OMAN INTERNATIONAL BANK S.A.O.G. ( NOW KNOWN AS HSBC BANK OMAN S.A.O.G), MUMBAI V. DDIT (IT) 4(2), MUMBAI

ITA 6883/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75313 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 09-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment
• Section: 244A; 148; 37

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL C CC C BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.6882/MUM/2012 6882/MUM/2012 6882/MUM/2012 6882/MUM/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2004-05) & ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.6883/MUM/2012 6883/MUM/2012 6883/MUM/2012 6883/MUM/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2005-06) OMAN INTERNATIONAL BANK S.A.O.G (NOW KNOWN AS HSBC BANK OMAN S.A.O.G), 201, RAHEJA CENTRE, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI-400021 % % % % / VS. THE DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)- 4(2), ROOM NO. 11, GROUND FLOOR, SCINDIA HOUSE, BALLARD ESTATE, N. M. MARG, MUMBAI-400038 #' ! ./ ( ./ PAN/GIR NO. :AAACO0440M ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI NIRAJ SHETH # # # # . / . / . / . / / REVENUE BY : SHRI RAVI PRAKASH % % % % . .. . -! -! -! -! / DATE OF HEARING : 16 TH JANUARY 2014 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOU NCEMENT: 22 ND JANUARY 2014 ' 2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE COMPOSITE ORDERS OF COMMISSIONER OF INCOME TAX(APPE ALS) DATED 1.8.2012 FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 RESPEC TIVELY. 2. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THESE APPEALS. GROUNDS RAISED FOR THE ASSESSMENT YEAR 2004-05 ARE AS UNDER: ITA NO.6882 &6883/M/2012 OMAN INTERNATIONAL BANK S.A.O.G 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) 11 [CIT( A)] ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT DIRECTOR OF I NCOME TAX (INTERNATIONAL TAXATION) - 4(2) [AO] OF RE-OPENING THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 AFTER THE EXPIR Y OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE CIT(A) OUGHT TO HAVE HELD THAT THE REASSESSMENT PROCEEDING ARE BAD IN LAW AND SHOULD BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO OF DISALLOWING RS.9,22,153, ON ACCOUNT OF EXPENSES INCURRED ON MR. MASOUD KHAMIS AL NAJAHI, BEING EMPLOYEE OF THE BANK WHO WA S DEPUTED TO INDIA, BY TREATING THE SAME AS HO EXPENSES ELIGI BLE FOR DEDUCTION UNDER SECTION 44C OF THE ACT HAVING FAILE D TO APPRECIATE THAT SUCH EXPENSES ARE INCURRED SPECIFIC ALLY FOR THE BRANCH IN INDIA. THE CIT(A) OUGHT TO HAVE HELD THAT THE EXPENSES ARE NOT IN THE NATURE OF HEAD OFFICE EXPENSES ALLOCABLE TO INDIA B UT ARE EXPENSES INCURRED SPECIFICALLY FOR THE EMPLOYEE DEP UTED TO INDIA FOR SERVICES PROVIDED TO INDIAN BRANCH OF THE BANK. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE APPEL LANTS HAD SUFFERED LOSS OF REVENUE ON ACCOUNT OF INTEREST UND ER SECTION 244A ON THE REFUND THAT WAS RIGHTLY DUE AS WELL AS POTENTIAL INCOME THAT THE APPELLANTS WOULD HAVE EARNED HAD TH E REFUNDS BEEN GRANTED IN TIME. 3. FIRST WE TAKE UP GROUND NO. 2 REGARDING DISALLOW ANCE ON ACCOUNT OF EXPENSES INCURRED ON THE EMPLOYEE MR. MASOUD KHAMIS AL NAJAHI BY TREATING THE SAME AS HEAD OFFICE EXPENSES BY THE A. O U/S 44C OF THE INCOME TAX ACT. WE HAVE HEARD THE LD. A.R AS WELL A S LD. D.R AND CONSIDERED THE RIVAL MATERIAL ON RECORD. THE LD. A. R OF THE ASSESSEE HAS SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDER ED AND DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO. 6800/2010 VIDE ORDER DATED 27.12.2013 AND THERE FORE, THIS ISSUE IS COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ITA NO.6882 &6883/M/2012 OMAN INTERNATIONAL BANK S.A.O.G 3 ASSESSMENT YEAR 2006-07. ON THE OTHER HAND, THE LD. D.R HAS SUBMITTED THAT THE PERSON FOR THE ASSESSMENT YEAR UNDER CONSI DERATION IS NOT SAME AS IN THE ASSESSMENT YEAR 2006-07 THEREFORE, THE TE RMS AND CONDITIONS OF THE EMPLOYMENT ARE TO BE EXAMINED BY THE A.O. HE HA S RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF RECORD WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CON SIDERED AND DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 (SUPRA) IN PARA 21 AS UNDER : 21. WE HAVE CAREFULLY CONSIDERED THE ORDER OF A.O AND THE DIRECTION OF DRP AND THE SUBMISSION OF LD. REPRESEN TATIVES OF THE PARTIES. WE HAVE ALSO GONE THROUGH THE LETTER DATED 3.5.2005, COPY IS PLACED ON RECORD, BY WHICH SHRI ZAKARIYA HA S BEEN APPOINTED AS OFFICER IN MUMBAI BRANCH FOR A PERIOD OF TWO YEARS COMMENCING FROM 1 ST DAY OF THIS REPORTING AT MUMBAI BRANCH. IN THE SAID LETTER ALLOWANCES WHICH WERE TO BE PAID TO HIM AS WELL AS THE DESCRIPTION OF WORK IS STATED. ON PERUSAL OF TH E SAID LETTER IT IS OBSERVED THAT HE HAS TO WORK ON FULL TIME BASIS FOR A PERIOD OF TWO YEARS AT MUMBAI BRANCH. NOT ONLY THIS, WE OBSER VE THAT SHRI ZAKARIYA ALSO FILED RETURN OF I9NCOME OF INDIA FOR THE ASSESSMENT YEAR 2006-07. CONSIDERING THE ABOVE FACT, WE FIND S UBSTANCE IN THE SUBMISSION OF LD. A.R THAT SHRI ZAKARIYA IS AN EMPLOYEE OF THE ASSESSEE BANK IN THE ASSESSMENT YEAR UNDER CONS IDERATION AND THE PAYMENT HAS BEEN MADE TO HIM EXCLUSIVELY FO R THE WORK PERFORMED BY HIM FOR ASSESSEES BRANCH AT MUMBAI. T HEREFORE, THE SAID EXPENSES PAID TO HIM AGGREGATING TO ` 17,4 2,363/- COULD NOT BE CONSIDERED A PART OF SECTION 44C AND THE SAM E ARE TO BE ALLOWED U/S 37 OF THE ACT. THEREFORE, WE DELETE THE SAID DISALLOWANCE OF ` 17,42,363/- BY ALLOWING GROUND NO . 5 OF THE APPEAL TAKEN BY ASSESSEE. 5. THUS, IT IS CLEAR IF THE PAYMENT HAS BEEN MADE T O THE EMPLOYEE EXCLUSIVELY FOR THE WORK PERFORMED BY HIM FOR THE I NDIAN BRANCH OF THE ASSESSEE THEN THE SAID EXPENDITURE DOES NOT FALL U/ S 44C OF THE INCOME ITA NO.6882 &6883/M/2012 OMAN INTERNATIONAL BANK S.A.O.G 4 TAX ACT BUT IS FULLY ALLOWABLE U/S 37 OF THE ACT. H OWEVER, THIS ASPECT IS REQUIRED TO BE EXAMINED WHETHER THE PAYMENT IS MADE FOR THE DUTY PERFORMED EXCLUSIVELY FOR THE INDIAN BRANCH OF THE ASSESSEE. ACCORDINGLY, FOR THIS LIMITED PURPOSE WE DIRECT THE A.O TO VERIF Y THIS ASPECT AND THEN DECIDE THE ISSUE IN TERMS OF OUR OBSERVATION. 6. GROUND NO. 3 REGARDING INTEREST ON REFUND U/S 24 4A. WE HAVE HEARD THE LD. A.R AS WELL AS LD. D.R AND CONSIDERED THE R ELEVANT MATERIAL ON RECORD. THE LD. A.R OF THE ASSESSEE HAS FAIRLY CONC EDED THAT THIS ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS GUJARAT FLOURO CHEMICALS 34 8 ITR 319. ACCORDINGLY, WE DISMISS THE GROUND NO 3 OF THE ASSESSEES APPEAL . 7. NOW WE TAKE UP GROUND NO. 1 REGARDING VALIDITY O F REOPENING OF ASSESSMENT. SINCE THE ISSUE ON MERIT REGARDING DISA LLOWANCE U/S 44C HAS BEEN IN PRINCIPLE DECIDED IN FAVOUR OF THE ASSESSEE AND FOR LIMITED PURPOSE REMITTED TO THE A.O, THEREFORE, THE LD. A.R OF THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE MAY BE KEPT OPEN AND IF THE GROUND NO. 2 IS FINALLY DECIDED BY THE A.O AGAINST THE ASSESSEE, THE ASSESSEE WOULD AGITATE THE SAME IF NEED ARISES. IN VIEW OF THE ABOVE FACTS AND CIRCUMS TANCES WE DO NOT PROPOSE BUT ADJUDICATE THE GROUND NO. 1 AS BECOME A CADEMIC IN NATURE. HOWEVER, THE SAME IS KEPT OPEN. ITA NO.6882 &6883/M/2012 OMAN INTERNATIONAL BANK S.A.O.G 5 8. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JANUARY 2014 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 22 ND JANUARY 2014 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI