Appeal details
Counselvise Citation
[2019] 115 COUNSELVISE.COM (IT) 3096 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 4 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-03-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
I
Assessment Year
2013-2014
Appeal Filed On
27-10-2017
Judgement Text
IN THE INCOME-TAX APPELLATE TRIBUNAL I B ENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, JUDICIAL MEMBER ITA NO. 6372/MUM/2017 (ASSESSMENT YEAR 2013-14) ITA NO. 6373/MUM/2017 (ASSESSMENT YEAR 2014-15) CREDIT SUISSE AG 10 TH FLOOR, CEEJAY HOUSE, PLOT F, SHIVSAGAR ESTATE, DR. ANNIE BESANT ROAD, WORLI, MUMBAI-400018. P AN: AABCC9113E VS. DCIT( INTERNATIONAL TAXATION),-2(1)(1), 17 TH FLOOR, ROOM NO. 1713, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. APPELLANT RESPONDENT APPELLANT BY : SHRI KETAN K. VED (AR) RESPONDENT BY : SHRI V. SREEKAR (CIT-DR) DATE OF HEARING : 05.03.2019 DATE OF PRONOUNCEMEN T : 05.03.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE TWO APPEAL BY ASSESSEE ARE DIRECTED AGAINST T HE ASSESSMENT ORDER PASSED IN PURSUANCE OF DIRECTION OF DISPUTE RESOLUT ION PANEL (DRP)-1, MUMBAI DATED 27.06.2017 BY ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 144C(13). THE ASSESSEE IN BOTH THE APPEAL HA S RAISED THE IDENTICAL GROUNDS OF APPEAL. THUS, BOTH THE APPEALS WERE HEAR D AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FACTS, WE ARE REF ERRING THE GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2013-14. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPELLANT RESPECTFULLY SUBMITS THAT THE LEARNED ASSESSING OFFICER ('AO') B ASED ON THE DIRECTIONS ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 2 ISSUED BY THE DISPUTE RESOLUTION PANEL ('DRP') UNDE R SECTION 144C(5) HAS IN HIS ORDER UNDER SECTION 143(3) READ WITH SECTION 14 4C(13) OF THE ACT ERRED: 1. IN HOLDING THAT THE REFERRAL FEES RECEIVED BY TH E APPELLANT [THROUGH CREDIT SUISSE AG, DUBAI BRANCH AND CREDIT SUISSE AG, SINGA PORE BRANCH ('CSSB')] FROM CREDIT SUISSE SECURITIES (INDIA) PRIVATE LIMIT ED QUALIFY AS INCOME DEEMED TO ACCRUE OR ARISE IN INDIA PURSUANT TO SECT ION 5(2)(B) OF THE ACT READ WITH SECTION 9(1)(I) OF THE ACT. 2. IN HOLDING THAT THE REFERRAL FEES RECEIVED BY TH E APPELLANT QUALIFY AS FEES FOR TECHNICAL SERVICES UNDER THE PROVISIONS OF THE ACT AND CONCLUDING THAT THE REFERRAL FEES ARE DEEMED TO ACCRUE OR ARISE IN INDIA PER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. 3. IN HOLDING THAT THE INTEREST PAID BY CREDIT SUIS SE AG, MUMBAI BRANCH ('CSMB') TO ITS HEAD OFFICE ('HO') AND CSSB, ON AMO UNTS BORROWED BY CSMB FROM THE HO AND CSSB, IS INCOME ATTRIBUTABLE T O THE HO / CSSB AND LIABLE TO TAX IN INDIA IN THE HANDS OF THE HO A ND CSSB. 4. IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ON THE BASIS THAT THE APPELLANT HAS CONCEALED PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT ALL THE GROUNDS OF APPEAL RAI SED BY ASSESSEE IN THE PRESENT APPEAL ARE SQUARELY COVERED IN FAVOUR OF AS SESSEE AND AGAINST THE REVENUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2011-12. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT GROUND NO.1 & 2 OF THE APPEAL ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CAS E FOR ASSESSMENT YEARS 2011-12 IN ITA NO. 7357/MUM/2016 AND ITA NO. 7357/MUM/2017 DATED 09.02.2018. 3. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE AFTER GOING THROUGH THE DECISION OF TRIBUNA L IN ASSESSMENT YEAR ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 3 2011-12 AGREED THAT GROUND NO. 1 & 2 OF APPEAL IS C OVERED IN FAVOUR OF ASSESSEE. HOWEVER, THE LD. DR FOR THE REVENUE SUBMI TS THAT HE SUPPORTS THE ORDER OF ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT ON IDENTICAL FACTS IN APPEAL FOR ASSESSMENT YEAR 2011-12 IN ITA NO. 7357/MUM/2016 AND ITA NO. 7357/MUM/2017 DATED 09.02.2018 AND THE CO-ORDINATE BENCH OF THE TRIBUNAL PASSED THE FOLLOWING ORDER: 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE AS SESSEE BEFORE US IS AN ENTITY INCORPORATED IN SWITZERLAND AND IS A TAX-RESIDENT O F SWITZERLAND. THE ASSESSEE IS A PART OF THE CREDIT SUISSE GROUP, A GLOBAL BANK PROVIDING VARIOUS FINANCIAL SERVICES IN THE FIELD OF INVESTMENT AND PERSONAL BA NKING TO ITS CLIENTS ACROSS THE GLOBE. THE ASSESSEE HAS A BANK BRANCH OFFICE IN IND IA WHICH IS REGISTERED WITH THE RESERVE BANK OF INDIA. THE ASSESSEE ALSO HAS A BRANCH IN DUBAI (HEREINAFTER REFERRED TO AS CSDB). IN SO FAR AS THE DISPUTE BE FORE US IS CONCERNED, THE SAME RELATES TO TAXABILITY OF A SUM OF RS. 18,27,90 ,578/- RECEIVED BY ASSESSEES DUBAI BRANCH (CSDB) FROM THE INDIAN COMPANY, WHICH IS AN ASSOCIATE ENTERPRISE. BEFORE THE ASSESSING OFFICER, ASSESSEE CANVASSED THAT THE SAID SUM WAS RECEIVED BY CSDB FOR REFERRING AN INDIAN RESIDE NT CLIENT TO THE INDIAN COMPANY FOR BRINGING OUT ISSUE OF CONVERTIBLE BONDS . THE ASSESSEE CONTENDED THAT SUCH REFERRAL FEE RECEIVED BY CSDB WAS A BUSI NESS INCOME NOT LIABLE TO TAX IN INDIA BECAUSE CSDB DID NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA AS RECOGNISED IN ARTICLE 5 OF THE INDO-SWISS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE STAND OF THE ASSESSEE AND INSTEAD HELD THAT THE REFERRAL FEE WAS LIABLE TO BE TAXED IN INDIA HAVING REGARD TO SECTION 5(2)(B) OF THE ACT READ WITH SECTION 9(1)(I) OF THE ACT. AS PER THE ASSESSING OFFICER, SINCE THE RE FERRAL FEE WAS PAYABLE TO CSDB IN RELATION TO THE EXECUTION OF TRANSACTION BE TWEEN INDIAN COMPANY AND REFERRED CLIENT, SUCH REFERRAL FEE IS DEEMED TO ACC RUE OR ARISE IN INDIA. IN OTHER ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 4 WORDS, AS PER THE ASSESSING OFFICER, BY VIRTUE OF T HE SOURCE OF THE REFERRAL FEE BEING LOCATED IN INDIA, THE SAME WAS TAXABLE IN IND IA. IN COMING TO SUCH CONCLUSION, THE ASSESSING OFFICER DIFFERED WITH THE ASSESSEE ON THE NATURE OF THE IMPUGNED FEE, WHICH ACCORDING TO HIM WAS IN THE NATURE OF FEE FOR TECHNICAL SERVICES AND NOT BUSINESS INCOME AS CO NTENDED BY THE ASSESSEE. FOR THE SAID REASONS, THE ASSESSING OFFICER BROUGHT TO TAX A SUM OF RS. 18,27,90,578/- TO TAX IN HAND OF THE ASSESSEE AS F EE FOR TECHNICAL SERVICES EARNED BY CSDB IN THE DRAFT ASSESSMENT ORDER PASSED U/S.144C(1) READ WITH SECTION 143(3) OF THE ACT DATED 25.03.2015. AGAINST THE SAID ORDER, THE ASSESSEE RAISED VARIOUS OBJECTIONS BEFORE THE DRP, INTER-ALIA, ASSAILING THE STAND OF THE ASSESSING OFFICER OF NOT TREATING THE REFERRAL FE E AS BUSINESS INCOME BUT FEE FOR TECHNICAL SERVICES AND ALSO CONTENDED THA T SUCH FEE WAS NOT TAXABLE IN THE HANDS OF THE ASSESSEE IN INDIA. THE ORDER OF TH E DRP HAS CAPTURED THE VARIOUS SUBMISSIONS OF THE ASSESSEE IN DETAIL, WHIC H WE ARE NOT REPEATING HERE BECAUSE THE DRP HAS ULTIMATELY UPHELD THE PLEA OF T HE ASSESSEE OF NON- TAXABILITY OF THE SAID RECEIPTS IN INDIA ON A SHORT POINT, WHICH IS TO THE EFFECT (I) THAT THE REFERRAL FEE INCOME IN QUESTION IS NOT IN THE NATURE OF FEE FOR TECHNICAL SERVICES; AND (II) THAT, THE REFERRAL FE E WAS NOT ATTRIBUTABLE TO ASSESSEES PERMANENT ESTABLISHMENT (PE) IN INDIA, A ND THUS SUCH REFERRAL FEE WAS NOT LIABLE TO BE TAXED IN INDIA AS PER ARTICLE 7 OF THE INDO-SWISS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). IN SUM AND SUB STANCE AS PER THE DRP, CSDB UNDERTOOK THE REFERRAL ACTIVITY AND IT HA D NO PE IN INDIA AND SO FAR AS ASSESSEES PE IN INDIA IS CONCERNED, SUCH INCOME COULD NOT BE ATTRIBUTABLE TO ITS ACTIVITIES IN INDIA. ACCORDINGLY, THE ASSESSING OFFICER PASSED THE FINAL ASSESSMENT ORDER U/S.144C(13) R.W.S. 143(3) DATED 1 1/01/2016 EXCLUDING THE SUM OF RS. 18,27,90,578/- FROM THE TOTAL INCOME, WHICH IS BEING AGITATED BY T HE REVENUE BEFORE US. 4. IN THIS BACKGROUND, THE LEARNED DR HAS REFERRED TO THE ABOVE STATED GROUNDS OF THE APPEAL WHEREBY, FIRSTLY, IT IS CANVASSED THA T THE DRP WAS WRONG IN HOLDING THAT THE REFERRAL FEE RECEIVED FROM INDIAN COMPANY DID NOT CONSTITUTE FEE FOR TECHNICAL SERVICES. SECONDLY, THE REVENUE HAS ALSO CANVASSED ERROR ON THE PART OF THE DRP IN HOLDING THAT THE REFERRAL FE E COULD NOT BE CONSIDERED TO BE ATTRIBUTABLE TO ASSESSEES PE IN INDIA. NOTABL Y, AT THE TIME OF HEARING, THE ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 5 GROUNDS OF APPEAL RAISED BY THE REVENUE HAVE BEEN R EITERATED BY THE LD. CIT- DR BUT NO SPECIFIC ARGUMENT, ON FACTS OR IN LAW, HA S BEEN LED BEFORE US TO ASSAIL THE DIRECTIONS OF THE DRP. THE LEARNED DR HAS MERELY REFERRED TO THE STAND OF THE ASSESSING OFFICER, AS MANIFESTED IN TH E DRAFT ASSESSMENT ORDER, SPECIALLY THE FACT THAT THE REFERRAL FEE INCOME HAS BEEN HELD TO BE IN THE NATURE OF FEE FOR TECHNICAL SERVICES. 5. ON THE OTHER HAND, LEARNED REPRESENTATIVE FOR TH E ASSESSEE HAS DEFENDED THE DIRECTIONS OF THE DRP, AND, IN PARTICULAR POINTED O UT THAT THE FOLLOWING DECISIONS CLEARLY SUPPORT THE INFERENCE OF THE DRP THAT THE REFERRAL FEE IN QUESTION CANNOT BE CONSTRUED TO BE IN THE NATURE OF FEE FOR TECHNICAL SERVICES AND THAT THE SAME IS MERELY IN THE NATURE OF COMMIS SION INCOME. (I) CUSHMAN & WAKEFIELD (S) PTE. LTD., 305 ITR 208( AAR) (II) CLSA LTD., VS. ITO (INTERNATIONAL TAXATION), 5 6 SOT 254(MUM) (III)ADIT (IT) VS. STAR CRUISE INDIA TRAVEL SERVICE S (P) LTD., 46 SOT 173(MUM) 6. THE STAND OF THE ASSESSEE IS THAT CONSIDERING TH E FACT THAT THE REFERRAL FEE IS IN THE NATURE OF COMMISSION INCOME, THE DRP MADE NO MISTAKE IN TREATING IT AS NOT TAXABLE IN INDIA IN VIEW OF THE ARTICLE 7 OF TH E INDO-SWISS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. AS THE AFORESAID DISCUSSION SHOWS, THE SHORT CONTROVERSY BEFORE US R ELATES TO THE NATURE AND CHARGEABILITY TO TAX OF REFERRAL FEE OF RS.18,27,90 ,578/- RECEIVED BY ASSESSEES DUBAI BRANCH (CSDB) FROM THE INDIAN COMPANY. THE CH ARGE OF THE ASSESSING OFFICER IS THAT HAVING REGARD TO SECTION 5(2)(B) RE AD WITH SECTION 9(1)(I) OF THE ACT, THE SAID INCOME IS INCLUDIBLE IN THE SCOPE OF TOTAL INCOME CHARGEABLE TO TAX IN INDIA. TO PUT IT DIFFERENTLY, AS PER THE ASSESSI NG OFFICER, REFERRAL FEE IS DEEMED TO ACCRUE OR ARISE IN INDIA AND THEREFORE, T HE SAME IS TAXABLE IN INDIA. THIS HAS BEEN INFERRED ON THE STRENGTH OF THE FACT THAT THE FEE HAS BEEN PAID BY THE INDIAN COMPANY AFTER EXECUTION OF THE WORK OF T HE REFERRED CLIENT BASED IN INDIA AND THEREFORE, THE SOURCE OF THE FEE IS LOCAT ED IN INDIA. ALLIED TO THE AFORESAID STAND, THE PERCEPTION OF THE ASSESSING OF FICER IS THAT SAID REFERRAL FEE IS IN THE NATURE OF FEE FOR TECHNICAL SERVICES. THE EXPRESSION FEES FOR ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 6 TECHNICAL SERVICES FINDS MEANING IN EXPLANATION(2) BELOW SECTION 9(1)(VII) OF THE ACT; BROADLY SPEAKING, THE EXPLANATION PRESCRIB ES THAT FEES FOR TECHNICAL SERVICES, MEANS ANY CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR OTHER CONSULTANCY SERVICES, INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL, BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLING, MINING OR LIKE PROJECT UNDERTAKEN BY TH E RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. AT THIS STAGE, WE MAY BRIEFLY TOUCH UPON THE NATURE OF THE IMPUGNED REFERRAL FEE EARNED BY THE ASSESSEE. THE RELEVANT DISCUSSION IN THE ORDERS OF THE AUTHORITIES BELOW REVEAL THAT CSDB REFERRED AN INDI A RESIDENT CLIENT TO THE INVESTMENT BANKING DIVISION OF THE INDIAN COMPANY; INDIAN COMPANY WORKED ON THE ASSIGNMENT OF THE ISSUE OF CONVERTIBLE BOND S FOR THE REFERRED CLIENT, AND 50% OF THE FEE EARNED BY THE INDIAN COMPANY WAS PAI D TO CSDB IN TERMS OF GLOBAL POLICY OF THE GROUP, WHICH IS THE AMOUNT OF RS.18,27,90,578/- IN QUESTION. IN THE FACE OF SUCH FACT SITUATION, WE ARE UNABLE TO APPRECIATE THE STAND OF THE ASSESSING OFFICER AS TO WHY THE REFER RAL FEE IS TO BE CONSTRUED AS FEES FOR TECHNICAL SERVICES AS UNDERSTOOD FOR THE PURPOSES OF THE ACT. AS PER THE ASSESSING OFFICER, THE REFERRAL FEE HAS BEEN PAID BY THE INDIAN COMPANY AFTER THE EXECUTION OF THE WORK OF THE REFERRED CLI ENT. MERELY BECAUSE THE FEE WAS PAYABLE BY THE INDIAN COMPANY TO CSDB AFTER EXE CUTION OF THE WORK OF THE REFERRED CLIENT IS NO GROUND TO DETERMINE THE N ATURE OF THE PAYMENT. IN THIS CONTEXT, THE AUTHORITY FOR ADVANCE RULINGS IN THE C ASE OF CUSHMAN & WAKEFIELD(S) PTE. LTD., (SUPRA) HAS DEALT WITH A SO MEWHAT SIMILAR SITUATION, WHEREIN THE APPLICANT WAS A RESIDENT OF SINGAPORE, WHO HAD EARNED COMMISSION FROM AN INDIA BASED ENTITY FOR HAVING REFERRED CUST OMERS. AS PER THE AUTHORITY FOR ADVANCE RULINGS, SUCH REFERRAL FEE, BEING IN THE NATURE OF COMMISSION WAS TO BE TREATED AS BEING IN THE NATURE OF BUSINE SS INCOME; BOTH, UNDER THE ACT AS WELL AS UNDER THE INDO-SINGAPORE DOUBLE TAXA TION AVOIDANCE AGREEMENT (DTAA), AND NOT AS FEES FOR TECHNICAL SE RVICES. TO THE SIMILAR EFFECT IS THE DECISION OF THE MUMBAI TRIBUNAL IN TH E CASE OF CLSA LTD., (SUPRA) WHEREIN ALSO REFERRAL FEE EARNED BY A NON-RESIDENT ASSESSEE FROM AN INDIA BASED ENTITY FOR REFERRING CERTAIN INTERNATIONAL CLIENTS WAS HELD NOT TO BE IN THE NATURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 9(1)(VII) OF THE ACT. NOTABLY, THE AFORESAID DECISIONS HAVE ALSO BEE N REFERRED AND RELIED UPON ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 7 BY THE DRP IN CONCLUDING THAT THE REFERRAL FEE IS IN THE NATURE OF COMMISSION TO BE TAXED AS BUSINESS INCOME AND N OT AS FEES FOR TECHNICAL SERVICES. IN THE COURSE OF HEARING BEFORE US, NO D ECISION TO THE CONTRARY HAS BEEN BROUGHT OUT BY THE REVENUE. FOR ALL THE SAID R EASONS, WE ARE UNABLE TO UPHOLD THE STAND OF THE ASSESSING OFFICER THAT THE IMPUGNED REFERRAL FEE WAS A CONSIDERATION IN THE NATURE OF FEES FOR TECHNICAL SERVICES. 8. ANOTHER FACTUAL ASPECT WHICH IS NOT IN DISPUTE I S THAT CSDB HAS NO PE IN INDIA AND ALSO THE FACT THAT ASSESSEES PE IN INDIA I.E., MUMBAI BANK BRANCH HAD NO ROLE TO PLAY IN THE PERFORMANCE OF THE REFERRAL ACTIVITY IN QUESTION. NEITHER THE DISCUSSION IN THE DRAFT ASSESSMENT ORDER AND NO R IN THE COURSE OF HEARING BEFORE US ANY CREDIBLE ASSERTIONS TO THE CONTRARY H AS BEEN BROUGHT OUT BY THE REVENUE. THUS, CONSIDERING THAT THE REFERRAL ACTIVI TY WAS UNDERTAKEN OUTSIDE INDIA AND ASSESSEES MUMBAI BRANCH (PE) HAD NO ROLE TO PLAY IN THE PERFORMANCE OF THE REFERRAL ACTIVITY, THE REFERRAL FEE OF RS.18,27,90,578/- EARNED BY CSDB COULD NOT BE CONSTRUED TO BE ATTRIB UTABLE TO ASSESSEES PE IN INDIA AND THUS, THE DRP RIGHTLY APPLIED ARTICLE 7 O F INDO-SWISS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) AND HELD THE SA ME TO BE NON-TAXABLE IN INDIA. THE AFORESAID CONCLUSION OF THE DRP IS HE REBY AFFIRMED. THEREFORE, CONSIDERING THE SHORT POINT ON THE BASIS OF WHICH THE DRP HAS ALLOWED THE PLEA OF THE ASSESSEE, WE DISPOSE OF THE AFORESAID A PPEAL BY AFFIRMING THE ULTIMATE DIRECTION OF THE DRP. THUS, REVENUE FAILS IN ITS APPEAL. 5. CONSIDERING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE, WHEREIN NO MATERIAL CHANGE IN THE FACT FOR THE YEAR UNDER CONS IDERATION IS BROUGHT TO OUR NOTICE, THEREFORE, FOLLOWING THE PRINCIPLE OF C ONSISTENCY, THE GROUND NO. 1 & 2 OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 6. GROUND NO.3 RELATES TO TAXABILITY OF INTEREST PAID BY ASSESSEE TO ITS HEAD OFFICE AS INCOME ATTRIBUTABLE TO HEAD OFFICE AND LI ABLE TO TAX IN INDIA. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS ISSUE IS A LSO COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF SPECIAL BENCH/LARGER BE NCH OF MUMBAI ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 8 TRIBUNAL IN SUMITOMO MITSUI BANKING CORPORATION VS. DCIT [2012] 10 TAXMANN.COM 364 (MUM) (SB). 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. T HE LD. DR FURTHER SUBMITS THAT THE FACT RELATED TO THE SYSTEM OF ATTR IBUTION OF PROFIT/EXPENSES BETWEEN HEAD OFFICE AND OTHER BRANCHES WAS NOT BROU GHT TO THE NOTICE OF TRIBUNAL IN SUMITOMO MITSUI BANKING CORPORATION CAS E BY THE DEPARTMENT AND THE CASE WAS ARGUED, IF THERE IS INC OME/EXPENSES ARISING OR ACCRUED TO HEAD OFFICE FROM BRANCH VICE-VERSA THE PROFIT & LOSS OF THE PERMANENT ESTABLISHMENT (PE) HAS TO BE COMPUTED FRO M ALL ACTIVITIES, INCLUDING THE TRANSACTION WITH OTHER UN-RELATED ENT ERPRISES WITH RELATED ENTERPRISES. THE LD. DR FURTHER SUBMITS THAT THE AS SESSING OFFICER WHILE TAXING THE INCOME ATTRIBUTABLE TO HEAD OFFICE HAS B ROUGHT SUFFICIENT MATERIAL AND RELIED UPON THE DECISION OF HONBLE KO LKATA HIGH COURT DECISION IN ABN AMRO BANK [2011] (343 ITR 81). 8. IN THE REJOINDER SUBMISSION, THE LD. AR OF THE ASSE SSEE SUBMITS THAT THE SUBMISSION OF LD. DR FOR THE REVENUE IS NOT ACCEPTA BLE AS THE INTEREST PAID BY ASSESSEE TO ITS HEAD OFFICE BEING PAYMENT MADE T O SELF DOES NOT GIVE RISE TO ANY INCOME I.E. CHARGEABLE TO TAX IN INDIA AS HELD BY HONBLE SUPREME COURT IN KIKABHAI PREMCHAND (24 ITR 506 (SC ). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT, THE ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 9 ASSESSING OFFICER CONCLUDED THAT INTEREST PAYMENT M ADE TO HEAD OFFICE IS ATTRIBUTION TO THE INTEREST INCOME OF HEAD OFFICE A S PROVIDED UNDER ARTICLE- 7(2) OF INDIA - SWITZERLAND TAX TREATY ON THE BASIS OF FUNCTION CARRIED OUT, ASSETS DEPLOYED AND THE RISK ASSUMED BY THE HE AD OFFICE AND NOT TO BE CONSIDERED AS EXPENDITURE AS THERE IS NO CONCEPT OF INCOME FROM SALARY. THE ASSESSING OFFICER ALSO CONCLUDED THAT THE INCOM E SHOWN IN THE PROFIT & LOSS ACCOUNT OF ASSESSEE WILL BE REDUCED TO THE E XTENT OF INCOME ATTRIBUTED TO HEAD OFFICE. THE INTEREST ATTRIBUTED TO INDIA BRANCH SHALL BE PART OF BUSINESS INCOME OF INDIAN BRANCH WHEREAS TH E INTEREST ATTRIBUTABLE TO HEAD OFFICE WOULD BE TAXABLE UNDER DOMESTIC SOUR CE OF RULE OF TAXATION UNDER SECTION 9(1)(V) AND IS LIABLE TO TAX IN INDIA . 10. WE HAVE NOTED THAT THE SPECIAL BENCH OF MUMBAI TRIB UNAL IN SUMITOMO MITSUI BANKING CORPORATION (SUPRA) HELD THAT WHEREI N INDIAN BRANCH OF FOREIGN BANK PAID INTEREST TO HEAD OFFICE AND OTHER OVERSEAS BRANCHES OF THE FOREIGN BANK, ON ADVANCES RECEIVED BY IT, SAID INTEREST IS NEITHER DEDUCTABLE IN THE HAND OF INDIAN BRANCH OR CHARGEAB LE TO TAX IN THE HAND OF HEAD OFFICE AND OVERSEAS BRANCHES BEING ALL SING LE ENTITY. THE TRIBUNAL IN PARA-74 OF THE ORDER HAS ALSO CONSIDERED THE SIM ILAR CONTENTION AS RAISED BY ASSESSING OFFICER IN THE PRESENT CASE THA T PROVISION OF SECTION 9(1)(V) OF THE ACT PRESCRIBED THAT INTEREST PAYABLE BY PE IN INDIA BEING INCOME DEEMED TO ACCRUE OR ARISE IN INDIA IS CHARGE ABLE TO TAX. THE SPECIAL BENCH FURTHER HELD THAT SUCH INTEREST PAYAB LE BY PE TO HEAD OFFICE ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 10 BEING PAYMENT MADE TO SELF DOES NOT GIVE RISE TO IN COME I.E. CHARGEABLE TO TAX IN INDIA AS HELD BY HONBLE SUPREME COURT IN KI KABHAI PREMCHAND (SUPRA) AND THE QUESTION OF BRINGING THE SAID INCOM E TO TAX BY RELYING ON THE PROVISION OF SECTION 9(1)(V), THEREFORE, DOES N OT ARISE. THE SPECIAL BENCH ALSO HELD THAT THE INTEREST PAID TO HEAD OFFI CE OF THE ASSESSEE BANK BY ITS BRANCH WHICH CONSTITUTE ITS PE IN INDIA IS N OT DEDUCTIBLE AS EXPENDITURE UNDER THE DOMESTIC LAW BEING PAYMENT TO SELF, THE SAME IS TAXABLE BY DETERMINE THE PROFIT ATTRIBUTABLE TO THE PE WHICH IS TAXABLE IN INDIA AS PER THE PROVISION OF ARTICLE 7(2) & 7(3) O F INDO-JAPANESE TAX TREATY R.W. PARAGRAPH-8 OF PROTOCOL WHICH ARE MORE BENEFICIAL TO THE ASSESSEE. IT WAS ALSO HELD THAT THE SAID INTEREST, HOWEVER, CANNOT BE TAXED IN INDIA IN THE HANDS OF ASSESSEE BANK, A FOREIGN E NTERPRISES BEING PAYMENT MADE TO SELF WHICH CANNOT GIVE RISE TO THE INCOME I.E. TAXABLE IN INDIA AS PER THE DOMESTIC LAW. IN OUR VIEW, THE OBS ERVATION MADE BY ASSESSING OFFICER THAT INTEREST PAYMENT MADE TO HEA D OFFICE IS ATTRIBUTION TO THE INTEREST INCOME OF HEAD OFFICE AS PROVIDED U NDER ARTICLE-7(2) OF INDIA - SWITZERLAND TAX TREATY ON THE BASIS OF FUNC TION CARRIED OUT, ASSETS DEPLOYED AND THE RISK ASSUMED BY THE HEAD OFFICE IS MISCONCEIVED. 11. WE HAVE NOTED THAT ALL THE OBJECTIONS RAISED BY LD. DR HAVE BEEN CONSIDERED BY SPECIAL BENCH IN SUMITOMO MITSUI BANK ING CORPORATION (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE SAME , THE GROUND NO.3 OF APPEAL IS ALSO ALLOWED IN FAVOUR OF ASSESSEE. ITA NO. 6372 & 6373 MUM 2017-CREDIT SUISSE AG 11 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 6373/MUM/2017 FOR A.Y. 2014-15 13. WE HAVE NOTED THAT THE ASSESSEE HAS RAISED IDENTICA L GROUNDS OF APPEAL AS RAISED IN APPEAL FOR A.Y. 2013-14, WHICH WE HAVE AL LOWED. THE FACTS FOR THE APPEAL UNDER CONSIDERATION IS ALSO ARE NOT AT V ARIANCE, THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE APPEAL FOR A.Y. 2014-15 IS ALSO ALLOWED WITH SIMILAR OBSERVATIONS. 14. IN THE RESULT, APPEAL ASSESSEE FOR A.Y. 2013-14 & 2 014-15 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/ 03/2019. SD/ SD/- N.K. PRADHAN PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 05.03.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR I BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI
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