DIRECTOR OF INCOME TAX vs. CARGIL TSF PTE LTD

Ct $-2 to 4 * IN THE HIGII COURT OF DELHI AT NI],W DELIII -f tTA^621l20l2 DIRECTOR OF'INCOME TAX ..... Appellant Through : Sh. Abhishek Maratha, Sr. Standing Counsel with Ms. Anshul Sharma. versus CARGIL TSF PTE LTD ..... Respondent Ihrough : Sh. Vikas Jain, Advocate. + tTA623t20L2 DIITECTOR OF INCOME TAX ; INTEI{NATIONAL TAXATION -I NBW DELFII ..... Appellant 'through : Sh. Abhishek Maratha, Sr. Standing Counsel with Ms. Anshul Sharma. VCTSUS CAITGIL TSF'PTH LTD ..... Respondent 'fhrough : Sh. Vikas Jain, Advocate. +. tTA 624t20I2. C.M. LPPL.I853212012 DIITECTOR OF INCOME TAX ..... Appellant Thlough : Sh. Abhishek Muatha, Sr. Standing Counscl with Ms. Anshul Sharma. veISus CARGIL'I'SF PTE, LTD ..... Itcspondent Through: Sh. Vikas Jain, Advocatc. CORAM: IION'BLE MR. JUSTICE S. RAVINDRA BHAT }ION'BLE MR. JUSTICE R.V.EASWAR ORDER o/r 19.L1.20L2 'I'he present appeals are directed against the three orders of the Income 'I'ax Appellate Tribunal (ITAT) dated 19.08.2011 for the Assessment Years 2005-06, 2006-07 and2007-08.'I'he questionl of larv sought to be urged on behalf of the Iteveneue is: "Whether the Tribunal fell into error in holcling that the discounting charges earned by the ossessee fi'ont Indian trtarties h1t discounting bills o.f exchange and pronzissory notes clid not antount to interest as defined under Section 2(28A) o.f the Income Tax Act? " -t- 2012:DHC:8016-DB

The assessee in this case is incorporated in Singapore and is a tax resident of that State. During the relevant year it used to provide ftnancial serviccs, including subscription,buying, underwriting or otherwise acquire, owtt, hold, sell or exchange securities or investments of any kind. It filed its retruns which were assessed to tax on the basis of scrutiny assessment. The Assessing Officer (AO) was of the opinion that the assessee had earned discounting charges by discounting bill of exchange in favor of the Indian companies which it had claimed as discounting charges and not paft of its business income. The AO treated all these amounts, i.e. the bill discorurting fees eamed by the assessee as interest income on the loans extended by the assessee to its customers. 'fhe CI l(Appeal) on being approached by the assessee confirmed the order of the AO. The Tribunal in the appeals frled by the assessee, analysed the nature of discounting services provided by the assessee to its customers and applied its ratio in thc previous ruling, i.e. ITA 684/D ell2009 for Assessment Year 2004-05 in M/s. Cargil Global Trading India (P) Ltd. and set aside the order of the CIT (Appeal) and the AO. 'fhe Tribunal also noticed tlrat its order for Assessment Years 2004-05 and 2005-06 had been carried in appeal before this Court which confirmed and adopted the reasoning in its order dated 17.02.2011. In the present case, the Tribunal, therefore, allowed the assessee's appeal, holding as follows: "The discounting charges are to be treated as business income and consequently the appeals filed by the assessee for assessment years 2006-07 and 2007-08, i.e. ITA No. 3057lDellll and ITA No.3880/Del/10 are allowed. In ITA No. 3880lDel/10, the assessee has challenged the charging of interest under sec. 2348 of the Act. Since, we have deleted the main addition in respect of taxability of discounting charges as intelest income. This issue in the light of our observations would require to be readjudicated. In other words, it is consequential in nature." I'his Court notices that in the decision of the Court confinning the previous ruling of the Tribunal (reporled as CIT v. Cargill Global Trading (I) (P) Lt(l. 2011 (335) ITR 94), the Courl took into consideration the definition of "interest" under Section 2(284) of the Act and also analysed the contents of two circulars issued by the CBD'I', being No.65 dated 02.09.1971 and the subsequent one dated 22.03.1993 (Circular No. 647), and confir'med the reasoning of the Tribunal that discounting charges did not amourt to 2012:DHC:8016-DB

interest and was not subject to tax. The Court deleted thc disallowance undcr Section 40(AXD of the Income Tax Act. In view of this reasoning which this Court fully conculs with, no substantial question of law arises. The appeals are dismisscd. S. RAVINDITA BHAT, J [4(.,.,-t. R.V.EASWAR, J NOVEMBER 19,2012 'ajk' 4 2012:DHC:8016-DB