BANK INTERNASIONAL INDONESIA, MUMBAI V. DDIT (IT) RG 3(2), MUMBAI

ITA 9068/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71129 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 29-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 27-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR
• Assessee Lawyers: MAJOJ PUROHIT
• Keywords: Opportunity of being heard
• Section: 143(3); 144

Judgement Text

L IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI . . , . , BEFORE SHRI B.R. MITTAL, JM AND SHRI D. KARUNAKARA RAO, AM ./ I.T.A. NO. 9068/M/2010 (AY: 2006 - 2007) BANK INTERNASIONAL INDONESIA, APEEJAY HOUSE, 2 ND FLOOR, R.NO.6E, 3, DINSHAW VACHHA ROAD, CHURCHGATE, MUMBAI 400 020. / VS. THE DDIT (IT) - 3(2), SCINDIA HOUSE, BALLARD PIER, MUMBAI 400 038. ./ PAN : AAATB 0658 D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : MR. MAJOJ PUROHIT / RESPONDENT BY : MR. NARENDRA KUMAR / DATE OF HEARING : 5 .9.2 013 / DATE OF PRONOUNCEMENT : 20. 9.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 27.12.2010 IS AGAINST THE ORDER OF THE AO U/S 143(3) READ WITH SECTION 144C(13) OF THE ACT DATED 20 TH OCTOBER, 2010. ORDER WAS PASSED BY THE DDIT (INTERNATIONAL TAXATION) - 3(2), MUMBAI AND THE GROUNDS READ AS UNDER: 1. THE LD DDIT ERRED IN ASSESSING THE TOTAL INCOME OF THE APPELLANT AT LOSS OF RS. 12,64,11,970/ - . 2. THE ORDER OF THE LD DDIT IS BAD IN LAW, CONTRARY TO THE PROVISIO N S OF LAW AND FACTS OF THE CASE AND WITHOUT FOLLOWING THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (DRP) IN THE RIGHT PERSPECTIVE. 3. DISALLOWANCE OF INTEREST (OTHER THAN INTEREST PAID BY THE APPELLANT TO TITS OVERSEAS BRANCH). 3.1. THE L D DDIT ERRED IN DISALLOWING THE INTEREST OF RS. 43,88,653/ - (OTHER THAN INTEREST OF RS. 48,41,347/ - PAID BY THE APPELLANT TO ITS OVERSEAS BRANCH) 3.2. THE LD DDIT ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT WAS ENGAGED IN BANKING BUSINESS AND ACC ORDINGLY INTEREST EXPENSE WAS INCURRED EXCLUSIVELY FOR THE PURPOSE OF THE APPELLANTS BUSINESS AND THEREFORE OUGHT TO BE ALLOWED AS A DEDUCTION. 3.3. THE LD DDIT ERRED IN NOT FOLLOWING THE DIRECTIONS OF DRP WHICH STATE THAT ONLY INTEREST PAID TO HEAD OFFIC E OR BRANCHES IS TO BE DISALLOWED. 4. DISALLOWANCE OF INTEREST PAID TO HEAD OFFICE AND OTHER OVERSEAS BRANCHES AMOUNTING TO RS. 48,41,347/ - , 2 4.1. THE DRP / LD DDIT ERRED IN DISALLOWING THE INTEREST PAID BY INDIAN OFFICE OF THE APPELLANT TO ITS HEAD OFFICE / OTHER OVERSEAS OFFICES IN ARRIVING AT THE APPELLANTS TOTAL INCOME. 4.2. THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW PREVAILING ON THE INTEREST PAID BY THE INDIAN OFFICE OF THE APPELLANT TO THE HEAD OFFICE AN D OTHER OVERSEAS OFFICES IS DEDUCTIBLE IN COMPUTING THE APPELLANTS TOTAL INCOME. 4.3. THE APPELLANT SUBMITS THAT THE LD DDIT BE DIRECTED TO DEDUCT THE INTEREST PAID BY THE INDIAN OFFICE TO THE HEAD OFFICE AND OTHER OVERSEAS OFFICES AND RECOMPUTED THE APPE LLANTS TOTAL INCOME AND TAX THEREON ACCORDINGLY. 5. THE LD DDIT ERRED IN INITIATING PENALTY U/S 271(1)(B). 6. THE LD DDIT ERRED IN INITIATING PENALTY U/S 271(1)(C). 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BU SINESS OF BANKING, FOREX, INVESTMENT AND TREASURY OPERATION ETC . ASSESSEE FILED ITS RETURN OF INCOME DECLARING THE TOTAL LOSS AT RS. 130,08,00,148/ - . DURING THE SCRUTINY PROCEEDINGS, THERE IS NO COOPERATION OF THE ASSESSEE AND NOBODY APPEARED BEFORE THE AO AND THEREFORE, NO DETAILS WERE FURNISHED. CONSIDERING THE FACT THAT THE ASSESSMENT GETTING IS TIME BARRED, AO PASSED THE ORDER U/S 143(3) READ WITH SECTION 144C(13) OF THE ACT DETERMINING THE TOTAL LOSS OF RS. 12,64,11,970/ - . BEFORE PASSING THE SAID O RDER , AO PROPOSED TO MAKE AN EX - PARTE ASSESSMENT U/S 144 OF THE ACT. HOWEVER, DURING THE PROCEEDINGS B EFORE THE DISPUTE RESOLUTION PANEL - 1 (DRP), ASSESSEE APPEARED AND OBJECTED TO THE ADDITION PROPOSED IN THE DRAFT ASSESSMENT ORDER. THE DRP - 1 ISSUED DIRE CTIONS ON 16.9.2010 U/S 144C(5) OF THE ACT, WHICH WAS INCORPORATED BY THE AO , WHILE MAKING THE FINAL ASSESSMENT U/S 143(3) READ WITH SECTION 144C(13) OF THE ACT . T HE SAME ARE THE SUBJECT MATTER OF DISPUTE BEFORE US. 3. AT THE OUTSET, MR. MAJOJ PUROHIT, L D COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE REVISED GROUNDS REPRODUCED ABOVE AND MENTIONED THAT GROUND NO.1 AND 2 ARE GENERAL IN NATURE AND THE SAME DOES NOT CALL FOR ANY SPECIFIC ADJUDICATION. THEREFORE GROUND NO.1 AND 2 ARE DISMISSED AS ACAD EMIC. 4 . FURTHER, R EFERRING TO GROUND NO.3, LD COUNSEL MENTIONED THAT THE ASSESSEE MADE PAYMENTS OF INTEREST TO ITS OVERSEAS BRANCHES AND ALSO TO OTHERS. AS PER THE ASSESSEE, THE INTEREST PAYMENT OF RS. 43,88,653/ - WAS MADE TO OTHERS FOR THE PURPOSE OF A SSESSEES BUSINESS AND THEREFORE, THE SAME IS ELIGIBLE FOR DEDUCTION. IN THIS REGARD, LD COUNSEL MENTIONED THAT THIS ISSUE WAS NOT EXAMINED THOROUGHLY 3 DURING THE ASSESSMENT PROCEEDINGS, CONSIDERING THE NON ATTENDANCE OF THE ASSESSEE AND SUPPLY THE RELEVAN T DETAILS. THEREFORE, HE REQUESTED THE BENCH TO SET ASIDE CONCLUSIONS OF THE AO/DRP AND REMAND THE MATTER TO THE FILES OF THE AO FOR EXAMINING THE ISSUE AFRESH IN THE LIGHT OF THE APPLICABLE PROVISIONS OF THE LAW, ACT OR THE TREATY PROVISIONS. 5 . ON THE O THER HAND, LD DR RELIED ON THE ORDER OF THE AO AND THE DIRECTIONS OF THE DRP - 1. 6 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES AND CONSIDERING THE INTEREST OF JUSTICE, WE ACCEDE TO THE REQUEST OF THE ASSESSEE FOR REMAND ING THE ISSUE TO THE FILES OF THE AO FOR FRESH EXAMINING AFTER CONSIDERING THE ACT /TREATY , ANY RELEVANT PRECEDENTS / SPECIAL BENCH DECISION IN THE CASE OF SUMITOMO MITSUI BANKING CORPORATION VS . DDIT (IT) VIDE ITA NOS. 2974/MUM/2004 (AY 2000 - 01) AND 687/MUM/2005 (AY 2001 - 2002) ORDER DATED 18.5.2012 . DURING THE SET ASIDE PROCEEDINGS, ASSESSEE SHALL BE GRANTED A REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, GROUND NO.3 IS ALLOWED FOR STATI STICAL PURPOSE S. 7 . GROUND NO.4 RELATES TO THE DISALLOWANCE OF INTEREST PAID TO HEAD OFFICE AND TO OTHER OVERSEAS BRANCHES AMOUNTING TO RS. 48,41,347/ - . IN THIS REGARD, LD COUNSEL MENTIONED THAT THIS IS A CASE OF PAYMENT OF INTEREST TO THE HEAD OFFICE AND OTHER OVERSEAS BRANCHES OF THE ASSESSEE. THEREFORE, APPLYING THE PRINCIPLES OF MUTUALITY, THE AMOUNT PAID IS NOT CHARGEABLE TO TAX. HE FAIRLY MENTIONED THAT THIS ISSUE SHOULD BE REMANDED TO THE FILES OF THE AO FOR EXAMINING THE ISSUE AFRESH IN THE LIG HT OF THE SPECIAL BENCH DECISION IN THE CASE OF SUMITOMO MITSUI BANKING CORPORATION VS. DDIT (IT) VIDE ITA NOS. 2974/MUM/2004 (AY 2000 - 01) AND 687/MUM/2005 (AY 2001 - 2002) ORDER DATED 18.5.2012. 8 . ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO AN D THE DIRECTIONS OF THE DRP - 1. 4 9 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE MATERIAL PLACED BEFORE US. CONSIDERING THE SUBMISSION OF THE LD AR AND DR, THE ISSUE FOR ADJUDICATION REVOLVES AROUND THE PRAYER OF REMANDING AFTER SETTING ASIDE THE FINDINGS OF THE AO/DRP. WE FIND MERIT IN THE ABOVE PRAYER OF THE ASSESSEES COUNSEL. ON HEARING BOTH THE PARTIES AND CONSIDERING THE REQUEST OF THE LD COUNSEL, WE SET ASIDE THE ORDER OF THE AO AND THE DRP - 1 AND REMAND THE MATTER TO THE FILES OF THE AO FOR EXAMINING THE ISSUE AFRESH CONSIDERING THE FINDINGS OF THE CITED SPECIAL BENCH DECISION (SUPRA). DURING THE SET ASIDE PROCEEDINGS, ASSESSEE SHALL BE GRANTED A REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, GROUND NO .4 IS ALLOWED FOR STATISTICAL PURPOSE . 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRO NOUNCED IN THE OPEN COURT ON 20 TH SEPTEMBER 2013. SD/ - SD/ - (B.R. MITTAL) (D. KARUN AKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 20 .9.2013 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . 5 //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI