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Income Tax Appellate Tribunal, MUMBAI BENCH “I ”, MUMBAI
आदेश/ ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax(Appeals)-55, Mumbai [in short ‘the CIT(A)’] dated 05/01/2018 for the assessment year 2013-14. Ms. Chandini Shah appearing on behalf of the assessee submitted at the 2. outset that she would not be pressing ground No.2 and 3 of the appeal, hence, the only ground for adjudication in appeal is ground No.1, assailing addition of Rs.1,44,17,145/- confirmed by the CIT(A) in respect of travelling expenditure specifically incurred by Head Office for its Indian branch operation u/s. 41(1) of the Income Tax Act, 1961 [in short 'the Act'].
Narrating facts of the case, the ld. Authorized Representative for the assessee submits that Abu Dhabi Commercial Bank Ltd. Is engaged in banking activities having its Head Office in UAE and two branches in India operating in Mumbai and Bangalore. In computation of income for the impugned assessment year assessee had claimed deduction of Rs.1,44,17,145/- u/s. 37(1) of the Act. This amount pertains to travelling expenses incurred on behalf of the Permanent Establishment (PE) by its Head Office. The deduction was claimed separately in computation of income without debiting the same to the P&L Account of the PE in India. The Assessing Officer observed that the aforesaid amount has never been paid nor shown as payable in the books of Head Office. Thus, the Assessing Officer had invoked the provisions of section 41(1) of the Act and made addition of the aforesaid amount. The ld. Authorized Representative for the assessee pointed that for similar reasons addition was made in assessment year 2012-13 and 2014-15. The ld. Authorized Representative for the assessee furnished copy of assessment order dated 19/05/2016 for assessment year 2012-13 and copy of assessment order dated 14/02/2017 for assessment year 2014-15. The assessee carried the issue in appeal before the Tribunal in for assessment year 2012-13 and ITA No.1882/Mum/2018 for assessment year 2014-15. The Tribunal decided the aforesaid appeals vide common order dated 10/01/2020 and deleted the additions. The ld. Authorized Representative for the assessee further pointed that similar additions were made in assessment year 2004-05 to 2006-07. The assessee carried the issue in appeal before the Tribunal in ITA No.4926 to 4928/Mum/2009 for the said assessment years. The Tribunal vide order dated 29/04/2016 common for the aforesaid assessment years, deleted the addition. Thus, the Tribunal has been consistently holding that in the facts of the case, no addition on account of expenditure incurred by Head Office for the branch office could be made.
Per contra, Shri Soumendu Kumar Dash representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. However, the ld. Departmental Representative fairly stated that the issue raised in ground No.1 of the appeal has been considered by the Tribunal in assessee’s own case in the preceding assessment years.
Both sides heard, orders of authorities below examined. The solitary ground for adjudication before Tribunal is:
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of INR 1,44,17,145 made by the Ld. Deputy Commissioner of Income Tax (International Taxation) – 1(1)(1) Mumbai ('Ld. AO') pertaining to travelling expenditure specifically incurred by the head office for its India branch's operations under section 41(1) of the Income-tax Act, 1961 ('the Act'). Further, the Ld. CIT(A) has followed the order of the Ld. AO without giving any specific reason for the same.
We find that the issue raised by the assessee in ground No.1 is perennial. This issue for the first time was decided by the Tribunal in assesee’s appeal in reported as 150 TTJ (Mum)85. The issue before the Co-ordinate Bench in assessment year 1995-96 was; “Whether in determining the profits of PE in India, the expenses incurred for the purpose of PE are to be computed by applying provisions of section 44C of the Act ( i.e. under the domestic law in which the PE is situated) on an interpretation of the Art.73 r/w Art.25.1 of the India – UAE DTAA as were prevalent in the relevant assessment year”. The Co-ordinate Bench after examining the provisions of section 44C of the Act, India-UAE DTAA and various relevant decisions concluded as under:
14.“Thus, in view of our above finding, we hold that, firstly, in the assessment year involved, limitation clause of applicability of Income-tax Act will not apply in Article 7(3) and consequently provisions of sections 44C will not be applicable; secondly, the amendment brought by way of Protocol by which article 7(3) has been amended and limitation clause has been brought in, will apply from 1st April, 2008 and will not have any retrospective effect; thirdly, the judgment of Mashreqbank PSC(supra), is no longer relevant in view of the decision of the Special Bench in the case of M/s Sumitomo Mitsui Banking Corp.(supra).and Lastly, from the above conclusions, it is held that computation of income and disallowance of expenses relating to head office cannot be made by invoking the provisions of Section 44C of IT Act. Thus, in view of the above conclusions, we hold that income of the PE of the assessee should be computed as business income after allowing all the expenses attributable to its business in India including the head office expenses.”
Thereafter for identical reason addition on account of expenditure incurred by Head Office was made in assessment year 2003-04 and 2004-05. The assessee carried the issue in appeal before the Tribunal in and ITA No.3463/Mum/2010, respectively. The Tribunal vide order dated 03/08/2012, common for both the assessment years following the decision rendered in the case of assessee in ITA No.3462/Mum/2010 (supra) deleted the addition. Similar was the situation in assessment years 2004-05 to 2006-07. The assessee assailed the findings of authorities below in respect of the said addition in ITA No.4926 to 4928/Mum/2009. The Tribunal vide order dated 29/04/2016 deleted the addition, wherein the Assessing Officer invoked the provisions of section 41(1) of the Act.
We find that in assessment years 2012-13 and 2014-15 (supra), the Assessing Officer made addition on account of travelling expenses incurred by the Head Office for branch office in India. The findings of Assessing Officer for assessment years 2012-13, 2014-15 and the assessment year under appeal i.e. 2013-14 is verbatim, except for the amounts. The Tribunal in appeals of the assessee for assessment year 2012-13 and 2014-15 in & 1882/Mum/2018 (supra) deleted the addition following the earlier orders of the Tribunal in assessee’s own case. No contrary material has been placed before us by the Revenue so as to force us to take a different view. The issue has been consistently decided by the Tribunal in favour of assessee deleting the addition on account of specific expenditure incurred by Head Office for branch office in India. For parity of reasons the addition of Rs.1,44,17,145/- u/s. 41(1) of the Act made in the impugned assessment year is directed to be deleted.
In the result, ground No.1 of the appeal is allowed.
The ld. Authorized Representative for the assessee stated at Bar that she is not pressing ground No.2 and 3 of the appeal. In view of the statement made by ld. Authorized Representative for the assessee ground No.2 and 3 are dismissed as not pressed.