NATWEST MARKETS PLC - INDIA BRANCH,KOLKATA V. CIT (IT & TP), CIR- 1(2), KOLKATA, KOLKATA

ITA 997/KOL/2024

AI Insights

The case involves NatWest Markets Plc-India Branch appealing against the revisory order passed by the Principal Commissioner of Income Tax, Kolkata, which set aside the assessment order for A.Y. 2018-19. The revisory order was based on the claim that the assessee had incorrectly claimed a deduction on interest received from an income tax refund, which was also taxed at a lower rate under the Double Taxation Avoidance Agreement (DTAA). The Tribunal referenced earlier decisions in favor of the assessee for subsequent assessment years, which had similar issues regarding the taxability of the same income in different entities' hands. The Tribunal concluded that the income in question had already been assessed in the hands of the Netherlands entity and could not be taxed again in the hands of the Indian branch post-amalgamation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772369 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: ITA No. 273/KOL/2023, ITA No. 1364/KOL/2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP LAKRA
• Assessee Lawyers: PERCY PARDIWALA
• Keywords: Set aside; Transfer pricing; TDS; Assessment record; Double taxation relief; Permanent establishment; Revision of order; Scheme of amalgamation
• Section: 143(3); 142(1); 263; 56; 68; 244A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 997/KOL/2024 (Assessment Year: 2018-19) NatWest Markets Plc-India Branch 907, Regus, 9th Floor, PS Arcadia, 4A, Abanindra Nath Thakur Sarani, Kolkata-700016 Vs. Commissioner of Income Tax (International Taxation & Transfer Pricing) Aaykar Bhavan Poorva, 2nd Floor, 110, Shanti Pally, Kolkata-700107, West Bengal (Appellant) (Respondent) PAN No. AACCT8020E Assessee by : Shri Percy Pardiwala, AR Revenue by : Shri Sandeep Lakra, DR Date of hearing: 31.07.2025 Date of pronouncement: 26.08.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the Revisory order passed by the ld. Pr. Commissioner of Income Tax, Kolkata (hereinafter referred to as the “Ld. PCIT”] dated 28.03.2024 for the AY 2018-19. 2. The appeal filed by the assessee is against the invalid exercise of jurisdiction by the ld. PCIT u/s 263 of the Income-tax Act, 1961 (the Act) and the consequent order passed u/s 263 of the Act setting aside the assessment order dated 12.04.2021, passed u/s 143(3) of the Act. Printed from counselvise.com Page | 2 ITA No.997/KOL/2024 Natwest Markets PLC_India Branch; A.Y. 2018-19 3. The facts in brief are that the return was filed by the assessee on 29.11.2018. The case of the assessee was selected for scrutiny and accordingly, the statutory notices u/s 143(2) and u/s 142(1) of the Act along with questionnaire were duly issued and served upon the assessee. Thereafter, the assessment order was framed by the ld. AO vide order dated 12.04.2021, passed u/s 143(3) of the Act. The ld. PCIT upon perusal of the assessment records observed that in the computation of income the assessee net interest of ₹9,60,95,000/- on income tax refund (income tax refund ₹16,57,49,200/- - TDS deducted ₹6,96,54,448/-) was claimed as deduction by the assessee on the ground that this was offered to tax in the income tax return of Royal bank of Scotland NV for A.Y. 2018-19. The ld. PCIT also noted that tax had been paid at special/ lower rate at 10% as per Double Taxation Avoidance Agreement (DTAA) in the return of Royal bank of Scotland NV against normal rate of 40% plus surcharge/ cess. Accordingly, the notice u/s 263 of the Act was issued on 04.03.2024 and finally, after taking the assessee’s submission, the assessment was set aside with a direction to conduct proper enquiry and pass assessment order in accordance with the findings given in the revisionary order. 3.1. At the outset, the ld. Counsel for the assessee pointed out that the issue is squarely covered by the decision of the co-ordinate bench in its own case in ITA no. 273/KOL/2023 for A.Y. 2020-21 vide order dated 27.11.2024 and ITA No. 1364/KOL/2023 for A.Y. 2021-22 vide order dated 31.01.2025, wherein identical issue has been decided in favour of the assessee. Therefore, the ld. Counsel for the assessee submitted that the appeal of the assessee may kindly be allowed by quashing the revisionary order as the co-ordinate bench has held that Printed from counselvise.com Page | 3 ITA No.997/KOL/2024 Natwest Markets PLC_India Branch; A.Y. 2018-19 the order passed by the ld. AO is as per the provisions of the Act and is not erroneous and prejudicial to the interest of the Revenue. 3.2. The ld. DR on the other hand fairly agreed that in the A.Y. 2020- 21 and 2021-22, the co-ordinate benches have decided the issue in favour of the assessee, however, relied on the order of the ld. PCIT vehemently. 3.3. After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered by the decisions of the co-ordinate benches in assessee’s own case for A.Y. 2020-21 and 2021-22, wherein the issue has been decided in favour of the assessee. For the sake of convenience we extract the operative in ITA no. 1364/Kol/2023 for A.Y. 2021-22 as under: “04. After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered by the decision of the co-ordinate Bench in assessee’s own case in ITA No. 273/KOL/2023 for A.Y. 2020-21, vide order dated 27.11.2024, wherein similar issue has been decided in favour of the assessee. So far as the facts of the present case before us are concerned, we note from the computation of the total income, a copy of which is available at page no.1 of the Paper Book, that the assessee has reduced interest on tax refund which was belonging to and offered to tax by RBS NV amounting to ₹62,12,73,011/-. We have also examined the copy of acknowledgement for A.Y. 2021-22 dated 09.02.2022, wherein the RBS NV has declared the interest on tax refund amounting to ₹62,12,72,670/- as income and paid taxes thereon and the ld. AO has not controverted the said fact. Therefore, the said income is not assessable in the hands of the assessee as it has been offered in the hands of the RBS NV in its return of income and if the same is allowed, it would amount to double taxation of the same income which is not permissible under the Act. For the sake of ready reference, we extract the operative part of the order in assessee’s own case for A.Y. 2020-21 in ITA No. 273/KOL/2023 as under:- “8. The ld. AO thereafter passed the final assessment order u/s 143(3) read with section 144C(13) of the Act dated 27.01.2023, wherein the ld. AO reiterated the finding given by him in the draft assessment order, save and except that he held that interest of ₹6,18,50,000/- could not be added to the assessee’s income u/s 68 of the Act but it should be added u/s 56 of the Act as income from other sources and thereafter, applied rate of 40% plus the educational cess and surcharge to bring the said amount under tax. Aggrieved assessee preferred the appeal before the Tribunal against he said final order. Printed from counselvise.com Page | 4 ITA No.997/KOL/2024 Natwest Markets PLC_India Branch; A.Y. 2018-19 9. The ld. AR vehemently submitted that having regard to the factual scenario as narrated hereinabove it is clear that no part of the interest granted under section 244A of the Act accrued to the assessee as the refund and interest was determined in the case of Netherlands Entity and not to the assessee. The ld. AR submitted that the assessee had taken over all assets and liabilities of the Indian branches that were in existence on 27.02.2017 and any amount which accrued thereafter to the Netherlands entity solely belonged to the Netherlands entity. The ld. AR submitted that the only reason why it was credited to the bank account and reflected in the books of account of the assessee was that because of Indian bank accounts of Netherlands entity that existed on 27.02.2017 vested in the assessee consequent to amalgamation and accordingly, as the said amount got credited to the profit and loss account. The ld. AR submitted that the said fact was neutralized by the assessee by reducing the same from the income of the assessee while filing the income tax return and copy of which is available in the paper book as stated hereinabove.The ld. AR placed reliance on the judgement of the Hon'ble Apex Court in Sutlej Cotton Mills Ltd. Vs. CIT 116 ITR 1 (SC) and Tuticorin Alkali Chemicals and Fertilizers Limited Vs. CIT 93 Taxmann502 (SC). The ld. AR further contended that the said income have been assessed in the hands of the Netherlands Entity and no corresponding steps were taken to delete or set at naught the assessment so made on the Netherlands entity it is not open to the Revenue to assess the same income in the hands of two different persons and, therefore, for this reason also the addition needs to be deleted. The ld. AR also placed reliance to corroborate his contention on the decision of CIT vs. R Dalmia 135 ITR 346 (Delhi), wherein the court held that where the dividends which were received by the assessee were offered to tax and assessed for the assessment year 1959-60 and the AO intending to tax the same income for A.Y. 1960-61. The court held that the same was already assessed at 1959-60 and it could not be assessed at for A.Y. 1960-61. The ld. AR submitted that since the orders of the income tax authority for earlier year had become final and accordingly, the tax of the same item of income twice in the hands of the same person was not permissible in-law. Undoubtedly in this case the revenue is seeking to tax a different person but in respect of the same item of income. Even if a view is taken that income has to be assessed in the hands of the correct assessee and, hence, it would be open to the revenue to take steps to do so in spite of the fact that it has already assessed another assessee, nevertheless, in the present case the correct person to be assessed is the Netherlands entity as explained hereinbefore and, hence, the revenue should not be permitted to do so. Even if it is permitted to do so, then, this must be cast with an obligation to rectify the wrong and delete the income which already stands assessed. As the same has not been done it is submitted that the addition of the income in the hands of the appellant cannot be sustained. In the event the Tribunal is pleased to hold that the income has to be assessed in the hands of the Appellant, then, it is submitted that the same can only be assessed at the rate specified in article 12(3)(a) of the UK DTAA (i.e. 10%) and not by applying the rate of 40% as has been done by the Assessing Officer in the final assessment order. In this regard reliance is placed on the order of Special Bench of the Tribunal in CIT vs. Clough Engineering Limited 130 ITD 137 as well as the judgment of the Bombay High Court in DIT vs. Credit Agricole Indozuez 377 ITR 102. In both these decisions the Tribunal/Court has taken the view that the interest earned from the tax Printed from counselvise.com Page | 5 ITA No.997/KOL/2024 Natwest Markets PLC_India Branch; A.Y. 2018-19 department has to be assessed in accordance with Article 11(2) of the relevant DTAA. 10. The ld. DR on the other hand relied heavily on the final assessment order by submitting that the income has been correctly assessed in the hands of the assessee on the basis of credit being given in the bank account of the assessee besides the income tax refund and corresponding entities being accounted in the books of accounts and also in the profit and loss account. The ld. DR submitted that when the interest has been credited in the bank account of the assessee it is obvious and apparent that same has to be assessed in the hands of the assessee and not in the hands of the Netherlands entity which owned and operated all the branches in India till 27.02.2017 when the Indian branches amalgamated with the assessee though the ld. DR could not duly explain that on the basis of the returns and computation filed a copies of which are available be in the Paper Book, the said income has been assessed in the hands of the Netherlands entity and there is no doubt as to that. The ld. DR finally submitted that the final assessment order may kindly be upheld. 11. After hearing the rival contentions and perusing the materials available on record, the undisputed facts are that the assessee was incorporated in United Kingdom and is a tax resident of the United Kingdom. During the previous year, relevant to A.Y. 2020-21, the assessee carried out its business activities through its branches which had merged in a scheme of amalgamation sanctioned by the RBI. Prior to 27.02.2017, Indian Branches i.e. these branches were owned by R.B.S. N.V. The said foreign entity used to file its return of income in India qua the income that are attributable to the activities of the permanent establishment in India as well as in respect of its income which accrued or rose in India. While giving appeal effect for A.Y. 2014-15, the Revenue determines that the tax refund of ₹40,76,1390/- which is included in interest of ₹9,65,18,062/- u/s 244A of the Act of which tax at source of ₹96,51,807/- was directed by the revenue during the previous year relevant to A.Y. 2019-20. Similarly, pursuant to certain appeal effect orders passed for various assessment years, the revenue determined a refund of ₹28,21,23,127/-, which included interest of ₹5,21,98,081/- in terms of Sectio 244A on which tax at source was directed by the Revenue of ₹56,39,097/- in A.Y. 2020-21. We note that the Netherland entity had offered to tax the interest income u/s 244A of the Act in the previous year relevant to A.Y. 2019-20 and copy of acknowledgement of ITR is available at page no.143, wherein interest of ₹9,65,18,062/- offered to tax and in accordance with the Article 11(2) of the Double Taxation Aviance Agreement entering into between India and Netherland, tax liability was determined at ₹96,51,807/-. Similarly in A.Y. 2020-21 refund was actually received byRBS. N.V. Netherla nds entity and interest thereon of Rs. 5,21,98,080/- was offered to tax and tax was determined in accordance withthe above DTAA at ₹52,91,808/- and the copy is available at page no.144 of the Paper Book, where it is noted that both the returns of income were processed u/s 143(1) of the Act and accordingly, the assessment in respect of Netherland entity in both the assessment years has become final. Now, mere fact that the refund as well as interest was credited in the bank account of the assessee post amalgamation would not decide the nature of the receipt in the hands of the assessee . In our opinion, it is a unequivocal Printed from counselvise.com Page | 6 ITA No.997/KOL/2024 Natwest Markets PLC_India Branch; A.Y. 2018-19 and settled position that the same income cannot be taxed twice first in the hands of the same assessee and secondly hands of some different assessee. In the present case, the income has been assessed in the hand of Netherlands entity and therefore it is not open to the Revenue to assess the same income in the hands of two different persons. Therefore, for this reason also the addition has to be deleted. The ld. AR also placed reliance to corroborate his contention on the decision of R Dalmia (supra) and similarly, in in Sutlej Cotton Mills Ltd. Vs. CIT 116 ITR 1 (SC) and Tuticorin Alkali Chemicals and Fertilizers Limited Vs. CIT 93 Taxmann502 (SC) Hon'ble Apex Court held that the entries in the books of accounts would not establish the taxability of the receipt. Considering the above fact, we are inclined to hold that the interest credited in the bank account of the assessee which is in respect of Indian branch which were belonging to Netherland Entity prior to 27.02.2017, is not taxable in the hands of assessee as the same has been assessed in the hands of Netherlands Entity by the department and the assessment has attained its finality. The appeal of the assessee is allowed. 12. In the result the appeal of the assessee is allowed.” 05. We therefore respectfully following the above decision of the coordinate bench in assessee’s own case set aside the order of ld. Dispute Resolution Panel/ AO and direct the ld. AO to delete the said addition.” 3.4. Thus the facts before us are materially same as decided by the co-ordinate bench in A.Y. 2021-22. In our opinion the assessment order is neither erroneous nor prejudicial to the interest of the revenue. Accordingly, we respectfully following the order of the co- ordinate Bench, quash the revisionary proceedings initiated by the ld. PCIT u/s 263 of the Act and consequent order. 4. In the result, the appeal of the appeal of the assessee is allowed. Order pronounced in the open court on 26.08.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 26.08.2025 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 7 ITA No.997/KOL/2024 Natwest Markets PLC_India Branch; A.Y. 2018-19 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "