Standard Chartered Grindlays Pty Ltd., New Delhi V. DDIT, New Delhi

MA 527/DEL/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1044 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 11-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 31-03-2022
• Assessment Year: 1995-1996
• Appeal Filed On: 07-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY CHOUDHARY
• Assessee Lawyers: PRAVESH SHARMA
• Keywords: Double taxation relief; Question of law; TDS; Set aside
• Section: 195; 254(2)

Judgement Text

MA. No. 527/Del/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER Misc. App. No. 527/Del/2017 [ in आ.अ.सं . I.T.A No. 3578/Del/2013 ] ( िनधाᭅरण वषᭅ/Assessment Year: 1995-96 ) Standard Chartered Grindlays Pvt. Ltd., C/o. Ms. Shashi M. Kapila, 17-Mahatma Gandhi Road, NH Lajpat Nagar – IV, Near Metro Hospital, New Delhi – 110 024. बनाम Vs. Dy. Director of Income Tax, Circle : 3 (2) International Taxation, New Delhi. PAN No. AAACA1049A अपीलाथᱮ/ Appellant ᮧ᭜यथᱮ/ Respondent िनधाᭅᳯरतीकᳱओरसे / Assessee by : Ms. Shashi M. Kapila, Adv. & Shri Pravesh Sharma, Adv.; Advocate; राज᭭वकᳱओरसे / Department by : Shri Vijay Choudhary, Sr. D. R.; सुनवाईकᳱतारीख/ Date of hearing : 20.05.2022 उ᳃ोषणाकᳱतारीख/Pronouncement on : 12.10.2022 आदेश / O R D E R PER C. N. PRASAD, J.M. 1. In the Misc. application the assessee request to recall the order of the Tribunal in ITA. No. 3578/Del/2013 dated 10.03.2017. The assessee in the Misc. application stated as as under:- MA. No. 527/Del/2017 2 “Miscellaneous Application under section 254(2) of the Income Tax Act, 1961. Arising Out of I.T.A. No.3578/Del/2013 In the case of-Standard Chartered Grindlays P Ltd. Assessment Year: 1995-96 1. The captioned appeal in I.T.A.No.3578/Del/2013 in the case of Standard Chartered Grindlays Bank Pty was disposed of by the Tribunal vide order dated 10.3.2017. 2. The Appellants above named beg to present this Miscellaneous Application for rectification of certain mistakes which are apparent from record in the said Impugned Order. (Copy of Impugned Order attached Application). Annexure 1 to this 3. That mistakes apparent on the face of the record have crept into the order, which may kindly be rectified. Such mistakes have occurred when disposing of Grounds 4 8s 5 as follows: 3.1 GROUNDS NOS. 5 8c 6 : The Tribunal has disposed off these Grounds in paragraph 8 of the Impugned Order as follows: "8. We have already discussed the relevant facts in brief in para No. 4 hereinabove. The issue involved is as to whether interest paid by the branch office to head officer is tax deductible. In support, the assessee placed reliance on the decision of Special Bench of the Tribunal in the case of Sumitomo Banking Corporation Vs. DDIT (supra). The assessee claimed that the issue raised is also covered by the decision of Hon’ble Kolkata High Court in the case of ABN Amro Bank N. V. Vs. CIT (supra) followed in the other decisions cited by the Id. AR hereinabove. The contention of the Revenue, while supporting the orders of the authorities below, remained that the decisions relied upon by the Id. AR are distinguishable as in those cases Indo Japan Tax Treaty was the subject matter, whereas in the present case before us is the Indo-UK DTAA. It was also submitted by the Revenue that in the case of ABN Amro Bank N.V. Vs. CIT (supra) the issue was, as to whether interest paid by branch to its head office is subject to TDS and hence not allowable as deduction under section 40(a)(i) read with section 195 of the Act, which is otherwise tax MA. No. 527/Del/2017 3 deductible, whereas in the present case the issue involved is as to whether interest paid by branch to HO is tax deductible per se or not. We are also fully agreeable with the finding of the authorities below that the decision in the case of ABN Amro Bank N.V. Vs. CIT (supra) relied upon by the Id. AR having different issue is not applicable in the present case as in that case issue was as to whether interest paid by branch to its head office is subject to TDS and hence, not allowable as deduction under section 40(a)(i) read with section 195 of the Act, which is otherwise tax deductible, whereas in the present case the issue involved is as to whether interest paid by the branch office to HO is tax deductible per se or not. The first appellate order in this regard is thus upheld. Ground Nos. 4 and 5 are thus rejected. 4. Mistake Apparent on the face of the record in disposing off Grounds 4 & 5: 4.1 Attention is invited to the Impugned assessment order for Assessment Year 1995-96 dated 3.12.2010 in which the Ld. AO had dis-allowed the deduction of interest paid by the Indian PE of Rs. 24,86,75,000 to Head Office for its Indian Business. 4.2. This dis-allowance was made by the Ld. AO solely by following the Tribunal judgment in the Appellant’s own case for AY 1996-97 wherein the Tribunal had followed the judgment of the Third Member in the case of ABN AMRO Bank which is reported in 280 ITR (AT) 117 (Cal.) & (97 ITD 89). (Copy of the Assessment Order dt. 3.12.2010 is attached as Annexure 2 to this Application.) 4.3 For AY 1996-97 in the assessee’s case on this issue came up in appeal before the Income Tax Appellate Tribunal. The Hon'ble ITAT had followed the judgment of the Third Member Order in the case of ABN AMRO Bank which is reported in 280 ITR (AT 117 (Cal.). The Tribunal vide Order dt.24-10-2008 in ITA No.4988/Del/2003 held as follows:- "40. The learned Departmental Representative submitted that the assessee herein is a non-resident having a PE in India and hence its income is liable to tax as per provision of IT Act as also under Indo-UK DTAA. There is no dispute that the assessee has PE in India in the form of branches. In computing the income of PE the expenses incurred are allowable subject to provisions of the IT Act. Under s. 9(1 )(v) income by way of interest payable by a person who is a non-resident where the MA. No. 527/Del/2017 4 interest is payable in respect of debt incurred or moneys borrowed and used for the purposes of business carried on by such person in India is deemed to accrue or arise in India. Therefore, the interest earned by the head office from the branch in India is also taxable in India. Special Bench of the Tribunal in the case of ABN Amro Bank NV v. Asstt. Director of IT [2005] 98 TTJ (Kol.)(SB) 295 : [2005] 97 ITD 89 (Kol.j(SB) held that payment of interest paid by the PE of a foreign enterprise to head office outside India is not an allowable deduction. Though the said case was in relation to treaty with Netherlands, there is no difference in treaty with UK treaty with Netherlands and UK are identically worded and hence as per interpretation of the Special Bench such interest cannot be allowed. 41. The learned counsel for the assessee on the other hand, relied upon the appellate order. She reiterated the submissions as made before the learned CIT(A). She also submitted that the decision of Special Bench shall not apply as a treaty with UK is differently worded than that with Netherlands. However, on a specific question from the Bench as to what is the difference between the two treaties, she fairly submitted that in fact there is no difference between the two treaties but only change in number of paragraphs." (Copy of the ITAT Order in the case of Standard Chartered Grindlays Bank dt.24-10-2008 in ITA No.4988/Del/2003 attached as Annexure3). This order is on record with the Tribunal even at the time of the hearing of the appeal. 4. Thereafter the assesse filed Appeal against the Tribunal Order for AY 1996-97 before the Hon’ble Delhi High Court. The HonTde Court has admitted this issue as a substantial question of law for adjudication: "c) Whether the Ld. Tribunal was right in law in disallowing the interest paid by the Appellant bank to Head Office of ANZ Grindlays London by following the Special bench order in the case of ABN Amro Bank Vs. DIT reported in 97 ITD 89?" Copy of the Order of the Delhi High Court for AY 1996-97 in Income Tax Appeal No. 580 of2009 dated 28.4.2009 is attached as Annexure 4 to this appeal. Thereafter the Third Member Judgement of ABN AMRO Bank was reversed 8& over-ruled by the Kolkotta High Court vide its judgment reported in 343 ITR 81. The Kolkatta High Court held that interest payment by branch office to head office is fully allowable as deduction. The court also held that such payment MA. No. 527/Del/2017 5 did not attract any with-holding tax as it was payment to self and therefore there was no obligation under Sec. 195 of the Act. Copy of the Kolkotta High Court Order was filed with the Tribunal at the time of the hearing of the appeal. 5. It is Most Respectfully submitted that the Kolkotta High Court Judgement in the case of ABN Amro Bank reversed the Third Member Judgement in the case of ABN Amro Bank, which was relied upon both by the Tribunal in the assessee's appeal for AY 1996-97, and also by the Assessing Officer in the Appellant's case for present year for dis-allowing the interest paid to head office. As the Kolkatta High Court reversed and over-ruled this judgment, hence it squarely covers the Appellants case. 6. In the Impugned Order under examination the Ld. ITAT has held as follows: “We are also fully agreeable with the finding of the authorities below that the decision in the case of ABN Amro Bank N.V. Vs. CIT (supra) relied upon by the Id. AR having different issue is not applicable in the present case as in that case issue was as to whether interest paid by branch to its head office is subject to TDS and hence, not allowable as deduction under section 40(a)(i) read with section 195 of the Act, which is otherwise tax deductible, whereas in the present case the issue involved is as to whether interest paid by the branch office to HO is tax deductible per se or not. ” 7. Because the Tribunal was bound to follow the judgement of Kolkata High Court in the case of ABN Amro Bank in the appellant's case as demanded by judicial propriety. 8. Because of Impugned Order passed by Ld ITAT a strange situation emerges which results in manifest travesty of justice. When the Third Member ABN Amro judgment of the Tribunal (97 ITD 87) is against the Appellant as for A.Y 1996- 97, it is held as applicable to the assessee’s case and relied upon by the Revenue, and upheld by the Tribunal. When this judgment is over-ruled and reversed by the Kolkatta High Court and decided in favor of the Appellant, as for A.Y '1995- 96 the Revenue says that it is distinguishable from Appellant's case, and this is again upheld by the Tribunal. Clearly this is mistake apparent on the face of the records which needs to be rectified. MA. No. 527/Del/2017 6 9. The Kolkotta High Court Judgement in the case of ABN AMRO Bank has been noted & discussed in the 5 Member Special Bench Judgement in the case of Sumitomo Banking Corporation as well. In the case of Sub-Inspetor Rooplal and Others v. LT. Governor and others (2000) 1 SCC 644 held sub-ordinate court is bound by precedent of superior court, and a bench in a court is bound by the precedent of a co-ordinate bench. 10. In CIT vs. Saurashtra Kutch Stock [2008] 305 ITR 227, SC) the Hon’ble Apex Court held that non -consideration of a decision of the jurisdictional High Court, which has brought to the notice of the Bench, constitutes mistake apparent from record. In this connection it is also submitted that Your Honor’s would re-call that at the time of hearing, as the Court rose for lunch after the DRs submissions. No opportunity of rebuttal through Re-joinder was given to me which is my right in the pleadings as this was my appeal. It would be in the fitness of things for the Tribunal to hear both paties and accordingly modify its order in exercise of its inherent power to do justice by the Tribunal. Because of this, perhaps the error occurred.” 2. The ld. Counsel appearing for the assessee submits that judicial discipline was not followed by the ITAT for the reason that the direct decision in the case of ABN Amro Bank Vs. DDIT reported in 334 ITR 81 and the decision of the Special Bench of the Tribunal in the case of Sumitomo Banking Corporation Vs. DDIT [(2012) 16 ITR (Trib.) 116 (Mum.)(SB)] and the Third Member decision in the case of ABN Amro Bank Vs. DDIT (supra) in deciding whether interest paid to head office by the Indian branch of bank and other branches in India is chargeable to tax in India under section 195 of the Income Tax Act, 1961 (the Act). 3. The ld. DR referring to para 8.5 of the order of the Tribunal submitted that the Tribunal has taken a conscious decision and after MA. No. 527/Del/2017 7 interpreting the DTAA between India and UK, affirmed the view of the ld. CIT (Appeals) in coming to the conclusion that the interest paid by PE to head office on money lent by head office to PE shall not be allowed as deduction. 4. Heard rival submissions perused the order of the Tribunal and the contentions raised in the Misc. application. On going through the Misc. application we find that the contentions raised in the Misc. application suggest to recall the order of the Tribunal and re-view its order on the conscious decision taken on merits by the Tribunal. Review of its own order by the Tribunal is beyond its scope and is not permissible under the provisions of section 254(2) of the Act. 5. Hon’ble Apex Court in the case of CIT Vs. Reliance Telecom Ltd. [(2021) 440 ITR 1 (SC)] held as under:- “3.1 We have considered the order dated 18.11.2016 passed by the ITAT allowing the miscellaneous application in exercise of powers under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013. 3.2 Having gone through both the orders passed by the ITAT, we are of the opinion that the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 is beyond the scope and ambit of the powers under Section 254(2) of the Act. While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, it appears that the ITAT has re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only. Therefore, the powers under MA. No. 527/Del/2017 8 Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering the application under Section 254(2) of the Act, the Appellate Tribunal is not required to re-visit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record 4. In the present case, a detailed order was passed by the ITAT when it passed an order on 06.09.2013, by which the ITAT held in favour of the Revenue. Therefore, the said order could not have been recalled by the Appellate Tribunal in exercise of powers under Section 254(2) of the Act. If the Assessee was of the opinion that the order passed by the ITAT was erroneous, either on facts or in law, in that case, the only remedy available to the Assessee was to prefer the appeal before the High Court, which as such was already filed by the Assessee before the High Court, which the Assessee withdrew after the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013. Therefore, as such, the order passed by the ITAT recalling its earlier order dated 06.09.2013 which has been passed in exercise of powers under Section 254(2) of the Act is beyond the scope and ambit of the powers of the Appellate Tribunal conferred under Section 254 (2) of the Act. Therefore, the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 is unsustainable, which ought to have been set aside by the High Court. 5. From the impugned judgment and order passed by the High Court, it appears that the High Court has dismissed the writ petitions by observing that (i) the Revenue itself had in detail gone into merits of the case before the ITAT and the parties filed detailed submissions based on which the ITAT passed its order recalling its earlier order; (ii) the Revenue had not contended that the ITAT had become functus officio after delivering its original order and that if it had to relook/revisit the order, it must be for limited purpose as MA. No. 527/Del/2017 9 permitted by Section 254(2) of the Act; and (iii) that the merits might have been decided erroneously but ITAT had the jurisdiction and within its powers it may pass an erroneous order and that such objections had not been raised before ITAT. 6. None of the aforesaid grounds are tenable in law. Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act. As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake parent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the Assessee withdrew the same in the instant case.” 6. As could be seen from the above the Apex court held that the Appellate Tribunal is not required to re-visit its earlier order and to go into details on merits. It was held that the powers under section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. It was also further held by the Apex court that even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers the Tribunal may pass order recalling its earlier order which is an erroneous order cannot be MA. No. 527/Del/2017 10 accepted. The Apex court further held that if the order passed by the Tribunal was erroneous on merits in that case the remedy available to the assessee was to prefer an appeal before the High Court. In view of the above we hold that there is no mistake on record in the order passed by the Tribunal in ITA. No. 3578/Del/2013 dated 10.03.2017 and thus the Misc. application filed by the assessee is rejected. 7. In the result, the Misc. application is dismissed. Order pronounced in the open court on : 12/10/2022 Sd/- Sd/- (PRADIP KUMAR KEDIA) ( C. N. PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 12/10/2022 *MEHTA* Copy forwarded to : 1. Applicant; 2. Respondent; 3. CIT 4. CIT (Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, New Delhi. Date of dictation 03.10.2022 Date on which the typed draft is placed before the dictating member 07.10.2022 Date on which the typed draft is placed before the other member 12.10.2022 MA. No. 527/Del/2017 11 Date on which the approved draft comes to the Sr. PS/ PS 12.10.2022 Date on which the fair order is placed before the dictating member for pronouncement 12.10.2022 Date on which the fair order comes back to the Sr. PS/ PS 12.10.2022 Date on which the final order is uploaded on the website of ITAT 12.10.2022 Date on which the file goes to the Bench Clerk 12.10.2022 Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the order