THE HONGKONG & SHANGHAI BANKING CORPORATION LTD,NAVI MUMBAI vs. ADIT (IT) RG-3(1), MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M):

ITA No.3857/Mum/2006 & ITA No.3401/Mum/2006 (A.Y.2002- 03) These cross appeals in ITA Nos. 3857/Mum/2006 and 3401/Mum/2006 for A.Y.2002-03 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-XXI, Mumbai in appeal No.CIT(A) XXI/Int.Tax/IT-70/05-06 dated 31/03/2006 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/03/2005 by the ld. Asst. Director of Income Tax (IT) 3(1), Mumbai (hereinafter referred to as ld. AO).

ITA No.4565/Mum/2009 & ITA No.3996/Mum/2009 (A.Y.2003- 04) These cross appeals in ITA Nos. 4565/Mum/2009 and 3996/Mum/2009 for A.Y.2003-04 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-XXXIII, Mumbai in appeal No.CIT(A) XXXIII/Intl.Taxn/IT-198H/05-06 dated 27/02/2006 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/01/2006 by the ld. Asst. Director of Income Tax (IT) 3(1), Mumbai (hereinafter referred to as ld. AO).

3 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

2.1. During the course of assessment proceedings, the assessee was requested to give details with regard to salary paid to expatriate employees and also justify the claim of deduction thereon. The assessee has filed detailed response in this regard vide letter dated 17/12/2004 stating that the expatriate officers rendered services in India for which they were paid salaries and said salary has been taken into account in computing their salary income chargeable to tax in India after due deduction of tax at source in terms of Section 192 of the Act. The assessee submitted that the expenditure has been incurred for the purpose of Indian Operations and for earning income in India and hence, it is an expenditure which is allowable as deduction in computing the income of the Indian branches. The assessee revised the claim of deduction of Rs.14,09,77,991/- during the course of assessment proceedings in respect of salaries to expatriate employees. All the necessary evidences in support of its claim were duly furnished by the assessee before the ld. AO.

2.2. It was also submitted before the ld. AO that such expenses are not “head office expenses” within the meaning of Section 44C of the Act. The ld. AO observed that the said expenditure was not debited by the assessee to the profit and loss account and the expatriate employees were not on the pay roll of the Indian branch. Accordingly, he held that the salary paid to expatriate employees will also be clubbed with the head office expenses and hence not allowable as deduction u/s.37 of the Act. The ld. CIT(A) upheld the action of the ld. AO by observing as under:- “7. I have carefully considered the appellant’s submissions. I find that a speaking order is given by the CIT(A) in A.Y.1992-93 and A.Y.2001-02. In A.Y. 1992-93, it was held that the expenditure involved cannot be regarded as Head Office expenses as the employees were employed in India, initially the payment might have been made by the Head Office but the liability was that of the appellant and therefore, there is no reason to disallow the salaries paid to the expatriate employees. However, in A.Y. 2001-02, it has been held that

4 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

there is merit in the AO's contention that the payments have been made overseas by the head office and there is no indication of any settlement of account, which would show that the liability incurred by the head office has been passed on the assessee bank and the expenses have been incurred outside India and are in the nature of head quarter expenses covered by section 44C of the Act. It was further observed that in the earlier years, the claim of the appellant had been consistently allowed but in the year under consideration, since the appellant has not been able to prove that the payments were made to expatriate officers for rendering services wholly and exclusively for the purpose of business in India and the relevant tax on their salaries though paid overseas were offered for taxation in India in their hands, the claim of the appellant disallowed by the AO is confirmed. 8. It was held in CIT vs. Emirates Commercial Bank Ltd. [now known as Abu Dhabi Commercial Bank Ltd.] 262 ITR 55 [Bom] that this was a case 'where the expenditure was exclusively incurred for the branch and there was concurrent finding of facts recorded by the CIT(A) as well as the Tribunal that the officers came from the head office at Abu Dhabi to Bombay to attend to the work of the Bombay Branch and, in connection with that work, the expense was incurred and that the expense was initially incurred by the head office and was recovered by the head office from the branch in India by raising a debit note and therefore, the expense was incurred for the branch office in India and hence, Section 44C had no application. In ABN Amro Bank NV vs. JCIT [ITA No.692/Cal/2000 (Calcutta ITAT)], the employees concerned rendered whole time service India throughout the accounting year under consideration and it was held that the assessee's claim towards off shore payment to the expatriate employees in India will have to be allowed [para 12 of the order]. In JCIT vs. British Bank of Middle East [ITA no. 2501/Mum/99] [pg. 98 of Paper Book], it was held by the Hon'ble ITAT, Mumbai that there is no dispute that the expatriate employees in question were working exclusively for the Indian operations and following the discussion in para no.5 of the order, it was held that these expenses cannot be treated as head office expenses and have to be allowed in computation of income of Indian operations which is taxable in India. In para no.5, reference was made to CIT vs. Emirates Commercial Bank Ltd. 262 ITR 55 [Bom] and it was also observed that as far as the question of expenditure not being debited in the books of account is concerned, this is not really relevant in the light of Kedarnath Jute Mills Ltd. 82 ITR 363 [SC] and so long as the expenditure is really incurred and is otherwise deductible, the deduction cannot be declined on the ground that it has not been debited in the books of account. 9. Therefore, in view of the decision of the Hon'ble Bombay High Court in vs. Emirates Commercial Bank Ltd. 262 ITR 55, it has to been seen whether the expenditure was exclusively incurred for the branch. In the present case, there was an initial claim of offshore salary of Rs.15,70,62,023/-. However, by

5 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

letter dt. 27.12.2004, the appellant stated before the AO that the claim for deduction for aggregate salary paid to expatriates outside India may be considered at Rs. 14,09,77,9917- and claim was not made of 50% of offshore salary of Mr. Ashok Bhatia Chief Technology Officer India [Rs.65,33,714/-] and offshore salary of Mr. Peter Valentine Senior Manager [Rs.95,50,348/-]. As regards Mr. Ashok Bhatia, it was stated before the TPO [para 5.3 of the order] that Mr. Ashok Bhatia has played an oversight role in Middle East and 50% of his total remuneration was stated to be for services rendered to AEs. As regards Mr. Peter Valentine, there is no explanation as to why his offshore salary should not be included in the claimed deduction. The complete salary [including offshore salary] is stated to be included in F no. 16 of the two officers. Therefore, the appellant's reliance on the F no. 16 and contention that part of the salary was paid overseas does not prove that the offshore salary claim was for services rendered by the 16 expatriate employees in India and was allowable as a deduction in computing the income of the Indian branch as it was incurred wholly and exclusively for the Indian operations. The disallowance of the AO of Rs.15,70,62,023/- being the salary paid to expatriate employees is confirmed, Ground no. 2 is dismissed. 2.3. Aggrieved, the assessee is in appeal before us. 2.4. We have heard rival submissions and perused the materials available on record. We find that this issue is already decided by the Co-ordinate Bench of this Tribunal in all earlier years in favour of the assessee. The ld. CIT(A) had placed reliance on the order passed by the predecessor for the A.Y.2001-02. We find that this Tribunal in assessee’s own case in ITA No.4670/Mum/2005 for A.Y.2001-02 dated 20/11/2015 had held as under:- 15. Before us the ld.DR submitted the facts as submitted before the lower authorities and relied on the order of AO. He submitted that the findings of the ld. CIT(A) is not in consonance with law and legal position. Therefore, he submitted that the order of ld.CIT(A) be set aside and that of AO be restored.

6 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

a) Emirtes Commercial bank Ltd (now known as Abu Dhabi Commercial Bank Ltd (262 ITR 55); b) M/s American Express Bank Limited in Income Tax Reference No.3 of 2002 R A No.568/Mum/1998 order dated 17.7.2003; c) Shinhan Bank V/s DCIT(IT) (2012) 54 SOT 140(Mum) =(2012) 23 taxmann.com 449(Mum); d) DCIT (IT) V/s Chohang Bank 126 ITD 448 (Mum); e) ABN Amro Bank N V V/s JCIT in ITA No.692/Cal/2000(AY-1996-97) dated 30.3.2001; f) Kedarnath Jute Mfg Co. Ltd.V/s CIT- 82 ITR 363 g) The British Bank of Middle East V/s JCIT in ITA No.751/Mum/1998 (AY-1993-94) order dated 28.6.2005 para 71 and 72.

7 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

was pleaded that this expenditure has been incurred wholly and exclusively for the purpose of banks Indian operations. It was specifically mentioned that this expenditure was incurred for specific purpose of deposits mobilization and rendering related services to its customers and are not in the nature of general administration expenses and also not in the nature of common expenditure allocable to the branches. Hence, it was specifically submitted that this expenditure will not fall within the ambit of “head office expenses” within the meaning of Section 44C of the Act. The ld. AO however, disregarded the contentions of the assessee and observed that these expenses were not debited by the assessee in its profit and loss account and accordingly treated the same as “head office expenses” u/s.44C of the Act. Hence, he disallowed the sum of Rs.4,54,65,934/- in the assessment. The ld. CIT(A) upheld the action of the ld. AO by observing as under:- “12. I have carefully examined the appellant’s submissions. The appellant has relied on Mumbai ITAT’s order dated 28.6.2005 in the case of BBME for A.Ys. 92-93 to 97-98 [paras no.4 to 6, pages 2 to 4] [pg.no.94 to 96 of compilation] in which the decision of Hon’ble Bombay High Court in Abu Dhabi Commercial Bank 262 ITR 55 [Bom] was also considered and it was held that the expenses on mobilization of NRI deposits do not fall under the scope of head office expenditure u/s.44C of the Act. However, in para no.4 of the order, the Hon'ble ITAT has observed 'A plain reading of the orders of the authorities below shows that the details of expenditure, along with certification of auditors, were duly furnished at the assessment stage.' In the present case, the auditor's certificate dt. 18.10.2002 is at page 123-128 of compilation. Page 123 is a letter dt. 21.10.2002 on the letterhead of KPMG Audit & Accounting PO Box 3800 Dubai UAE addressed to the Manager NRI Services HSBC Bank Middle East P O Box 66 Dubai. The letter as well as the accompanying statement are riot signed by KPMG and it is also noted 'This statement is the responsibility of the bank management' i.e., the correctness of the contents of the statement is not verified. Page 126 is a certificate dt. 18.10.2002 for examination of records maintained at the Hong Kong Office International Banking Centre - India Desk of HSBC Ltd. for the year ended 31.3.2002. The certificate bears some signature but the name of the signatory and even the identity of the 'Certified Public Accountants' who are shown to have signed the certificate is not given. Therefore, it cannot be said that the details of expenditure, along with certification of

8 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

auditors, were duly furnished at the assessment stage. Therefore, following the CIT(A) order for A.Y. 2001-02 disallowing the claim of expenses on account of NRI deposit mobilisation on the ground that they are not subject to verification, the disallowance of the claim of Rs.4,54,65,934/- in A.Y.2002-03 is confirmed. Ground uo.3 is dismissed.

3.1. Aggrieved the assessee is in appeal before us.

3.2. We have heard rival submissions and perused the material available on record. We find that this issue was subject matter of adjudication by this Tribunal in assessee’s own case for A.Y.2000-01 in ITA No.2680/Mum/2004 dated 20/11/2015, among other years, wherein the Tribunal held as under:-

“62. After considering the rival contentions of the parties, on perusal of the records as well as orders of the Tribunal in assessee's own case including the cases relied upon, we find that that the facts of the case relied upon by the assessee and case in hand are similar. The order relied upon by the assessee is dated 22.2.2006 and the present appeal pertains to the assessment year 1999-2000, and even today the revenue could not bring any material contrary to constrain to take a different view. Therefore, respectfully following the order of the Tribunal in assessee's own case, we allow Ground No.2 taken by the assessee.”

3.2.1. We also find that on further appeal by the revenue before the Hon’ble Jurisdictional High Court in Income Tax Appeal No.1569/2016 dated 06/02/2019 against this Tribunal order, the Hon’ble High Court held that the Tribunal had decided in identical manner in earlier years in identical situation and that revenue had not preferred any appeal before the High Court for those earlier years. The Hon’ble High Court also observed that non-filing of appeals by the revenue before the Court for the earlier years was not on the ground of low tax effect. Hence, it held that the decision of the revenue not to challenge the Tribunal judgment in earlier years in respect of some assessee had to be understood as

9 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

conscious decision of accepting the proposition of the Tribunal. Accordingly, the Hon’ble High Court did not entertain the question raised by the revenue.

3.3. Respectfully following the aforesaid decision of this Tribunal and Hon’ble Jurisdictional High Court, the ground No.2 raised by the assessee is allowed.

Exchange Gain/Loss in valuation of outstanding Foreign Exchange Forward Contracts: (Ground No.3 of the assessee for A.Y.2002-03 & Ground No.1 of the appeal of the revenue for the A.Y.2002-03)

4.1. The assessee also pleaded before the ld. AO that since the revenue was consistently having a stand that loss arising out of unmatured foreign exchange contracts as valued at the year end was not a permissible deduction, the amount of loss which was disallowed in earlier year amounting to Rs.15,16,14,000/- should be allowed as a deduction during the year under consideration as the contracts have been settled during the previous year relevant to A.Y.2002-03. The ld. AO did not agree to the contentions of the assessee and observed that the loss arising on

10 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

account of unmatured foreign exchange contracts at the end of the year are only notional in nature and hence, cannot be allowed as a deduction. The ld. AO remained silent in his order with regard to the alternative claim of the assessee for allowing deduction of Rs.15,16,14,000/- in respect of very same loss which was disallowed in the earlier year had to be granted as deduction during this year as the contracts had been settled during the year under consideration.

4.2. The assessee submitted that the sum of Rs.14,46,27,000/- represent foreign exchange gain arising out of valuation of outstanding forward contracts as at the end of the year as on 31/03/2002 and that the same were credited to profit and loss account and offered to tax. The assessee pleaded that by going by the same analogy of the ld. AO, the said foreign exchange gain of Rs.14.46 Crores also would become notional in nature and cannot be brought to tax. The ld. CIT(A) appreciated the contentions of the assessee and directed that this sum of Rs. 14,46,27,000/- should be taxed only in the year in which the said forward contracts gets matured i.e. in A.Y.2003-04. The ld. CIT(A) also directed the ld. AO to grant deduction of Rs.15,16,14,000/- being the loss arising on account of valuation of outstanding forward contracts as on 31/03/2001 as the same is to be allowed even as per analogy of the ld. AO.

4.3. Aggrieved, both revenue and assessee are in appeal before us.

4.4. We have heard rival submissions. We find that this issue is already covered by the decision of this Tribunal in assessee’s own case for A.Y.2001-02 in ITA No.4424 and 4670/Mum/2005 dated 20/11/2015 wherein it was held as under:-

11 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

“120. We have considered the rival submissions and perused the record. We find that the issue raised by the assessee stands covered by the decision of Hon'ble Supreme Court in the case of Woodward Governor India P. Ltd (supra) wherein the Hon'ble Supreme Court held that "that the loss suffered by assessee on account of fluctuations of foreign exchange as on the date of Balance Sheet is an item of expenditure under section 37(1), allowed the mark to market loss in the case of equity index/stock future as an allowable loss." We find that the issue in hand and the facts of the cases relied upon are same, therefore, respectfully following the decision of the Hon'ble Apex Court in the case of Woodward Governor India Pvt. Ltd (supra), we set aside the order of ld.CIT(A) and direct the AO to delete the addition. Ground No.5 taken by the assessee is allowed.”

4.4.1. Respectfully following the same, we hold that the sum of Rs.14,46,27,000/- should be taxed in A.Y.2002-03 and Rs.15,16,14,000/- should not be allowed as deduction in A.Y.2002-03. This would ensure no claim of double deduction by the assessee and also ensure that there is no double taxation on the part of the revenue. Accordingly, ground No.3 raised by the assessee is allowed and ground No.1 raised by the revenue is dismissed.

Disallowance u/s.14A of the Act:- Ground No.4 of the assessee appeal for A.Y.2002-03.

12 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

availability of own funds at its kitty to the tune of Rs.870 Crores and 1790 Crores to drive home the point that it was flooded with interest free funds to make various investments in tax free securities and bonds. In other words, the assessee pleaded that the interest free funds available with the bank was over Rs.2650 Crores as against total investment in tax free bonds made to the extent of Rs.284 Crores. The ld. AO observed that the total investments made by the assessee were Rs.89,48,13,717/- in securities and assumed the average cost of funds at 6.45% and applied the said percentage on the investments of Rs.89.48 Crores and arrived at the disallowance of expenditure u/s.14A of the Act in the sum of Rs.5,77,15,485/- (Rs.89,48,13,717/- x 6.45%) and disallowed the same in the assessment. The ld. CIT(A) upheld the action of the ld. AO.

5.1. Aggrieved, the assessee is in appeal before us.

5.2. We have heard rival submissions and perused the material available on record. We find from page 99 of the paper book comprising of letter dated 21/03/2005 filed by the assessee before the ld. AO wherein it has been categorically stated by the assessee that the incremental investments made in tax free bonds during the year by the assessee was only Rs.49,48,13,717/-, which has been erroneously taken by the lower authorities at Rs.89,48,13,717/-. From the perusal of the balance sheet of the assessee, it is very clear that the assessee is having substantial interest free funds which is much more than the investment made in the securities and bonds of the assessee which had yielded exempt income. Hence, by placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of Reliance Utilities and Power Ltd., reported in 313 ITR 340 and HDFC Bank Ltd. reported in 366 ITR 505, there cannot be any disallowance on account of interest on borrowed funds u/s.14A of

13 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

the Act. However, certain administrative expenses certainly need to be disallowed u/s.14A of the Act as the law has been amended with retrospective amendment from 01/04/1962 onwards. In this regard, we find that the Hon’ble Calcutta High Court in the case of CIT vs. R.R. Sen & Brothers P Ltd in GA No.3019/2012 in ITA No.243/2012 dated 04/01/2013 had held as under:- “The assessee did not show any expenditure incurred by him for the purpose of earning the money which is exempted under income tax. The Tribunal has computed the expenditure at 1% of such dividend income, according to them, as the thumb rule applied consistently. We find no reason to interfere. The appeal is dismissed.” 5.3. Respectfully following the aforesaid decision of Hon’ble Calcutta High Court, we direct the ld. AO to disallow 1% of total exempt income u/s.14A of the Act. Accordingly, the ground No.4 raised by the assessee is partly allowed.

Payments made to Club:- Ground No.5 of assessee appeal & Ground No.3 of Revenue appeal 6. The ld. AO observed that assessee had made payment of Rs.84,83,457/- to clubs. The assessee was asked to explain the beneficiaries to this club facilities and justify the claim as deduction. The assessee vide reply dated 17/12/2004 submitted that the executives of the bank had used club facilities which directly help in bringing the business to the bank and made prospective clients and therefore, the expenditure incurred on clubs is wholly and exclusively for the purpose of business. The assessee also filed break-up of expenses comprising of membership fees, subscription, entrance fees and other payments made to clubs. The ld. AO observed that assessee had not furnished the break- up of these expenses and also brought no evidence to lead that the said

14 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

expenditure is incurred for the purpose of business. Accordingly, the ld. AO resorted to disallow 50% of the total expenditure as not incurred for the purpose of business in the sum of Rs.42,41,728/-.

6.1. The ld. CIT(A) observed that the break-up of expenses are as under:- Membership and subscription - Rs.25,92,410/- Entrance Fees - Rs.41,95,000/- Other Payments - Rs.16,96,047/- ----------------- Total Rs.84,83,457/- ======== 6.2. The ld. CIT(A) by placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of OTIS Elevators Company India Ltd. reported in 195 ITR 682 held that membership, subscription and entrance fees are business expenditure and accordingly directed the ld. AO to allow the deduction for the same. With regard to other payments made to clubs in the sum of Rs.16,96,047/-, the ld. CIT(A) reduced the estimated disallowance to 20% thereon.

6.3. Aggrieved, both assessee as well as revenue are in appeal before us.

6.4. We find that this issue is already covered in favour of the assessee by the Co-ordinate Bench of this Tribunal in assessee’s own case for A.Y.1998-99 in ITA No.5306 & 5472/Mum/2001 dated 22/01/2016 wherein the ground raised by the revenue was dismissed by placing reliance on the order of this Tribunal in assessee’s own case for A.Y.1992- 93 in ITA No.628/Mum/1999 dated 15/02/2007. We also find that the issue on payments to clubs are covered by the decision of Hon’ble Supreme Court in the case of United Glass Manufacturing Company Ltd., in Civil Appeal No.6447/2012 and also by the decision of Hon’ble Jurisdictional High Court in the case of OTIS Elevators Ltd. reported in

15 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

195 ITR 682. Respectfully following the same, the ground no.5 raised by the assessee is allowed and ground no.3 raised by the revenue is dismissed.

7.1. The brief facts of this issue are that the assessee made provision of Rs.3,19,61,437/- towards liability on account of bonus points payable to credit card customer by the bank. The details of said provision were worked out as under:- Gross amount towards bonus points liability - Rs.6,54,71,962/- Less points redeemed during the year (encashed by the cardholders) - Rs.76,86,725/- Less reversed during the year - Rs.1,86,23,800/- =============== Provision made during the year under Consideration - Rs.391,61,437/- ===============

7.2. The assessee explained that the bonus points accrued to the credit card holder when such credit card holder makes purchases through the use of the card when the cardholder make such purchase, the bank earns commission income that is taxed. As the bonus points directly relate to the purchases made by the credit card holder in respect of which the bank earns commission income, the corresponding bonus points liability of the bank is recognized and provided for. On accrual of the bonus points, the card holder has a legal right to engage the same from the bank. Hence, it is an accrued liability as on 31st March on the side of the

16 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

bank and hence, provided for and claimed as deduction in the return of income. The assessee has also placed reliance on the decision of the Hon’ble Supreme Court in the case of Bharat Earth Movers Ltd. vs. CIT reported in 245 ITR 428 to drive home the point that the said provision is not made on account of any contingent liability. The ld. AO without giving any finding simply dismissed the claim of the assessee and disallowed the sum of Rs.3,91,61,437/- in the assessment. The assessee submitted before the ld. CIT(A) as under:-

“34. During the appellate hearing, it has been stated that the credit card holders are entitled to one reward point on every purchase of Rs.100/-; the credit card holder needs a threshold of 250 points to redeem the bonus point; these points are valid for two years from the date of enrolment to the reward points programme; the programme is available to all card holders. It has been stated that since the Indian branches of the bank did not have an existing bonus point programme at that point of time, the provisioning has been done as per the guidelines from its head office in Hong Kong which is based on international experience and provision was made at the rate of 0.70% of the card holder effective June, 2001 and prior to that the provision was 1%. The bonus points on the basis of 'estimated eligible purchases' [80%] multiplied by estimated cost per unit' [0.91%] multiplied by the 'estimated redemption rate' )[0.80%] is stated to be 0.58% but considering local consumer expectations, the Indian (branches of the bank provide for bonus points at 1% upto June, 2001 and 0.70% w.e.f. 'June, 2001. The provisions, redemptions and reversals for F.Y. 2001-02 to 2002-03 is given as under: - Financial Provision Redemption Reversals Net Provision [per the Tax Audit Report] (Rs.) (Rs.) (Rs.) (Rs.) 2001-2002 6,54,71,962 (76,86,725) (1,86,23,800) 3,91,61,438 2002-2003 6,46,00,000 (2,86,06,953) Nil 3,59,93,047

7.3. The ld. CIT(A) upheld the action of the ld. AO by observing as under:- 35. I have carefully considered the appellant's submissions. In support of its contentions, the appellant has relied on the order of the CIT(A) for A.Y.2001-02 in its own case. It was held in para 14 of the appeal

17 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

order for A.Y. 2001-02 that the CIT(A) agreed with the contention of the appellant that the bonus points accruing to the customers is a liability against the commission income earned from the credit cards business, which is brought to tax as income and since the appellant is following the mercantile system of accounting, Cut claim of the appellant is allowed. It is however, to be noted that the bonus points can only be redeemed when a threshold of 250 points is attained and moreover, the points are valid for two years from the date of enrolment to the reward point programme. Therefore, it is respectfully submitted that the finding of the CIT(A) in A.Y.2001-02 that the liability accrued in the year under consideration is not correct in view of the facts brought out above. The liability is in the nature of a contingent liability and this is also substantiated by the extent of the redemption [Rs.76,86,725/-] as compared to the provision for F.Y.2001-02 [Rs.6,54,71,962/-]. The provisioning upto June, 2001 was being made at 1% i.e., the complete claim of bonus points was the provision. After that 0.70% of the card holders spends is stated to be provided for but this provision is also not in consonance with the extent of redemptions in F.Y.2001-02. The appellant has not furnished the extent of redemptions for F.Y.2000-01. The redemptions in F.Y.2002-03 do not have Relevance for determining the extent of provisioning in F.Y.2001-02. The appellant had relied on Bharat Earth Movers vs. CIT 245 ITR 428 [SC]. It is respectfully submitted that this decision is distinguishable since it was held there in that 'what should be certain is the incurring of the liability' which as discussed above, is not the position in the present case. The AO is justified in making the disallowance of the claim of provision on account of bonus point on credit cards of Rs.3,91,61,437/-. Ground no. 10 is dismissed.

7.4. Aggrieved the assessee is in appeal before us.

7.5. The ld. DR vehemently relied on the order of the lower authorities. We have heard rival submissions. We find that this issue was subject matter of adjudication of this Tribunal in assessee’s own case for the A.Y.2001-02 in ITA No.4424/Mum/2005 and CO No.84/Mum/2006 and ITA No.4670/Mum/2005 dated 20/11/2015 wherein it was held as under:-

18 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

7.5.1. Respectfully following the same, the ground No.6 raised by the assessee is allowed.

Disallowance of depreciation of Rs.1,45,80,000/- on the amount of Rs.20 Crores paid to Great Eastern Shipping Company Ltd. (GESCO) in F.Y. 1998-99 relevant to A.Y.1999-2000.

19 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

had already got relief in respect of the amounts paid to GESCO as revenue expenditure in earlier years. Accordingly, ground No.7 raised by the assessee is dismissed.

Addition towards deferred guarantee commission of Rs.24 Lakhs:

9.1. The ld. CIT(A) upheld the action of the ld. AO by observing as under:-

20 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

“41. I have carefully considered the appellant's submissions. In the appellant's case for A.Y.2001-02, the CIT(A) considered the finding in the appellate order of Abu Dhabi Commercial Bank Ltd. for A.Y.98-99 supra in which it was inter alia held that when the bank gives a guarantee, its obligation extends to the entire period for which the guarantee is given and in exchange of this obligation, the bank received the commission and it is wrong to say that such commission accrues to the full extent the moment when the bank stands as a guarantor since the obligation is spread over a period of time, so should the guarantee commission. It was also observed in the case of Abu Dhabi Commercial Bank l.:d. that the issue is covered by the decision of the Hon'ble Calcutta High Court in ilio case of CIT vs. Bank of Tokyo Ltd. 71 Taxman 85 where it was held that the right to receive for unexpired period beyond the expiry date of the previous year remains in suspense and it is only upon certain conditions fulfilled viz. the guarantee running the full course or the period of debt guaranteed, that the right to the entirety of the commission can be said to have accrued. However, in the present case, as stated by the appellant by letter dt. 23.3.2006, there is no clause for refund of guarantee commission in case it is revoked before the date of maturity and therefore, the entire commission accrues at the point of time when the guarantee is entered into by the bank. The appellant's explanation regarding refund of part of guarantee commission to some high relationship customers does not mean that the complete guarantee commission has not already accrued. The circumstances leading to the refund would be required to be examined in the assessment year in which the refund is claimed for the purpose of determining whether the same is allowable. The addition of Rs. 24 lacs made by the AO is confirmed. The appellant has also made a without prejudice claim that the AO ought not to have taxed that portion of the guarantee commission which was received and taxed in the financial year relevant to A.Y.2001-02 and accounted for in the financial year relevant to the assessment under appeal [i.e., A.Y.2002-03] on an accrual basis [since guarantee commission is accounted for over the validity period of the guarantee]. As discussed above, the addition made in A.Y.2001-02 was deleted by the CIT(A) in the order for A.Y.2001-02 and therefore, the without prejudice claim does not survive. Ground no.12 is dismissed.”

9.2. Aggrieved, the assessee is in appeal before us.

9.3. We have heard rival submissions. The ld. DR vehemently relied on the order of the ld. AO. We find that this issue has already been adjudicated by this Tribunal in assessee’s own case in ITA No.4424 and 4670/Mum/2005 for A.Y.2001-02 dated 20/11/2015 wherein this Tribunal

21 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

by placing reliance on the decision of Hon’ble Calcutta High Court in the case of CIT vs. Bank of Tokyo reported in 71 Taxmann.com 85 had deleted the addition made by the ld. AO. The relevant observations of this Tribunal for A.Y.2001-02 are reproduced as under:-

“98. The ld. DR relied on the decision of the AO and also contented the facts of the issue as mentioned before the ld. CIT(A). 99. The ld. AR submitted the facts and contended that the ld. CIT(A) has considered the issue and decided in favour of the assessee. He submitted that the findings of the ld.CIT(A) are in consonance of the law and, he therefore prayed that the findings of the ld.CIT(A) be upheld. He also contended that an identical issue had come up before the various Courts and they have decided the issue in favour of assessee. Accordingly, he placed reliance on the following case law: a) BNP Paribas SA (Bombay HC) (2013) (32 Taxman.com 276); b) CIT V/s Bank of Tokyo Ltd (71 Taxman 85) ; c) Bank of Baharain and Kuwait (Mumbai ITAT SB) (2010) 41 SOT 290). 100. After hearing both the parties on the issue and on perusal of the records including the case relied upon by the parties, we find that the ld. CIT(A) has passed well reasoned order and directed the AO to delete the addition. For the sake of convenience, we also reproduce the relevant findings of the Hon'ble Calcutta High Court( viz CIT Vs. Bank of Tokyo Ltd.) as under : "The Revenue contends that the right to receive the commission being a one-time right, its accrual shall coincide with the commencement of the service rendered by way of guaranteeing the debt repayment; it is immaterial that the repayment covers more than on previous year. Therefore the entirety of the commission accrues at a time. The assessee-bank on the other hand, submits that the service having a spread of years the accrual should be year by year. The Revenue's contention that the accrual of the entire commission is a point of time accrual is not tenable. The contesting submissions boil down to one question whether accrual is co-eval with the pay ability, the same may be payable but may not be apportionable until the happening of an event; in the present case the expiry of the period, for, the guarantee beyond the expiry date of the previous year the right to receive for unexpired period, for, the guarantee beyond the expiry date of the previous year remains in a suspense. It may or may not fructify into an actual right to

22 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

receive for the subsequent period of the term of the guarantee as the sooner determination of the guarantee is a contingency not ruled out by the agreement. It is only upon certain conditions being fulfilled, viz., the guarantee running the full course or period of the debt guaranteed, that the right to the entirety of the commission can be said to have accrued"..... Accordingly, we dismiss Ground No.7 taken by the revenue.

9.3.1. Respectfully following the same, the ground No.8 raised by the assessee is allowed.

Disallowance of payments towards canteen subsidy, holiday home subsidy contribution, staff cultural committee and payments to recreation club for Rs.7,21,65,811/-. Ground No.2 raised by the revenue for A.Y.2002-03. 10. The ld. AO disallowed the aforesaid expenses by holding that the expenses are covered by the provisions of Section 40A(9) of the Act. The assessee explained before the ld. AO that it was only for administrative convenience that the expenditure is incurred by making payments to staff cultural committee and that the expenditure was not in the nature of provision as contemplated u/s.40A(9) of the Act. The assessee pleaded before the ld. CIT(A) that this issue is covered in its favour by the orders of the Tribunal for the A.Y.1984-85 to 1987-88 and the orders of the ld. CIT(A) for A.Y.1996-97 to 2001-02. The ld. CIT(A) following the orders in assessee’s own case for earlier years as stated supra deleted the disallowance. We find that this issue has already been decided in assessee’s favour for A.Y.2001-02 among other years vide order dated 20/11/2015, wherein it was held as under:-

“90. The ground No.4 taken by the revenue pertains to deletion of disallowance of Rs.14,99,000/- incurred on library subsidy, contributions to staff cultural committee and recreation club.

23 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

10.1. Respectfully following the same, the ground No.2 raised by the revenue is dismissed.

Disallowance of Guest House Expenses: Rs.60,42,262/- 11. The ld. AO observed that assessee furnished the break-up of the expenditure towards rent, salaries and other expenses like electricity, laundry, telephone etc., but did not file any details with regard to user of the goods used and how the expenditure was connected with the business of the assessee u/s.37 of the Act. Accordingly, the ld. AO disallowed the sum of Rs.60,42,262/- in the assessment. The assessee before the ld. CIT(A) submitted that this issue is already covered in its favour by the orders of the ld. CIT(A) for A.Yrs. 1998-99 to 2001-02. Respectfully following the said orders, the ld. CIT(A) deleted the disallowance of Rs.60,42,262/- made on account of guest house expenses.

11.1. Aggrieved, the revenue is in appeal before us.

11.2. We have heard rival submissions. We find that this issue has already been considered in assessee’s own case by this Tribunal for A.Y.2001-02 in ITA No.4424/Mum/2005 dated 20/11/2015 wherein it was held as under:-

“88. The Ground No.3 of appeal pertains to deletion of disallowance of Rs.77,17,146/- incurred on guest house and holiday home in view of the section 37(4) of the Act .w.e.f.1.4.1998.

24 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

11.2.1. Respectfully following the same ground No.4 raised by the revenue is dismissed.

Disallowance of Entertainment Expenses: - Rs.2,25,79,485/- 12. The assessee submitted before the ld. AO that the bank being in the service industry had to incur entertainment expenses as common business courtesy towards entertaining its customers and business associates and had also incurred expenditure on staff get together and communication made etc., with a view to improve morale and build team work to improve performance. The ld. AO observed that assessee itself separately debited expenditure on clubs and staff get together etc., and hence, there is no need for incurrence of any separate expenditure towards entertainment expenses amounting to Rs.2,26,79,485/- and accordingly disallowed the same in the assessment. Before the ld. CIT(A), the assessee submitted that this issue was already decided in its favour for the A.Yrs 1998-99 to 2001-02 wherein the disallowance of Rs.1 lakhs alone was sustained and remaining sums were deleted. The ld. CIT(A) restricted the disallowance to Rs.1 lakh by following the earlier orders in assessee’s own case.

12.1. Aggrieved, the revenue is in appeal before us.

12.2. We have heard rival submissions. The ld. DR vehemently relied on the order of the ld. AO. We find that this issue has already been decided in assessee’s own case for the A.Y.2001-02 in ITA No.4424/Mum/2005

25 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

dated 20/11/2015 among other assessment years wherein it was held as under:-

“92. The next issue raised by the revenue in this appeal pertains to deletion of disallowance of Rs.2,37,21,174/- in respect of entertainment expenses. 93. This ground being identical and no change in facts to that of Ground No.5 for the assessment year 1999-2000, we take similar view as taken therein vide para No.30 to 35 of this order. Accordingly, we dismiss Ground No.5 taken by Revenue.”

12.2.1. Respectfully following the same, the ground No.5 raised by the revenue is dismissed.

Transfer pricing issues: 14. The assessee is an Indian branch office of HSBC and a reference was received from ADIT International Taxation-3(1), Mumbai on 30/09/2003 u/s.92CA(1) of the Act by the ld. TPO for computing the arm’s length price (ALP) in relation to international transactions with associated enterprises (AEs) reported in form 3CEB filed along with the return of income for the A.Y.2002-03. An additional reference was also received from the ld. AO for computing ALP of the international transactions relating to marketing services for correspondent banking activity and also oversight responsibilities of the employees of the HSBC India. The ld. TPO observed that assessee is one of the oldest foreign bank operating in India in commercial as well as retail banking. The commercial banking includes corporate banking, treasury, custodian services, institutional

26 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

banking and retail banking includes home loans, consumer finance and individual deposits. During the year, the bank had international transactions with head office situated at Hong Kong, foreign branches of the bank, affiliated entities of the Bank in India as well as overseas. The main international transactions are for sale and purchase of securities and treasury bills, bank charges / guarantee commission received, brokerage paid, consultancy fee paid, marketing commission paid, debt syndication fee received, fee for marketing of derivatives, commission received for services with regard to import of gold by Indian customers, interest received / paid on deposits / NOSTRO accounts, premium paid on options (net), net receipt on interest, head office expenses payable and various reimbursements / cost allocations to Indian group entities.

Correspondent Banking Activities: 14.1. The Ld. TPO issued a letter dated 04/02/2004 in respect of correspondent banking activities of the assessee asking the assessee to submit reply in respect of the following question. "Whether the bank has rendered any marketing services to overseas branches/ HO in respect of any correspondent banking activities i.e. opening ofnostro accounts, letters of credit, export bill collections, remittance facilities, credit review / due diligence of the customers to ascertain the creditworthiness and monitoring the risk profile of the customers, 0 assistance in executing foreign currency loan / ECB transactions, debts syndication etc., marketing of derivative products for which, the benefit is derived by the overseas branches/ HO. If such services are rendered, please give the details of such services, the functional analysis and the amounts received for such services"

14.2. The assessee vide reply dated 20/12/2004 submitted before the ld. TPO submitted as under:-

27 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

The Correspondent Banking Division (INM IB') of HSBC India manages with Non-bank Financial Institutions ('FIs') like insurance companies, Management companies, and securities houses as well as banks in India. Indian FIs INM IB’s efforts vis-a-vis Indian FIs includes marketing of loans, payments and cash ent facilities, guarantee and other products offered by HSBC India These if and when sold by HSBC India results in revenue streams like float income, guarantee commission, fee income as a result of payment and cash lent facilities etc. This revenue is booked by HSBC India and is also offered to income tax It may be noted and appreciated that such revenue arises directly as a result of all underlying risks assumed by HSBC India vis-a-vis the products that are sold to such Indian FIs. The revenue booked by HSBC India for the subject year is hereunder. Sr.No. Sector Amount INR million 1. Securities Houses 27.759 2. NBFC 9.244 3. Fund Managers 0.624 4. Insurance 7.229 TOTAL 44.856 Indian banks The Indian banks have to establish relations with the overseas banks as the Indian banks themselves do not have network of branches outside India. INM IB markets the Nostro accounts and trade finance services offered by overseas branches of HSBC to such Indian banks. In this connection no revenue is booked by HSBC India since the underlying risks associated with products sold by overseas branches of" HSBC are assumed by such overseas branches of HSBC alone and not by HSBC India. Further, in connection with the role of INM IB, it may also be noted that Overseas HSBC branches also provide services that benefits HSBC India I.e., in selling INK Vostro accounts of HSBC India to banks domiciled outside India. HSBC India does not pay any amount to Overseas HSBC branches for such services. As a result of such services of Overseas HSBC branches, HSBC India has earned float income of INK 19.72 million from such Vostro accounts. It can be observed from the above that HSBC India and the Overseas HSBC offices derive reciprocal benefits due to they being a part of the HSBC Group and the non charging of costs for providing the marketing support services to Overseas HSBC entities is not prejudicial to this interest of HSBC India. Without prejudice to the above contention, as desired by you, the details about the nature of services rendered by INM IB and the costs of providing these services arc provided hereunder: Nature of Services INM IB broadly provides the following services in relation to Indian banks:

28 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

Marketing Nostro accounts and trade finance services offered by overseas HSBC offices. • Marketing arranger's role of overseas HSBC offices in debt/equity capital raising. • Customer Service: Responding to queries raised by banks by liasing with the appropriate overseas HSBC office. • Conducting credit review. As mentioned above, INM IB also markets HSBC India products to Indian FIs”.

14.3. The assessee vide letter dated 18/03/2005 submitted that the statement showing details of derivative products marketed by them were already furnished before the ld. TPO vide submission dated 28/01/2005 which included both the deals originated during the F.Y.2001-02 and also cancelled /unwound derivatives.

14.4. On without prejudice basis, the assessee submitted the following information in respect of correspondent banking activities before the ld. TPO as under:- Particulars Total Cost Estimated costs for correspondent banking activity (50% of total costs) Direct costs of employees Rs.8,842,381 Rs.4,421,190 providing support for correspondent banking as well as engaged in providing services to Indian banks (refer our letter dated 20 December 2004) General administration Rs.5,683,700 Rs.2,841,850 costs allocated to above direct costs (refer our letter dated 20 December 2004) Head Office expenses Rs.994,648 Rs.497,324 allocated @17.5% of administration costs (based on the ratio of Head office expenses debited to P & L operating expenses

29 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

(excluding employee costs) Total costs Rs.15,520,729 Rs.7,760,364

14.5. The assessee vide letter dated 21/03/2005 submitted before the ld. TPO with regard to marketing of derivatives by attaching an extract from the global transfer pricing policy relevant to the year under consideration in respect of determination of fees for marketing activities for derivative products. The assessee submitted that the fees received by HSBC India i.e. the assessee, was in accordance with the said policy.

14.6. The ld. TPO has observed that the bank had rendered above mentioned services to the foreign entities and for these services, the income is earned by such foreign entities. Out of the income earned, HSBC India was not rewarded for the functions undertaken by it, despite the fact that HSBC India had incurred certain costs for rendering these services. The ld. TPO observed that any independent entity, who renders services to any other independent entity, would not render the services without adequate compensation. The ld. TPO observed that since assessee had not rendered similar services to any unrelated entity in India and hence, the Comparable Uncontrolled Price Method (CUP) is not applicable. He also observed that considering the facts and circumstances of the case and the non-availability of data, application of Resale Price Method (RPM) and Profit Split Method (PSM) is also ruled out. Accordingly, he adopted Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM). The ld. TPO adopted the Profit Level Indicator as total cost plus mark up. The ld. TPO observed that for obtaining the mark up, it is necessary to identify the independent companies who have a functional and risk profile similar to HSBC India i.e. the assessee, relating to the transaction. He observed that such

30 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

companies would be those rendering fee based services in the financial services industry.

14.7. Based on the information available in the database available in the public domain namely PROWESS, CAPITALINE, such independent companies were identified by the ld. TPO applied by identifying companies earning more than 75% of their income from fee based activities. The assessee in response thereto vide letter dated 21/03/2005 submitted before the ld. TPO as under:- “We submit that no mark-up should be loaded on any attribution of costs towards the incidental marketing support activities undertaken by the bank in connection with correspondent banking activities and provision of support by employees of the bank to overseas associated enterprises. We request you to appreciate that provision of the above support is merely incidental to our normal business operations, i.e. corporate and consumer banking. We invite your attention to the Transfer Pricing Guidelines issued by the OECD, which state that there is no need to charge mark-up in cases where the equivalent market price of the service is not greater than the costs incurred by the service provider in rendering that service. This could be the case where the service is not part of the main business activity of the service provider, but is offered incidentally as a benefit to the related party (para 7.33 and 7.34 of the guidelines). Without prejudice to our above contention, we submit that in any case a mark-up should not be loaded on the Head Office expenses proposed to be allocated to the marketing support provided in respect of correspondent banking activities and support provided by bank's employees to overseas associated enterprises as there is no value addition by the branch, with respect to the Head Office costs allocated on an overall basis by the Head office. 4. Without prejudice to our contention that no mark-up should be loaded on the cost proposed to be attributed to the marketing support provided in respect of correspondent banking activities and support provided by bank's employees to overseas associated enterprises, as regards the seven comparable companies selected by your office, we submit that the said companies are not functionally comparable to the marketing activities undertaken by the bank. These companies are engaged in full-fledged financial services and are exposed to risks which are significantly different

31 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

than those assumed by the bank. At best, these companies can be compared to our associated enterprises, who provide financial services to the customers. Thus, we submit that the comparability criteria provided in Rule 10B of the Income-tax Rules, 1962 is not satisfied.”

14.8. The ld. TPO observed in his order as under:- “1. The contention that no mark-up should be loaded on the costs is not acceptable because : (a) The products of the foreign branches sold by the bank are not dealt by HSBC India, if such correspondent banking products are marketed by the employees of HSBC India, the benefit is derived by the associated enterprises. Due to marketing of these products, no direct benefit is derived by HSBC India. (b) The contention that the activities are incidental is also not acceptable because this is a specific activity, carried out for the benefit of foreign branches and for this purpose, special marketing skills are required and accordingly the activities requires to be rewarded separately. (c) The Reference to the OECD Guidelines that there is no need to charge mark-up in cases where the market price of the service is not greater than the costs is not of any help to the assessee in the present transaction, because it is not proved that how the market price would be less than the cost. If any independent entity renders the similar services for the specific benefit of any entity, it would ask for a fair compensation, which would be the costs incurred as well as an appropriate profit. (d) The contention of the bank that the mark-up should not be loaded on the Head Office Expenses is also not accepted because the bank has accepted trie Head Office Expenses as a cost attributable to the Indian Operations and debited to the Profit & Loss A/c and also paid, therefore, there is no reason why it should be excluded from the Cost Base for recovery purposes. Accordingly, contention of the assessee is rejected. (e) The contention of the bank that the companies referred by this office as comparables are not functionally comparable to the marketing activities undertaken by the bank is also not acceptable, because (f) The marketing services provided by the bank are in respect of the products offered by the foreign branches. Such products, if sold results into very high income to the associated entities. The services are rendered by highly qualified experts in the financial market. These are the traders/marketers, who are paid very high salaries. The assets used is one of the important factor which requires to be considered while analyzing

32 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

the comparability of uncontrolled transaction with the international transaction. A search was conducted by this office for the companies who are engaged in the financial consultancy services, business consultancy services and other consultancy services and the companies which were earning more than 75% of the income from fee based activity were identified for FAR analysis. After considering the Directors Report and Notes to Accounts of the companies, the companies mentioned in the show cause notice were considered as comparables. No company can be identified, whose FAR analysis would be exactly comparable to the international transactions, considering the availability of data. The services rendered by the bank are unique and are rendered by foreign banks only. No Indian company renders the exactly similar services, therefore, there is a shortage "of the reliable data. The Transactional Net Margin Method used by this office as the Most Appropriate Method measures the total return derived from the controlled tax payer's most narrowly defined business activity for which reliable data incorporating the controlled transactions under review is available. It tests the Arm's Length Character by comparing the Operating Profits earned by parties engaged in similar business activities. Under the TNMM, comparable transactions need to be only broadly similar. Significant product diversity and some functional diversity between the controlled and uncontrolled entities are acceptable. In this context, Para 3.27 of the OECD Guidelines reads as : Para 3.27 : "One strength of the transactional net margin method is that net margins (e.g. return on assets, operating income to sales, and possibly other measures of net profit) are less affected by transactional differences than is the case with price, as used in the CUP Method. The net margins also may be more tolerant to some functional differences between the controlled and uncontrolled transactions than gross profit margins. Differences in the functions performed between enterprises are often reflected in variations in operating expenses. Consequently, enterprises may have a wide range of gross profit margins but still earn broadly similar levels of net profits." In this case, as the services rendered by bank are unique and the precise/clear-cut comparables are not available, a broader level of comparability is acceptable. It is for this reason that the TNMM is preferred over other methods since net margins are less affected by

33 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

transactional differences and are also more tolerant to some functional differences. The comparables suggested by this office are broadly comparable to the services rendered by bank. The Arithmetic Mean of the margins suggested by this office of 20.82% en net cost, where the margins on conservative side. If any independent entity renders the services, similar to that rendered by the bank for the very specific financial products, the margins earned by such independent enterprise would be much higher. Considering the above, the contentions of the bank are rejected and operating margin on cost of 22.91% is used for computing the Arm's Length Price. The Arithmetic Mean of the Net Cost Plus Mark-up is worked out at 22.91% and the same is adopted for computing the Arm's Length Price of this transaction. The total cost attributable of corresponding banking activity is Rs. 15,520,729/-. After applying a mark-up of 22.91% on costs, the Arm's Length Price of this transaction is computed at Rs. 19,076,528/- as against Nil. Due to this, an upward adjustment of Rs.19,076,528/- is required to be made to the income of the assessee.”

14.9. With the aforesaid observations, the ld. TPO made an upward adjustment of Rs.1,90,76,528/- to the ALP in respect of correspondent banking activities of the assessee.

14.10. While applying TNMM, the ld. TPO aggregated the entire direct, indirect cost of the correspondent banking department of the assessee along with head office expenses to calculate the cost base and subsequently applied mark up on this cost to arrive at the adjustment. The ld. CIT(A) provided an adhoc relief by restricting the cost base to only 75%.

14.11. Aggrieved the assessee is in appeal before us.

34 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

14.12. We have heard the rival submissions and perused the materials available on record including the various judicial pronouncements that were relied upon by the parties at the time of hearing before us. The preliminary facts stated hereinabove are not reiterated herein for the sake of brevity. From the facts narrated above, we find that INM IB majorly manages relationships of Indian FIs to provide services and products. INM IB offers vis-à-vis the Indian FIs including marketing of loans, payments and cash management facilities, guarantee and other products offered by the assessee. These products when sold by the assessee, result in earning of revenue like float income, guarantee commission, fee income as a result of payment and cash management facilities etc., The details of the said revenue earned from sale of products to the Indian FIs are as under:-

Sr. Sector Amount No. (Rs. In Crores) AY 2002-03 I. Securities 2.7759 Houses 2. NBFCs 0.9244 3. Fund Managers 0.624 4. Insurance 0.7229 TOTAL 4.4856

14.12.1. We find that the assessee had duly offered the aforesaid amount of Rs.4.4856 Crores as its income in the return of income. We find considerable force in the arguments advanced by the ld. AR that the Indian banks have to establish relations with the overseas banks as the Indian banks themselves do not have network of branches outside India.

35 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

lNM IB markets the Nostro accounts and trade finance services offered by overseas branches of HSBC to such Indian banks. The lNM IB division does not use any additional facility, and the employees providing this support do not have any special marketing skills or knowledge of the products provided by the overseas HSBC branches. It is important to emphasize that the global network of the assessee is a direct asset and mainly benefit the assessee to have global reach and the ability to offer services under its network. This directly encourages FI's to approach the assessee for the services as compared to others who may not have such global reach. It may also be noted that the overseas HSBC branches also provide services that benefit the assessee, i.e., in selling INR Vostro accounts of HSBC India to banks domiciled outside India, The assessee does not pay any amount to overseas HSBC branches for such marketing services. It is also pertinent to note that as a result of various services of overseas HSBC branches, as above, assessee had earned float income of Rs.1.97 Crores on the interest free balances maintained by the Indian banks which have maintained Vostro account with the assessee. This fact is not disputed by the revenue before us. Hence, it could be safely concluded that the assessee and the overseas HSBC offices being a part of the HSBC group derived reciprocal benefits and thus the non-charging of costs for providing the incidental marketing support services to overseas HSBC entities would not cause any prejudice to the interest of the assessee as well as the revenue.

14.12.2. Further, the total cost of INM IB division is only Rs 1.55 Crores, whereas the income earned from the activity performed by INM IB division is Rs 4.48 Crores (including income from Indian FI and Rs 1.97 Crores- float income from Vostro account). Even if only the float income from Vostro Account is considered, still the assessee has earned a profit of Rs. 42 Lakhs (1.97-1.55 cr) resulting in profit margin of 27%, which has been already offered to tax. The profit margin arrived is much higher than the

36 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

margin of 22 percent arrived at by the TPO. If both the income (income from Indian FI and Float income) are considered, the profit margin stands at 189 percent. This shows that the assessee is adequately compensated for the activities carried out by INM IB division. Hence the allegation of the revenue that the assessee has not been adequately compensated has no merits.

14.12.3. We find lot of force in the case law relied upon by the ld. AR before us that when services are rendered free of charge to the AE by the assessee and similarly AE also provided reciprocal services free of charge to the assessee, there cannot be any reason for doubting the said transaction or make any transfer pricing adjustment thereon as both the assessee as well as the AEs are part of global conglomerate. The decision relied upon by the ld. AR in this regard is in the case of Aramex India Pvt. Ltd. vs. DCIT reported in 51 Taxman.com 573 (Mumbai Tribunal).

14.13. In view of the aforesaid observations in the peculiar facts and circumstances of the case herein and respectfully following the aforesaid decision of this Tribunal, we hold that the assessee had considerably benefitted out of earning income from Indian FIs and float income pursuant to correspondent banking activities and the said benefit directly flows to the assessee.

14.14. It would be crucial to note that assessee had reflected more than 100 international transactions in form No.3CEB filed along with the return of income and the same were accepted to be at arm’s length by the ld. TPO. Admittedly these transactions include items which are marketed by INM IB division such as custodian charges, guarantee commission charges etc as is evident from Annexure ‘C to form 3CEB. Hence, it could be seen that the main transactions were found to be at arm’s length and

37 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

the incidental benefit arising out of such transaction has been considered as a separate transaction. We find in the instant case that the main business transactions have been accepted to be at arm’s length and hence, the ld. TPO cannot separately treat the incidental benefit as a separate transaction unless it is shown that they are separate from the main business activities. In this regard, we find that the ld. AR placed reliance on the decision of Co-ordinate bench decision of this Tribunal in the case of Det Norske Veritos A/S. v. Additional Director of Income Tax reported in 67 taxmann.com 16 (Mumbai Tribunal) wherein it was held that if the main international transactions have been benchmarked, then incidental transaction cannot be considered as a standalone transaction and an adjustment to that effect cannot be made independently.

14.15. We find that with regard to allocation of cost and mark up thereon, the ld. AR argued that the ld. TPO and the ld. CIT(A) erred in considering the head office expenses for arriving at the cost base. It was submitted that only indirect costs are attributable to the activities should have been considered as concerned employees perform the work in the Indian business of the assessee and they do not use any significant additional facility to provide marketing support in respect of correspondent banking activities. Further, there is no reason for allocating head office expenses to the costs incurred for rendering services as the head office expenditure allocated to India is for the purpose of main line of banking business undertaken by the assessee and the inputs provided by the head office are not directly related to the incidental marketing support activity rendered by the assessee. Though we find lot of force in the aforesaid argument of the ld. AR, in any case, the nature of services are such that they are reciprocal in nature and hence, there cannot be any attribution of mark up on the same. Hence, we hold that no mark up should be loaded on the attribution of costs towards incidental marketing activities

38 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

undertaken by the assessee in connection with the correspondent banking activities.

14.16. In view of the aforesaid observations, we are not inclined to adjudicate the other arguments advanced by the ld. AR that no search process has been identified by the ld. TPO and no AE has been identified in respect of the subject mentioned marketing support services etc and the comparables chosen thereon by the ld. TPO etc as the adjudication of the same would become academic in nature.

14.17. In view of elaborate observations given hereinabove, we hold that no transfer pricing adjustment on account of correspondent banking activity is warranted in the instant case. Accordingly, ground Nos.10.1 to 10.4 raised by the assessee are allowed.

Services provided by employees of the bank to overseas AEs: 15. The assessee submitted details of certain expatriate employees working for Indian branches before the ld. TPO. The assessee further stated that Mr. Ashok Bhatia (expatriate employee) had predominantly rendered services in India and had pleaded only oversight role for Middle East. The bank had not claimed any deduction for Rs.65,33,714/- out of his total taxable salary of Rs.1,81,99,614/- which represented around 36% of total salary paid to him.

15.1 As regard to Mr. Christopher R Trench (expatriate employee), the assessee submitted that he had visited certain overseas HSBC banks in connection with internal audit and the estimated number of days spent by him on such internal audits and proportionate salary cost was considered and submitted before the ld. TPO in the form of an annexure.

39 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

15.2 The assessee also submitted the details of local employees working in Indian branches who have spent some time for AEs and these details were given in the form of a separate annexure before the ld. TPO together with estimated number of days spent by them and their proportionate salary cost.

15.3. The assessee vide letter dated 21/03/2005 further submitted that with regard to allocation of costs of expatriates / Indian employees rendered services to AEs as under:- designation Name Total proportionate Allocated it Fully loaded Remuneration remuneration for direct costs n costs (A) + (B) services rendered eluding Head to AEs (A) office allocation @ (B)

18,199,614 6,870,354 15,970,161 Head 9,099,807(50% of total costs) Information Ashok Bhatia Technology - India & Middle East 10,455,398 3,029,623 4,755,904 Christopher R Manager 1,726,281 (based : Group Audit on actual time Trench India spent)

2,605,241 269,446 626,328 Chandrashekar Manager 356,882 {based on Service Quality estimated time Sawant Training spent)

40 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

2,060,904 597,181 937,455 R L Asst Manager 340,274 (based on Internal Audit actual time spent) Gopalkrishnan

Pramod Maveli 270,523 426,667 879,337 Executive 156, 144 (based on Internal Audit actual time spent)

Total 22, 716, 515

15.4 The assessee submitted that these employees normally rendered the services from India only. In case of travel, the travel expenses, boarding and lodging expenses are borne by the respective entities. The cost attributed to the services rendered to the AEs is based on the actual time spent and maintained by the bank in the form of time sheets.

15.5. The ld. TPO applied TNMM as the MAM with net cost plus as the profit level indicator. He adopted the comparable entities rendering the services in the telephone service industry and arrived at the comparable mean margin of 22.91% and applied the same on the total cost of Rs.2,27,16,515/-. Accordingly, the ALP of the said transaction was worked out at Rs.2,79,20,869/- by the ld. TPO in his order.

15.6. With regard to services provided by the employees of the assessee to overseas AEs, we find that certain employees of the assessee play the oversight role for foreign AEs on account of their functions and role. It was stated that however, these employees predominantly render services for India. These employees play a relevant role in the assessee’s day to day running of the business. Along with these functions within the assessee organization, these employees were required to liaision and coordination at the group level. We find that the ld. TPO had considered

41 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

the liaision and coordination at the group level done by these employees as international transaction. The ld. TPO had adopted TNMM as MAM to benchmark the said transaction. Based on the proportionate time spent by these employees, the ld. TPO aggregated the proportionate direct cost and indirect cost along with Head Office expenses to compute the cost base and then applied mark up on the said cost base to arrive at the adjustment. We find considerable force in the arguments advanced by the ld. AR that generally in a multinational group, several oversight roles would arise within one’s functions as an employee. These are mere incidental activities carried out by the employees, which acquire group- wise liasoning and coordination and the same need not be required to be compensated. These employees are not employed for day to day functioning of the group companies. The activities carried out by the employees were considered as a separate international transaction by segregating them from routine functions by the ld TPO. We also find that in case of certain employees, the assessee had suo-moto not claimed deduction of proportionate salary pertaining to services provided to foreign AEs. Hence, the same cannot be subject matter of consideration while making TP adjustment as it would lead to double disallowance. In any case, these employees render liasoning and coordination of services at group level as a mere incidental activity and the same need not be even considered as separate international transaction warranting any benchmarking thereon. As we have already held, that the main banking transactions carried out by the assessee have been accepted to be at ALP, the incidental activities cannot be separated and benchmarked independently. Hence, the transfer pricing adjustment made in this regard by the ld. TPO in respect of role of certain employees of the bank for the A.Y.2002-03 is directed to be deleted. Accordingly, the ground Nos. 11.1. to 11.4 raised by the assessee for the A.Y.2002-03 are allowed.

42 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

17.1. The brief facts of this adjustment are that the assessee submitted details of ECBs by Indian Corporates from the overseas branches to the extent they relate to the relationship / efforts of the Corporate banking team of HSBC India as under:-

Name of Indian Amount of Loan Date of borrowings Overseas lender Borrower provided by A.E overseas A.E Larsen & Toubro USD 10 million July, 2001 HSBC Mauritius Ltd (L&T) Reliance Industries USD 30 Million Sep/Dec.2001 HSBC Mauritius Ltd (RIL) 17.2. The functions performed by HSBC India with regard to the aforesaid ECBs are as under:-

Discussions with the Indian corporate to understand their  requirements. Providing the requirements to the overseas lender Associated  Enterprise.

43 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

Providing credit data to overseas lender A.E. It may be noted  that since the Indian corporates are customers of HSBC India, the credit appraisals are in any case done by HSBC India from time to time for the purposes of their local business. Accordingly, the credit data provided to overseas A.E does rot require any significant additional efforts of HSBC India. Liaisoning between Indian corporate and overseas A.E 

17.3. The assessee submitted that with regard to the services rendered by the assessee for the aforesaid ECBs, the Debt Syndication fee of Rs.67,68,620/- was earned by the HSBC India on the above two deals. Additionally in respect of relationship / efforts of HSBC India, an amount of 50,000 USD was earned by HSBC India from HSBC Mauritius in respect of ECB by Reliance Industries Pvt. Ltd., The charging of fees of HSBC India is based on the commercial parameters which include the relationship with the Indian Corporate, the efforts required from HSBC India, the overall cost of borrowing to the client etc., Accordingly, no additional fee has been charged to HSBC Mauritius in respect of ECB to L & T. The ld. TPO asked the assessee to submit the details of income earned by the foreign branches in respect of such ECB deals and the details of fee sharing with HSBC India. Assessee submitted that in respect of Banner Pharmacaps India deal, the estimated indicative earnings overseas was USD 0.02 million and in respect of the other deal it was Australian Dollar 0.13 million. The assessee submitted that no fee is shared with HSBC India. In respect of continuing transactions, after disbursal of the ECBs, the Indian Branch undertake the normal monitoring of the accounts and follow up with the customers. For these services, the assessee is not receiving any compensation from the foreign branches who have advanced the ECBs to the customers of Indian Branches.

44 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

17.4. The ld. TPO observed that the arm’s length price in respect of services rendered for continuing ECB transactions is required to be worked out because the overseas branch is helped by a local branch for the documentation, collecting fees, ensuring smooth and timely payment of interest etc., and credit review and monitoring of performance, monitoring of breach of covenants, monitoring of assets, co-ordination with other banks, lenders to clients under syndication and preparation of watch list report.

17.5. The ld. TPO observed that for the activity relating to origination and marketing of foreign currency loans, provided by foreign branches of the banks, the uncontrolled transactions are not available, as the same service are not being provided by any Indian entity to unrelated party, similarly the foreign branches of the foreign bank are not obtaining such services from any unrelated party in India. Therefore, the CUP method by using uncontrolled transactions cannot be applied. The ld TPO observed that during the Transfer Pricing Assessments, in the cases of other foreign banks, it is seen that the banks are receiving compensation for services provided for ECBs disbursed earlier. He observed that this information is not discussed, by naming the bank, for the confidentiality reasons. However, from the data available, it is seen that, the Indian branches are being compensated for the functions performed, and assets used, for the transactions relating to continued ECBs, granted by the foreign branches to the Indian Customers. The Indian branches are being compensated on different basis. Some of these are : (i) The fee received from the borrower either as Arrangement Fee or Commitment Fee or Agents Fee or commission or in any other name is being shared upto 50% by the foreign branch with the Indian Branch.

45 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

(ii) The net interest margin (Spread), earned by the foreign branches, from the ECB loans, fresh as well as continuing, is being shared upto 50% with the Indian branch. The sharing depends on the spread earned. More the spread, more the sharing.

17.6 For these transactions, the uncontrolled data is not available in India, because of non availability of such data, it is considered appropriate to use controlled data available. On the issue of use of controlled transaction, paragraph 1.70 of the 1995 OECD Report indicates that evidence from enterprises engaged in controlled transactions with associated enterprises may be useful in understanding the transaction under review or as a pointer to further investigation. The dealings between associated enterprises, for comparison, can also be used in the cases of last resort where :

(1) there is sufficient data available to demonstrate their reliability and (2) related party comparable data provides the most reliable available data upon which to determine or estimate an arm's length outcome.

17.7. The ld TPO observed that the information available in the controlled transactions can be used as a guide. In the cases, where the Indian branch has not received any compensation or the compensation received is less than arm's length, depending on the facts and circumstances of the case, either of the above basis could be adopted for computing the Arm's Length Price, however, if either net interest or fee is shared with Indian Branch, it may not be the sharing at arm's length, for the following reasons :

46 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

(a) The fee as well as the interest charged in the ECB Transactions depends on the convenience of the two parties to the transactions. The client would agree to pay a higher fee with less interest rate or vice versa because the loan disburser is concerned with the value received in the transaction and not the split thereof.

(b) The income streams from ECBs would be the interest margin, commitment fees or any similar charges paid by the borrower and booked in overseas branch books. If a particular split from either interest or fee is used for computing the arm's length price, it might lead to shifting of consideration for the ECBs, from fee to interest or vice versa.

17.8. The Arm's Length Price in respect of the services rendered for continuing ECB transactions is also required to be worked out as the bank is rendering the services which are discussed above.

17.9. The compensation for such services is required to be computed at Arm's Length. In the present case, by using the data available in the case of other foreign banks, the 25% of the earnings received by the Foreign Branches is considered as compensation at arm's length. The transactions of providing the support for continued ECB transactions offered by the foreign branches, are the unique transactions undertaken by the foreign banks only, and in such cases, it is reasonable and appropriate to use the data in controlled transactions. For computing the arm's length price of this transaction, the CUP method but with controlled transactions, is used. The cost plus method/transactional net margin method is not used, because of the non availability of exact cost, and the results by using the CUP method are realistic.

47 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

The total fee received by the foreign branches is Banner Pharma ECB USD 0.02 Million equals to Rs. 976,000/- NHAVA Seva International ECB AUD 0.13 Million Rs.3,344,900/- Rs.4,320,900/- 25% of this works out to Rs.1,080,225/- This is added to the income of the assessee.

17.10. The ld. CIT(A) deleted the transfer pricing adjustment in the sum of Rs.10,80,225/- by observing as under:- “61. I have carefully considered the appellant’s submissions. The appellant’s contention is that in respect of ECBs given by HSBC foreign branches in earlier years, it is undertaking normal monitoring of accounts and follow up with the customers and that no compensation is received from the foreign branches. The appellant's contention appears to be justified since even the services enumerated at page 13 of the TPO order would show that the work is of normal monitoring and follow up for the 2 ECBs given by HSBC foreign branches in earlier years. Moreover, there were 2 ECBs given by HSBC Mauritius in F.Y.2001-02 in which the relationship/efforts of the corporate banking team of HSBC India wee involved for which debt syndication fee of Rs.67,68,620/- as well as an amount of US $ 50000 was earned by HSBC India. The fee received was treated at arm's length price. The appellant is therefore, accounting for income in respect of ECBs given by HSBC foreign branches. In respect of ECBs given by HSBC foreign branches in earlier years, in the absence of risks assumed and taking into consideration the nature of the services provided, the appellant's contention that no adjustment is to be made in respect of the services is accepted. In view of this finding, the other contentions raised by the appellant are not being examined. The AO is directed to delete the adjustment of Rs.10,80,225/-. Ground no. 19 is allowed.” 17.11. Aggrieved, the revenue is in appeal before us.

17.12. We have heard rival submissions. At the preliminary facts stated hereinabove remained undisputed and hence, the same are not reiterated herein for the sake of brevity. It is not in dispute that assessee had

48 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

received Debt Syndication Fees of Rs.67,68,620/- together with 50,000 USD as its fee / commission income for enabling the Indian customers to avail ECBs from its overseas branches. The said receipt of fee / commission income has been accepted to be at arm’s length. Hence, there is no question of further fee that is required for the assessee in respect of continuing ECBs. We find that the ld. CIT(A) had categorically observed that HSBC India does not assume any risk in respect of continuing ECBs compared to the nature of service rendered by them. This categorical finding has not been controverted by the revenue before us. Hence, we hold that no transfer pricing adjustment in respect of the services rendered by HSBC India in respect of continuing ECBs more so when the entire commission income / Debt Syndication Fee income received by the assessee have already been accepted to be at arm’s length. Accordingly, ground No.6 raised by the revenue is dismissed.

ITA No.3996/Mum/2009 & ITA No.4565/Mum/2009 (A.Y.2003- 04) (Revenue Appeal)

49 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

ITA NO. AY APPEAL BY RESULT 3857/Mum/2006 2002-03 Revenue Dismissed 3401/Mum/2006 2002-03 Assessee Partly Allowed 4565/Mum/2009 2003-04 Revenue Dismissed 3996/Mum/2009 2003-04 Assessee Partly Allowed

Order pronounced in the open court on this 27/11/2019

Sd/- Sd/- (RAVISH SOOD) (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 27/11/2019 KARUNA, sr.ps

50 ITA No.3857/Mum/2006 and other appeals M/s. Hongkong and Sanghai Banking Corporation Ltd.

Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. 6. //True Copy//

BY ORDER,

(Asstt. Registrar) ITAT, Mumbai