OR THE RIGHT TO USE OF THE COMPUTER SOFTWARE, WHICH IS A KIND OF COPY RIGHT. IN THE PRESENT CASE, THE PAYMENT MADE ITA NO. 5857 / 1 0 3 BY THE BRANCH IS NOT FOR USE OF OR RIGHT TO USE OF SOFTWARE WHICH IS BEING EXCLUSIVELY DON E BY THE HEAD OFFICE ONLY, INSTALLED IN BELGIUM. THE BRANCH DOES NOT HAVE ANY INDEPENDENT RIGHT TO USE OR CONTROL OVER SUCH MAIN FRAME OF THE COMPUTER SOFTWARE INSTALLED IN BELGIUM, BUT IT SIMPLY SENDS THE DATA TO THE HEAD OFFICE FOR GETTING IT PROCESSED. INSOFAR AS THE BRANCH IS CONCERNED, IT IS ONLY REIMBURSING THE COST OF PROCESSING OF SUCH DATA TO THE HEAD OFFICE, WHICH HAS BEEN ALLOCATED ON PRORATA BASIS. SUCH REIMBURSEMENT OF PAYMENT DOES NOT FALL WITHIN THE AMBIT OF DEFINITION OF ROYALTY WITHIN THE ARTICLE 12(3)(A). TO FALL WITHIN ITS AMBIT, THE BRANCH SHOULD HAVE EXCLUSIVE AND INDEPENDENT USE OR RIGHT TO USE THE SOFTWARE AND FOR SUCH USAGE, PAYMENT HAS TO BE MADE IN CONSIDERATION THEREOF. IT IS NOT THE CASE OF THE REVENUE THAT THE HEAD OFFICE HAS P ROVIDED ANY COPY RIGHT OF SOFTWARE OR ANY COPYRIGHTED ARTICLE DEVELOPED BY THE HEAD OFFICE FOR THE EXCLUSIVE USE OF THE ASSESSEE FOR, WHICH THE ASSESSEE IS MAKING THE PAYMENT ALONG WITH THE MARK UP EXCLUSIVELY FOR THE PURPOSE OF ROYALTY. IF THE PAYMENT FOR LICENSE FOR THE SOFTWARE WHICH IS INSTALLED IN THE HEAD OFFICE IS BEING MADE BY THE HEAD OFFICE, THEN ANY ALLOCATION OF COST AND REIMBURSEMENT THEREOF BY THE BRANCH TO THE HEAD OFFICE CANNOT BE TERMED AS INDEPENDENT PAYMENT FOR THE PURPOSE OF ROYALTY. TO FALL WITHIN THE AMBIT OF ROYALTY UNDER ARTICLE, THE PAYMENT SHOULD BE EXCLUSIVELY QUA THE USE OR THE RIGHT TO USE THE SOFTWARE EXCLUSIVELY BY THE BRANCH. THE CHARACTER OF THE PAYMENT UNDER THE ROYALTY TRANSACTIONS DEPENDS UPON THE RIGHTS THAT THE TRANSFE REE ACQUIRES IN RELATION TO THE USE AND EXPLOITATION OF THE SOFTWARE PROGRAMME. HERE, THERE IS NO SUCH RIGHT WHICH HAS BEEN ACQUIRED BY THE BRANCH IN RELATION TO THE USAGE OF SOFTWARE, BECAUSE THE HEAD OFFICE ALONE HAS THE EXCLUSIVE RIGHT OF THE LICENSE TO USE THE SOFTWARE. THUS, THE REIMBURSEMENT OF THE DATA PROCESSING COST TO THE HEAD OFFICE DOES NOT FALL WITHIN THE AMBIT OF DEFINITION OF ROYALTY UNDER ARTICLE 12(3)(A). 17. THE LEARNED COMMISSIONER (APPEALS) AND THE LEARNED SENIOR COUNSEL HAVE STRONGLY RELIED UPON THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL IN KOTAK MAHINDRA PRIMUS LTD. (SUPRA). ON A PERUSAL OF THE SAID DECISION, IT IS SEEN THAT THE CONCLUSION DRAWN BY THE TRIBUNAL, IS DIRECTLY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AL SO, WHICH IS EVIDENT FROM THE FOLLOWING OBSERVATIONS AND CONCLUSIONS DRAWN BY THE TRIBUNAL: 11. THE CONSIDERATION OF PAYMENT IS ONLY THIS DATA PROCESS WORK. NO PART OF THIS PAYMENT CAN BE SAID TO BE FOR THE USE OF SPECIALIZED SOFTWARE ON WHICH DATA IS P ROCESSED OR FOR THE USE OF MAINFRAME COMPUTER BECAUSE THE INDIAN COMPANY DOES NOT HAVE ANY INDEPENDENT RIGHT TO USE THE COMPUTER OR EVEN PHYSICAL ACCESS TO THE MAINFRAME COMPUTER, SO AS TO USE THE MAINFRAME COMPUTER OR THE SPECIALIZED SOFTWARE. ALL THAT TH E RIGHT IS FOR PROCESSING OF DATA, AND THE USE OF MAINFRAME COMPUTER IS PERMITTED ONLY FOR THAT PURPOSE. THE INDIAN COMPANY CAN FEED THE RAW DATA IN THE MAINFRAME COMPUTER IN AUSTRALIA, WITH THE HELP OF THE TELECOMMUNICATION LINK, AND THE OUTPUT DATA, AFTE R DUE PROCESSING IS TRANSMITTED BACK TO THE INDIAN COMPANY. THERE IS NO PRIVILEGE OR RIGHT GRANTED TO THE INDIAN COMPANY BY THE AUSTRALIAN COMPANY. THE CONTROL OF THE ITA NO. 5857 / 1 0 4 INDIAN COMPANY IS ONLY ON THE INPUT TRANSMISSION AND THE RIGHT IS TO GET THE OUTPUT PROCE SSED DATA BACK. THE ACTUAL PROCESSING OF DATA IS THE EXCLUSIVE CONTROL OF THE AUSTRALIAN COMPANY AND IT IS FOR THIS WORK THAT THE AUSTRALIAN COMPANY GETS PAID. IN OUR CONSIDERED VIEW, THEREFORE, IN ESSENCE THE IMPUGNED PAYMENT IS MADE TO THE AUSTRALIAN COM PANY IN CONSIDERATION OF ITS PROCESSING OF DATA BELONGING TO THE INDIAN COMPANY. 14. AS FAR AS THE SCOPE OF ARTICLE 12(3)(A) IS CONCERNED, WE FIND THAT IT COVERS ONLY A PAYMENT FOR THE USE OF, OR THE RIGHT TO USE OF, ANY COPYRIGHT, PATENT, DESIGN OR MODE L, PLAN, SECRET FORMULA OR PROCESS, TRADEMARK, OR OTHER LIKE PROPERTY OR RIGHT. THE CASE OF THE REVENUE IS THAT THE PAYMENT IS MADE FOR THE USE OF SPECIALIZED SOFTWARE WITH THE HELP OF WHICH DATA IS PROCESSED. WE ARE NOT PERSUADED. AS WE HAVE CONCLUDED EAR LIER IN THIS ORDER, ON THE FACTS OF THIS CASE, THE PAYMENT MADE BY THE INDIAN COMPANY IS NOT FOR THE USE OF, OR RIGHT TO USE OF, SOFTWARE, THE PAYMENT IS FOR DATA PROCESSING. BE THAT AS IT MAY, EVEN IF STAND OF THE REVENUE IS TO BE UPHELD AND IT IS TO BE C ONCLUDED THAT THE PAYMENT IS MADE FOR SOFTWARE PER SE, THAT DOES NOT LEAD TO TAXABILITY OF RECEIPT IN THE .HANDS OF THE AUSTRALIAN COMPANY EITHER. IT IS ALSO BY NOW SETTLED THAT THE PAYMENT FOR SOFTWARE IS FOR A COPYRIGHTED ARTICLE AND NOT COPYRIGHT PER SE , AND, THEREFORE, IS NOT COVERED BY THE SCOPE OF PAYMENT FOR COPYRIGHT. THE AUTHORITY FOR THIS PROPOSITION IS CONTAINED IN SPECIAL BENCH DECISION IN THE CASE OF MOTOROLA INC. V. DY. CIT (2005) 95 ITD 269 (DEL)(SB), SAMSUNG ELECTRONICS COMPANY LTD. V. ITO ( 2005) 94 ITD 91 (BANG), AND LUCENT TECHNOLOGIES HINDUSTAN LTD. V. ITO (2005) 92 ITD 366 (BANG). IT IS NOT EVEN THE REVENUES CASE THAT THE PAYMENT IN QUESTION IS NOT (SIC) FOR THE USE OF, OR RIGHT TO USE OF, PATENT, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR TRADE MARK. IN ANY EVENT, HAVING PERUSED THESE CLASSIFICATIONS AND HAVING CONSIDERED THE FACTS BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT THE PAYMENT DOES NOT FIT INTO ANY OF THESE CLASSIFICATIONS. IT IS, HOWEVER, CONTENDED THAT THE IMPUGNED PAYMENT IS COVERED BY THE RESIDUARY CLAUSE, I.E., 'OTHER LIKE PROPERTY OR RIGHT'. IT IS CONTENDED THAT BY MAKING PAYMENT OF US $ 60,000 PER ANNUM, THE INDIAN COMPANY GETS A VALUABLE PROPERTY AND RIGHT AS THE PAYMENT CANNOT BE SAID TO. HAVE BEEN MADE IN VA CUUM AND WITHOUT ANY CONSIDERATION. THIS PLEA ALSO DOES NOT IMPRESS US. IT IS NOT EVERY PROPERTY OR RIGHT WHICH CAN BE COVERED BY THESE EXPRESSIONS APPEARING IN THE END OF ARTICLE 12(3)(A), BECAUSE, FOLLOWING THE PRINCIPLES OF EJUSDEM GENERIS MEANING OF TH E GENERAL WORDS FOLLOWING THE SPECIFIC WORDS HAVE TO TAKE COLOUR FROM THE SPECIFIC WORDS PRECEDING IT. WHEN THAT PROPERTY OR RIGHT, EVEN IF IT SO EXISTS, IS NOT OF THE NATURE OF ANY OF THE SPECIFIC CATEGORIES SET OUT IN ARTICLE 12(3)(A), IT CANNOT BE COVER ED BY THE GENERAL WORDS FOLLOWING THOSE CATEGORIES EITHER. FOR ALL THESE REASONS, WE ARE OF THE CONSIDERED VIEW THAT PROVISIONS OF ARTICLE 12(3)(A) CANNOT BE INVOKED ON THE FACTS OF THE CASE BEFORE US. ITA NO. 5857 / 1 0 5 15. THAT TAKES US TO THE QUESTION WHETHER THE PROVISI ONS OF ARTICLE 12(3)(B), AS RELIED UPON BY THE REVENUE AUTHORITIES, CAN BE INVOKED ON THE FACTS OF THE PRESENT CASE. ARTICLE 12(3)(B) CAN APPLY ONLY WHEN THE PAYMENT IN QUESTION CAN BE HELD TO BE PAYMENT FOR 'THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL , COMMERCIAL OR SCIENTIFIC EQUIPMENT'. THIS CONDITION CAN ONLY BE SATISFIED WHEN IT IS ESTABLISHED THAT THE IMPUGNED PAYMENT IS MADE FOR THE USE OF, OR RIGHT TO USE OF, MAINFRAME COMPUTER. TH E INDIAN COMPANY DOES NOT HAVE ANY CONTROL OVER, OR PHYSICAL ACCE SS TO, THE MAINFRAME COMPUTER IN AUSTRALIA. THERE CANNOT, THEREFORE, BE ANY QUESTION OF PAYMENT FOR USE OF THE MAINFRAME COMPUTER. IT IS INDEED TRUE THAT THE USE OF MAINFRAME COMPUTER IS INTEGRAL TO THE DATA PROCESSING BUT WHAT IS IMPORTANT TO BEAR IN MIND IS THE FACT THAT THE PAYMENT IS NOT FOR THE USE OF MAINFRAME COMPUTER PER SE, THAT THE INDIAN COMPANY DOES NOT HAVE ANY CONTROL OVER THE MAINFRAME COMPUTER OR PHYSICAL ACCESS TO THE MAINFRAME COMPUTER, AND THAT THE PAYMENT IS FOR ACT OF SPECIALIZED DATA P ROCESSING BY THE AUSTRALIAN COMPANY. USE OF MAINFRAME COMPUTER IN THE COURSE OF PROCESSING OF DATA IS ONE OF THE IMPORTANT ASPECTS OF THE WHOLE ACTIVITY BUT THAT IS NOT THE PURPOSE OF, AND CONSIDERATION FOR, THE IMPUGNED PAYMENT BEING MADE TO AUSTRALIAN CO MPANY. THE PAYMENT, AS WE HAVE OBSERVED EARLIER, IS FOR THE ACTIVITY OF SPECIALIZED DATA PROCESSING. IT IS NEITHER PRACTICABLE, NOR PERMISSIBLE, TO ASSIGN MONETARY VALUE TO EACH OF THE SEGMENT OF THIS ECONOMIC ACTIVITY AND CONSIDER THAT AMOUNT IN ISOLATION , FOR THE PURPOSE OF DECIDING CHARACTER OF THAT AMOUNT. THEREFORE, NEITHER THE IMPUGNED PAYMENT CAN BE SAID TO BE TOWARDS USE OF, OR RIGHT TO USE OF, THE MAINFRAME COMPUTER, NOR IS IT PERMISSIBLE TO ALLOCATE A PART OF THE IMPUGNED PAYMENT, AS ATTRIBUTABLE TO USE OF, OR RIGHT TO USE OF, MAINFRAME COMPUTER. ACCORDINGLY, THE PROVISIONS OF ARTICLE 12(3)(B) CANNOT HAVE ANY APPLICATION IN THE MATTER. 18. INSOFAR AS THE RELIANCE PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE DECISIONS OF THE MADRAS HI GH COURT AND ALSO THE SCOPE OF ROYALTY AS GIVEN IN EXPLANATION 4 AND 5 TO SECTION 9(1)(VI) BROUGHT IN STATUTE BY THE FINANCE ACT, 2012 ARE CONCERNED, WE FIND THAT THE SAME IS NOT TENABLE FOR THE REASON THAT ONCE THE ASSESSEE HAS OPTED FOR THE BENEFIT OF THE DTAA, THEN THERE IS NO REQUIREMENT FOR RESORTING TO THE DEFINITION AND THE SCOPE OF ROYALTY AS GIVEN IN SECTION 9(1)(VI). THE SAID AMENDMENT CANNOT BE READ INTO THE TREATY AND WILL NOT INFLUENCE THE DEFINITION OF ROYALTY, AS GIVEN IN ARTICLE 12(3). THIS PROPOSITION IS SQUARELY COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN SIEMENS AKTIONGESELLSCHAFT (SUPRA), THE DECISION OF DELHI HIGH COURT IN NOKIA NETWORK (SUPRA) AND DIT V/S ERICSON AB, [2012] 343 ITR 470. EVEN THE DECISIONS OF MADRAS HIGH CO URT AS RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IS NOT APPLICABLE WHICH IS EVIDENT FROM THE ISSUE INVOLVED AS IS EVIDENT FROM THE SUBSTANTIAL QUESTION OF LAW WHICH WERE FORMULATED BY THE HIGH COURT FOR ADJUDICATION. HENCE, THE SAID DECISIONS ARE NOT APPLICABLE. ITA NO. 5857 / 1 0 6 19. THUS, IN VIEW OF THE AFORESAID REASONS, WE HOLD THAT THE IMPUGNED PAYMENT MADE BY THE BRANCH TO THE H.O. TOWARDS REIMBURSEMENT OF COST OF DATA PROCESSING CANNOT BE HELD TO BE COVERED WITHIN THE SCOPE OF EXPRESSION ROYALTY UNDER A RTICLE 12(3)(A) OF THE INDIA BELGIUM DTAA. ACCORDINGLY, THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER (APPEALS) IS AFFIRMED. 20. SINCE WE HAVE ALREADY HELD THAT THE DATA PROCESSING COST PAID BY THE ASSESSEE DOES NOT AMOUNT TO ROYALTY, CONSEQUENTLY, TH ERE IS NO REQUIREMENT FOR DEDUCTING TAX AT SOURCE ON SUCH PAYMENT. THEREFORE, THE PROVISIONS OF SECTION 40(A)(I) WILL NOT APPLY. ACCORDINGLY, THE ISSUE ARISING OUT OF GROUND NO.1 AND 2 IS DISMISSED. 4 . GROUND NO.2 RELATES TO DEDUCTION U/S.44C OF THE ACT. THIS ISSUE HAS ALSO BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE MENTIONED ABOVE, WHEREIN THE OBSERVATION OF THE TRIBUNAL IS AS UNDER : - 23. BEFORE US, THE LEARNED SENIOR COUNSEL HAS RELIED UPON THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN GOODR ICKE (SUPRA) AND THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL IN STOCK ENGINEER AND CONTRACTORS B.V. (SUPRA). WE FIND THAT IN THE SAID DECISION, THE TRIBUNAL HAD HELD THAT THE HEAD OFFICE EXPENSES ARE RESTRICTED TO EXECUTIVE AND GENERAL ADMINISTRA TIVE EXPENSES ONLY, AS DEFINED IN EXPLANATION (IV) TO SECTION 44C AND IT DOES NOT APPLY IN RESPECT OF EACH AND EVERY EXPENSES INCURRED BY THE H.O. THE DATA PROCESSING COST, AS HAVE BEEN DISCUSSED IN THE FORGOING PARAGRAPHS, PERTAINS TO ALLOCATION OF EXPENS ES INCURRED BY THE HEAD OFFICE ON PRORATA BASIS FOR THE BANKING APPLICATION SOFTWARE ACQUIRED BY THE HEAD OFFICE. SUCH EXPENDITURE DOES NOT FALL WITHIN THE MEANING OF HEAD OFFICE EXPENSES AS PROVIDED IN SECTION 44C. THE NATURE OF EXPENSES AS GIVEN IN SEC TION 44C, HAS TO BE NECESSARILY IN THE NATURE OF EXECUTIVE AND GENERAL ADMINISTRATIVE EXPENSES ONLY. THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER (APPEALS) THAT SUCH EXPENDITURE DOES NOT FALL WITHIN THE PURVIEW OF SECTION 44C, IS IN CONSONANCE OF THE D ECISION OF THE SPECIAL BENCH AND THE CO ORDINATE BENCH OF THE TRIBUNAL CITED SUPRA, WHICH WE UPHOLD. THUS, GROUND NO.3, AS RAISED BY THE REVENUE, IS DISMISSED. 5 . GROUND NO.3 RELATES TO INTEREST PAID TO HEAD OFFICE. THE VERY SAME ISSUE HAS ALSO BEEN DEC IDED BY THE TRIBUNAL IN THE AFOREMENTIONED CASE, WHEREIN THE OBSERVATION OF THE TRIBUNAL IS AS UNDER : - 24. IN GROUND NO.4, THE REVENUE HAS CHALLENGED THAT THE DELETION OF DISALLOWANCE OF INTEREST OF ` 58,20,110. THE LEARNED COMMISSIONER (APPEALS) HAS NOT ONLY DELETED THE SAID DISALLOWANCE ON MERIT BUT HAS ALSO HELD THAT THIS AMOUNT HAS ALREADY BEEN DISALLOWED BY THE ASSESSEE ON ACCOUNT OF FAILURE TO DEDUCT THE TAX AT SOURCE. ITA NO. 5857 / 1 0 7 THEREFORE, IT WILL LEAD TO DOUBLE ADDITION. THE RELEVANT OBSERVATIONS OF THE LEARN ED COMMISSIONER (APPEALS) IS AS UNDER: 5.2 I HAVE CONSIDERED THE ARGUMENTS OF THE AR. THE ISSUE OF ALLOWANCE OF DEDUCTION OF INTEREST PAYMENT BY INDIAN BRANCH TO OVERSEAS BRANCH HAS BEEN EXAMINED IN DETAILS BY HON'BLE ITAT, KOLKATA, SPECIAL BENCH IN TH E CASE OF ABN AMRO BANK N.V. 97 ITD 89. IT HAS BEEN HELD THEREIN THAT THE BRANCH AND H.O. CONSTITUTE THE SAME LEGAL ENTITY AND THERE CAN BE NO TRANSACTION BETWEEN SELF OR ONE CANNOT EARN INCOME FROM ONESELF. NO INCOME ACCRUES ON ACCOUNT OF PAYMENT OF INTER EST BY H.O. TO INDIAN BRANCH OR VISE VERSA AS THERE CAN BE NO TRANSACTIONS WITH ONESELF. ACCORDINGLY, FOLLOWING THE DECISION OF HON'BLE KOLKATA ITAT, THE A.O. HAS CORRECTLY DISALLOWED THE CLAIM OF ADDITION MADE. THE ADDITION MADE BY THE A.O. IS CONFIRMED. IT IS, HOWEVER, OBSERVED THAT THE APPELLANT HAD ITSELF ALREADY DISALLOWED AMOUNT OF ` 58,20,110 FOR FAILURE TO DEDUCT TAX AT SOURCE. THE A.O. HAS DISALLOWED THE HEAD OFFICE INTEREST OF ` 3,10,93,950 THEREFORE, THE AMOUNT OF ` 58,20,110 HAS BEEN DOUBLY ADDE D. THE A.O. IS DIRECTED TO DELETE THIS DOUBLE ADDITION. APPEAL IN RESPECT OF THIS GROUND IS PARTLY ALLOWED. 25. BEFORE US, THE LEARNED SENIOR COUNSEL POINTED OUT THAT APART FROM THE FACT THAT THE ASSESSEE ITSELF HAS DISALLOWED THE SAID AMOUNT, THIS ISSU E OF ALLOWANCE OF DEDUCTION OF INTEREST PAYMENT BY INDIAN BRANCH TO OVERSEAS BRANCH IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005 06, WHEREIN THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BE NCH IN SUMITOMO MITSUI BANKING CORPORATION V/S DDIT, ORDER DATED 30TH MARCH 2012. THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, RELIED UPON THE FINDING OF THE ASSESSING OFFICER. 26. IN VIEW OF THE ABOVE CONTENTION OF THE LEARNED SENIOR COUNSEL AND THE CATEGORICAL FINDING OF THE LEARNED COMMISSIONER (APPEALS), WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE REVENUE, AS NOT ONLY THE SAID ISSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH AND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, BUT ALSO THERE IS NO REBUTTAL OF THE FINDING OF THE FACT RECORDED BY THE LEARNED COMMISSIONER (APPEALS), THAT THE ASSESSEE HAD ITSELF DISALLOWED THE SAID AMOUNT ON ACCOUNT OF FAILURE TO DEDUCT THE TAX AT SOURCE AND FURTHER DISALLOWANCE WILL LEAD TO DOUBLE DISALLOWANCE. THUS, THE GROUND NO.4 IS ALSO DISMISSED. 6 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, R ESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, AS REPRODUCED ABOVE , WE ALLOW ALL THE THREE GROUNDS OF THE ASSESSEE . 7 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED . ITA NO. 5857 / 1 0 8 O RDER PRONOUNCED IN THE OPEN COURT ON THIS 10/04 / 201 5 . SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 10/04 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//