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Facts
The assessee, Bharti Airtel Ltd., made interest payments to ABN AMRO Bank, Sweden, and Holstein Girozentrale, Sweden, without deducting tax at source. The assessee claimed a bonafide belief that these entities were tax residents of Sweden, relying on Tax Residency Certificates (TRCs). However, subsequent information indicated that the TRCs may have been incorrect or that the entities were not considered tax residents under the relevant Double Taxation Avoidance Agreements (DTAAs).
Held
The Tribunal held that the ABN Amro Bank, Stockholm branch, was not a tax resident of Sweden under the Indo-Sweden DTAA as its place of effective management was in the Netherlands. The assessee's plea of bonafide belief was rejected as the department's stand was consistent, and the TRC was found to be inaccurate. For Holstein Girozentrale, the TRC was issued after the payment date and was subsequently withdrawn, rendering the bonafide belief unsubstantiated.
Key Issues
Whether the assessee was liable for non-deduction of tax at source on interest payments made to ABN Amro Bank and Holstein Girozentrale, and whether the bonafide belief of the assessee negated this liability.
Sections Cited
201(1), 201(1A), 195, 40(a)(i), Article 4 of Indo-Sweden DTAA, Article 11(2) of Indo-Dutch Tax Treaty
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Income Tax Appellate Tribunal, DELHI BENCH “D”, DELHI
(A.Y 2009-10) Bharti Airtel Ltd., Bharti Crescent, 1 Nelson Mandela Road, Vasant Kunj, Phase II, New Delhi 110070 ...... अपीलार्थी/Appellant PAN: AAACB-2894-G बिाम Vs. Income Tax Officer, TDS, Ward 1(1), International Taxation, ..... प्रनिवादी/Respondent New Delhi अपीलार्थी द्वारा/ Appellant by : Shri Anil Bhalla, Chartered Accountant प्रधििािीद्वारा/Respondent by : Shri Vikram Singh Sharma, Sr. DR सुिवाई की निथर्थ/ Date of hearing : 09/10/2025 घोषणा की निथर्थ/ Date of pronouncement : 06/01/2026 आदेश/ORDER PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-42, New Delhi [in short ‘the CIT(A)’] dated 10.04.2017, for Assessment Year 2009-10 in proceedings arising from assessment order passed u/s.201(1) and 201(1A) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’).
Shri Anil Bhalla, appearing on behalf of the assessee submits that during the period relevant to assessment year under appeal, the assessee had made interest payments without deduction of tax at source to:
(i) ABN AMRO Bank, Sweden, USD 1,017,573/-; & (ii) Holstein Girozentrale, Sweden, USD 43,336/- 2.1. Narrating facts of the case, the ld. AR of the assessee submits that for purchase of telecom equipments from Ericsson, a Swedish supplier, the assessee sought foreign exchange credit facility from ABN AMRO Bank, NV, Stockholm Branch (in short ‘ABN Amro’). The Term Loan was advanced in the foreign currency. The said loan was guaranteed by Swedish Export Credits Guarantee Board- EXPORTKREDITNAMNDEN (EKN). The assessee entered into four facility agreements with the original lender for availing the Foreign Currency Term Loan. The assessee paid principal amount of the loan and interest thereon to ABN Amro which in turn, to the extent of loans novated remitted the amount to the designated bank account of the novated lenders without any retention. The assessee on the basis of a letter from ABN Amro dated 12.09.2002 (at page 662 of the paper book) and Tax Residency Certificate (TRC) issued by Swedish Tax Authorities dated 11.09.2002 (at page 661 of the paper book) and dated 14.03.2007 (at page 431 to paper book) was under the bonafide belief regarding Swedish tax residence status of the bank, hence, did not deduct tax at source on the interest payments made to ABN Amro. The Assessing Officer (AO) under the provisions of section 201(1) and 201(1A) of the Act initiated proceedings for non-deduction of tax at source on the payment of interest to ABN Amro and vide order dated 29.03.2010 held the assessee, ‘deemed to be an assessee in default’. The ld. AR submits that the certificate of residence issued by Tax Authorities of Sweden (supra) furnished by ABN Amro was sufficient documentary evidence for the assessee to presume that the payments made to the said bank does not require deduction of tax at source. The ld. AR further refer to Clarificatory Circular No. 789 dated 13.04.2000 (at page 621 of the paper book) to contend that TRC furnished by the foreign entity is sufficient evidence to decide the domicile residency of the foreign entity. The ld. AR pointed that the communication from Swedish Tax Authority dated 17.04.2008, clarifying that Tax Residency Certificate issued to ABN AMRO Bank, NV, Stockholm Branch was wrongly issued, was received by the assessee after the assessee had already made the payment of interest USD 1017573 to ABN Amro without deduction tax at source on 02.06.2008. The ld. AR pointed that in the assessment order passed u/s.201(1) and 201(1A) of the Act, the AO has observed that the assessee was provided with the letter from Swedish Tax Agency on 13.06.2008. Thus, on the date of payment i.e. 02.06.2008, it was not in the knowledge of the assessee that the TRC issued by Swedish Tax Agency was defective The ld. AR submits that in the preceding assessment years the payments were made by the assessee to ABN Amro without deduction of tax at source based on the TRC issued by Tax Authorities and no action u/s.201(1) and 201(1A) of the Act was taken against the assessee. It was only for the first time on 27.06.2008 that an order u/s.201(1) and 201(1A) of the Act was passed holding the assessee to be an assessee in default based upon clarification upon from Swedish Tax Agency. The ld. AR placing reliance on the decision rendered by Hon’ble Supreme Court of India in the case of Bharti Cellular Ltd. Vs. ACIT, 160 taxmann.com 12 submitted that the assessee was not under legal obligation to deduct tax at source on the payment of interest, where documents on record (in this case TRC) suggest that no tax is required to be deducted at source.
2.2 In respect of interest payment made to Holstein Girozentrale (Now known as HSH Nordbank AG), Sweden (in short Holstein), the ld. AR submits that the payment amounting to USD 43,366/- was made on 18.08.2008. No other payment was made during the relevant period. The assessee did not deduct tax at source, relying on certificate of residence dated 27.02.2009 issued by Swedish Tax Authority in respect of said entity. Copy of said TRC is at page 501 of the paper book. Thus, the assessee was under bonafide belief that Holstein is a tax resident of Sweden. Considering said TRC, the assessee did no deduct tax at source on the interest payment to Holstein. It was subsequently in the year 2017 that the Swedish Tax Agency confirmed that during the period from 01.04.2008 to 31.03.2010 Holstein was not registered as tax payer or tax resident in Sweden within the meaning of India-Sweden Double Tax Avoidance Agreement (DTAA). The ld. AR thus prayed for reversing finding of the CIT(A) in upholding the assessee as, deemed to be an assessee in default under provisions of section 201(1) and 201(1A) of the Act.
Per contra, Shri Vikram Singh Sharma representing the department vehemently supporting the impugned order prayed for dismissing appeal of the assessee. The ld. DR submits that ABN Amro is a Dutch Bank with headquarters at Amsterdam. It is only the branch of ABN Amro which is located in Stockholm, Sweden. Article 4 of India-Sweden DTAA specifically provides that treaty benefit is available only if the entity is liable to tax in Sweden on global income basis and not on source basis. Since, ABN Amro is based/headquartered in Netherlands, it is liable to be taxed on global income in Netherlands. The assessee can not escape from provisions of withholding tax on the ground of bonafide belief relying on wrongly issued TRC by Swedish Tax Agency.
3.1. With regard to compliance of TDS provisions in respect of payment of interest to Holstein, the ld. DR pointed that the TRC on which assessee is placing reliance is for subsequent year and even that has been withdrawn by the Swedish Tax Agency. The interest was paid in August 2008 and the date of TRC is 27.02.2009 (at page 501 of the paper book). The assessee cannot rely on TRC issued subsequent to the date of payment and plead bonafide.
We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also considered the decisions on which the ld. AR of the assessee has placed reliance in support of his submissions. The assessee in appeal has assailed the order of CIT(A) in upholding findings of the AO in treating the assessee as, ‘deemed to be an assessee in default’ for non-deduction of tax at source qua payment of interest to ABN Amro and in respect of payment of interest made to Holstein.
With regard to the interest payments made to ABN Amro the reason given by the assessee for non-deduction of tax at source on payment of interest USD 1,017,573/- is that the assessee had bonafide belief that ABN Amro is tax resident of Sweden, within the meaning of Article 4 of India-Sweden DTAA. We find that the issue whether the assessee was liable to deduct tax at source on the interest payments made to ABN Amro is subject matter of dispute since AY 2004-05. In the immediate preceding assessment years i.e. AY 2007-08 and 2008-09, the AO had disallowed payment of interest to ABN Amro invoking provisions of section 40(a)(i) of the Act. The AO had also passed common order u/s.201(1) and 201(1A) of the Act for AY 2004-05 to 2009-10 holding the assessee as, ‘deemed to be an assessee in default’. In First Appellate proceedings, for AY 2007-08 & 2008-09 the CIT(A) decided (AY 2009-10) the issue in favour of the assessee deleting the disallowance made u/s.40(a)(i) of the Act. Against the findings of CIT(A), the Revenue filed appeal before the Tribunal in & 6079/Del/2019 inter alia assailing findings of the CIT(A) in deleting disallowance of interest paid to ABN Amro u/s.40(a)(i) of the Act. The Coordinate Bench after considering submissions of the assessee allowed the ground raised by the Revenue, rejecting assessee’s plea of ‘bonafide’. For the sake of completeness, the relevant findings of the Coordinate Bench on this issue are extended herein under:-
Both sides heard. The short issue for our consideration in the second round of litigation before us is the taxability of interest in the light of factual findings on tax residency status of beneficial owner of the interest paid by the assessee and also the assessee’s plea of ‘bonafide’ in not deducting tax at source on interest payment to ABN Amro.
Before proceeding further, it would be imperative to refer to the findings of the Coordinate Bench in the First round of litigation before the Tribunal. The Coordinate Bench in a succinct manner has culled out the facts of the case and the transaction of advancing loan by ABN Amro to the assessee and its taxability with reference to relevant DTAA, vis a vis residential status of the Bank. For the sake of ready reference, the findings of the Tribunal in the First round in (supra) are extracted herein below: “22. So far as this ground of appeal is concerned, the relevant material facts, as culled out from material before us, are as follows. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has paid a sum of Rs 87,83,92,587 as interest on borrowings to ABN Amro Bank, Stockholm branch (ABN-S, in short), but has not deducted any tax at source from the same. When Assessing Officer probed the matter further, he found that the assessee had acquired certain supplies of telecommunication equipment form Ericsson, a Sweden based company. This transaction involved large financing, and, as an export promotion measure by the Government of Sweden, export of equipment was facilitated by Swedish Export Credit Guarantee Board, i.e. Exportkreditnamnden (EKN, in short). ABN Amro Bank, Stockholm branch, was willing to enter into a contract for advancing this term loan, but EKN was to guarantee this loan, and the actual financing of the loan was to be done by certain other lenders. The assessee, for the purpose of arranging the borrowings to finance the purchase of equipment, entered into a multilateral agreements. The parties to these agreements were the assessee (the borrower), ABN Amro Bank Stockholm branch (the arranger) and the financial institutions actually funding the loan (the original lenders). These agreements were guaranteed by EKN. The assessee’s case was that (AY 2009-10)
since the assessee made the payment of interest to ABN Amro Bank NV, Stockholm branch, and since, in terms of Article 11(3) of the India Sweden Double Taxation Avoidance Agreement ( 229 ITR Statute 11) any interest paid, on borrowings endorsed by EKN, to a Swedish resident is not taxable in India, the assessee was not required to withhold any taxes under section 195. The assessee had also produced a certificate dated 11th September 2002 from the Swedish tax authorities to the effect that ABN Amro Bank NV Branch, Stockholm, is “ a company resident in Sweden within meanings of the convention to avoid double taxation between Sweden and India” and that “the company is registered for taxes as a firm under number 516401-9761”. This plea was rejected by the Assessing Officer on the ground that the ABN Amro Bank NV was in fact a Dutch resident and it had a limited tax liability in Sweden in respect of its Swedish sourced income only. Reliance was also placed on the letter dated 17th April 2008 received from the Swedish Tax Authority, in terms of exchange of information provisions under the Indo Swedish tax treaty, which confirmed that the Stockholm branch of ABN Amro bank is liable to income tax Sweden within the meanings of the tax treaty, i.e. Article 7, and that it not a resident of Sweden as required by Article 4 of the treaty. It appears that the demands under section 201(1) r.w.s 195 were also raised on the assessee which are right now pending in appeal before this Tribunal. It was in this backdrop of facts that the claim of deduction for interest paid to ABN Amro Bank, amounting to Rs 87,83,92,587 was disallowed under section 40(a)(i). The assessee’s objection, raised before the DRP, was also rejected. Aggrieved by the disallowance so made, the assessee is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We find that so far as assessee’s dealings with ABN -S are concerned, these are to be examined in accordance with the provisions of the India NetherlandsDouble Taxation Avoidance Agreement, rather than India Sweden DoubleTaxation Avoidance Agreement, for the reason that the ABN Amro Bank is a taxresident of the Netherlands and ABN Amro Bank’s Stockholm branch is an integral part of the AB Amro Bank NV. ABN-S’s taxability in Sweden is confined to the taxability of its profits in Sweden, whereas under Article 4(1) of Indo Swedish tax treaty, an enterprise can be treated as resident of Sweden only when, inter alia, such a person “under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature”. Clearly, the mere fact that such profits of an enterprise are taxable in Sweden cannot lead to the conclusion that the enterprise is tax resident of Sweden. Elaborating upon the scope of expression ‘liable to tax by the reason of domicile, residence, place of management or any other criterion of similar nature’, a coordinate bench of this Tribunal, in the case of DCIT Vs General Electric Co plc [71 TTJ 973 (2001)] and speaking through one of us (i.e. the Accountant Member), has observed as follows:
the laws of that state, is liable to taxation therein by reasons of his domicile, residence, place of management or any other criterion of a similar nature". The requirements for fiscal domicile cannot be satisfied by mere liability to tax in that country, but as clearly provided by art. 4(1) of the Indo- Dutch DTAA, such a liability to taxation has to be on account of domicile, residence, place of management or any other criterion of a similar nature. The question, then, is as to what are the connotations of these terms and whether source taxability of dividend income per se can generate ‘treaty entitlements’ of the country in which such taxes on dividends have been paid. The wordings of art. 4(1) leave no doubt about the fact that merely because a person is tax-payer in one of the countries which are party to the Indo-Dutch DTAA, i.e. in India or in Netherlands, such a person cannot be treated as ‘resident of one of the states’ for the purposes of the DTAA. Coming to specific tests laid down in the DTAA, as far as ‘domicile test’ is concerned, in common law, ‘domicile’ has a somewhat restricted meaning, denoting a fixed and lasting attachment to a country or state with its own separate legal system—one only in each case—which initially is acquired by birth (‘domicile by origin’), and capable of being altered later by a personal decision (‘domicile by choice’). In the case before us, the assessee-companies were incorporated in United Kingdom and there is nothing on record to even remotely suggest that the assessee-company was domiciled in the Netherlands. Since there can only be one country of domicile and since the assessee-companies are already domiciled in United Kingdom by the virtue of its incorporation in that country, the assessee-companies cannot be said to be domiciled in the Netherlands. Coming to the ‘residence test’, it is admittedly not the assessee’s case that the assessee - companies are residents of Netherlands. Similarly, it is also not in dispute that ‘place of effective management’ is United Kingdom and the case of the assessee- companies cannot even be covered by this criterion. That leaves us only with ‘any other criterion of similar nature’. It may be useful to first refer to the principle of ‘ejusdem generis’ in interpretation of statutes. Simply stated, the principle of ejusdem generis is that where there are general words following particular and specific words, the general words will have restricted meaning which will be confined to the things of the same kind as specified. In other words, the general expression is to be read as ‘comprehending only things of the same kind as that designated by preceding particular expressions, unless there is something to show that wider sense was intended. In the case before us, the principle of ejusdem generis have been incorporated in the text of the treaty provision itself, ‘any other criterion’ referred to in the treaty has to be restricted to the genus of three earlier expressions i.e. domicile, residence and place of effective management. The key question, therefore, is whether ‘earning of dividends earned from the Netherlands’ can be said to belong to the same genus to which ‘domicile, residence and place of effective management’ belong ? No. doubt, as observed by Dr. Klaus Vogel in his Commentary to the Double Taxation Conventions, the term
‘other criterion of similar nature’ makes clear that the enumerated criterion of domestic law which attracts tax liability are no more than examples for the rule, but Dr. Vogel has further stated that, "The term should be understood to mean any locality-related attachment that attracts residence-type taxation." An illustration given in this commentary refers to "statutory seat which, under German law, serves as an alternative point of attachment in the absence of a place of management within the domestic territory." We are in considered agreement with Dr. Vogel’s observation that ‘any other criterion of similar nature’ should be understood to mean any locality related attachment that attracts residence type taxation. In the light of these discussions, it is clear that only ‘locality related attachment’ (‘locality related’ being the genus to which expressions ‘domicile’ ‘residence’ and ‘place of effective management’ belong ) can be covered by the scope of expressions ‘any other criterion of similar nature’ in terms of art. 4(1) of the Indo -Netherlands DTAA. We are also of the considered view that cases before us clearly fail on this test.
In view of the above discussions and bearing in mind the fact that ABN- Sdid not have any locality related attachment in Sweden which could lead to residence type taxation on global basis, in our considered view, ABN-S cannot be treated as tax resident of Indo Swedish tax treaty. Accordingly, the benefit of Article 11 (3) of Indo Swedish tax treaty cannot be applicable on the ground that the interest remittances are made to ABN-S. However, for the reasons we will now set out, the mere fact that the interest has been remitted to ABN-S and that the benefit of Article 11(3) of Indo Swedish tax treaty or benefit of Article 11(3) of the Indo Dutch tax treaty are not available in respect of these remittances, does not imply that the amounts so paid are taxable in India.
We find that there is no dispute about the fact that the ABN- S, was arranger of the loan and there were also other financial institutions termed as ‘original lenders’ who had actually financed this transaction. The role of the ABN-S, except to the extent of financing of its own funds in this arrangement, was confined to that of a facilitator. We have also noted that it is an undisputed position that subsequently these loan agreements were novated and the original lenders came into direct agreements with the assessee. Under these circumstances, in our considered view, the interest received by the ABN-S, except to the extent received for the financing done by itself, was not entirely in his own right but merely as a conduit for making onwards payments to identified original lenders in a transparent manner. As we take note of these facts, it is also important to bear in mind the fact that the liability under section 201(1) r.w.s. 195, which has been invoked in this case for non deduction of tax at source from payments to ABN-S – which is the bedrock of disallowance impugned in this appeal, is based on taxability of ABN Amro Bank @ 10% (before grossing up) under Article 11(2) of the Indo- Dutch tax treaty and by thus treating ABN Amro Bank as beneficial owner of the interest. It may be noted that under Article 11 of the Indo Dutch tax treaty, interest arising in one of the States and paid to a resident of the other State may be taxed in that (AY 2009-10)
other State. Article 11(2), however, provides that such interest may also be taxed in the State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed 10 per cent of the gross amount, amongst other, in the cases of the interest on loans made or guaranteed by a bank or other financial institution carrying on bona fide banking or financing business. It is thus beyond doubt that the taxation of interest, even according to the revenue authorities, is being done in the hands of the beneficial owner. In these circumstances, the authorities below were clearly in error in treating ABN Amro Bank as recipient and as beneficial owner of the entire interest paid by the assessee remitted to ABN-S In our considered view, even though such interest is remitted to ABN-S, since ABN -S has mainly acted as a conduit, it is to be treated as having been paid to the beneficial owners of such interest i.e. original lenders under the financing arrangement – though through the ABN-S……”
Thus, the Tribunal after examining the facts gave an explicit finding that ABN Amro Bank, Stockholm Branch is an integral part of ABN Amro Bank, Netherlands. ABN Amro, Stockholm Branch cannot be treated as tax resident of Sweden, in terms of Article 4 of Indo-Sweden DTAA, hence, Indo- Sweden DTAA will not apply. The transaction of payment of interest shall have to be examined in light of the provisions of Article 11(2) of Indo-Dutch Tax Treaty. In the backdrop of aforesaiddefinite findings of the Coordinate Bench, the assessee’s plea of ‘bonafide’fornon deduction of tax at source on payment of interest to ABN Amro is to be tested.
The assessee has built its plea of ‘bonafide’ only on the ground that TRC issued by Swedish Tax Authority indicated ABN Amro to be Tax resident of Sweden. The TRC issued by Swedish Tax Authority dated 11.09.2002 is at page 159-160 of the paper book. Except for the said TRC there is no other document on record to show that ABN Amro at any point of time had asked the assessee not to deduct tax at source on the payment of interest or deduct tax at source at concessional rate. The Revenue has been disputing non deduction of tax at source on payment of interest to ABN Amro right through.This is evident from the order passed u/s. 201(1) and 201(1A) of the Act dated 27.06.2008 for AYs 2003-04 to 2008-09. It is elementary that global income of the corporates/banks is taxable with reference to ‘Rule of Residence’. Article 4 of DTAA defines the term ‘Resident’. In case of a person other than individual or to put it in simple words, in case of the corporates, the place of residence is determined with reference to ‘place of effective management’. ABN Amro Bank is headquartered in Netherlands, thus its effective place of management is Netherlands, ABN Amro, Stockholm, Sweden is only a Branch of the Bank. The Branch is a Permanent Establishment of the Bank and an integral part of ABN Amro Netherlands. Therefore, ABN Amro, Stockholm, Sweden fails the test of Resident set out in Article 4(3) of Indo-Sweden DTAA.
The Swedish Tax Authorities vide letter dated 17.04.2008 has also clarified that ABN Amro Bank N.V is a Netherlands based bank and loan to the company in Indian is given by its Stockholm Branch. The Stockholm Branch of the bank is a permanent establishment, a Branch is liable to tax of its Branch profits. The Stockholm Branch is liable to Income Tax in Sweden within the meaning of the tax treaty of Article 7. It is not a resident as required by Article 4 of the Treaty. The Swedish Tax Agency fairly admitted that the information provided in certificate is not correct although the certificate was issued by Swedish Tax Agency.
The assessee has placed reliance on the decision rendered in the case of Kotak Securities Ltd.(supra) to support its plea of ‘bonafide’. We find that the Hon’ble High Court accepted assessee’s plea of ‘bonafide’ in the peculiar facts of the case, as both the Revenue and the assessee were under the bonafide belief for nearly a decade that tax was not deductible at source on payment of transaction charges. The Hon’ble Court in the backdrop of above fact held that no fault can be attributed to the assessee in non deduction of tax at source as for considerable period of time the Department was also of the view that no tax at source was required to be deducted. Whereas in the instant case it is the assessee alone who has been reiterating ‘bonafide belief’ of non deduction of tax at source based on TRC,whereas the consistent stand of the Department is that the assessee is liable to deduct tax on the interest payment made to ABN Amro. Thus, we find no merit assessee’s plea of ‘bonafide’.
Here we would also hasten to refer to observations of Tribunal in the case of Google India P Ltd. vs. JDIT (Int. Taxation) (supra) wherein the plea of bonafide was rejected even after considering the decision rendered in the case of Kotak Securities Ltd. (supra) for the following reason: “253…………..A non- obstante clause is usually used in a provision to indicate that the provision should prevail despite anything to the contrary in the mentioned in such non- obstante clause. In case there is any inconsistency or a departure between the non- obstante clause and another provision, one of the objects of such a clause is to indicate that it is the non-obstante clause which would prevail over the other clause [see CIT v. Navabharat Enterprises [1987] 31 Taxman 173/[1988] 170 ITR 332)(AP). Therefore, the plea of bona fide belief has no place in the non-obstante provisions of the Act.” For the aforesaid reason as well, the assessee’s plea of bonafide is rejected.
In light of our above findings, the Revenue succeeds on ground no. 1 of appeal. [Emphasized by us]
The Coordinate Bench jettisoned assessee’s plea of bonafide, on the ground that ABN Amro Bank, Stockholm Branch was PE of its headquarters based at Amsterdam, Netherlands. The residence status of the Bank is determined by Place of Effective Management (POEM) which generally coincides with location of head office. This is a settled position in international tax jurisprudence. POEM in the case of ABN Amro Bank cannot be certainly its Branch office at Stockholm, Sweden. Therefore, assessee’s plea of bonafide was not accepted.
In the instant appeal, the assessee in support of its decision has placed reliance on various decisions including Kotak Securities Ltd. 340 ITR 333 and Google India Pvt. Ltd., 93 taxmann.com 183 (Bang-Trib). The said decisions have been considered by the Coordinate Bench and has distinguished the same on facts. The ld. AR of the assessee has also placed reliance on the decision in the case of Bharti Cellular Ltd. (supra). We find that in the said case, the facts are distinguishable. The decision was rendered in peculiar facts of the case. In the said case, the cellular, mobile, telephone, and service providers had entered into agreements with distributors/franchisees for the sale of prepaid products (start-up kits). The said start-up kits were sold by the service providers to their distributors at a discounted price. The discounts were given on the printed price on the packs. The case of the Revenue was that the difference between the discounted price and the sale price in the hands of the distributor was in the nature of commission or brokerage. According to the Revenue, the relationship between the service providers (the assessee’s) and the distributors was that of principal and agent. Consequently, the assessee was held liable to deduct tax at source under section 194H of the Act. In the backdrop of these facts, the Hon’ble Apex Court held that the assessees were not under any legal obligation to deduct tax at source on the income/profit component embedded in the amount received by the distributor from third-party customers at the time of sale of start-up kits. Accordingly, the provisions of section 194H of the Act were held to be not applicable. The ld. AR of the assessee has vehemently placed reliance on the observations of the Hon’ble Apex Court in paragraph 35 of the said judgment. There is no dispute and their cannot be any question with regard to the observations made in paragraph 35 of the judgment. However, the reliance placed by the ld. AR on the said observations, in the facts of the present case, is misplaced. Therefore, the said decision of the Hon’ble Apex Court does not support cause of the assessee.
The facts in the impugned assessment year are in no way different from AY 2006-07 and AY 2007-08. The plea of the assessee for non-compliance of provisions of section 195 of the Act in both cases is identical. Hence, the reasoning given by the Coordinate Bench on the issue would mutatis mutandis apply to the facts of present case. We find no infirmity in findings of the CIT(A) in upholding the assessment order on the issue of non-deduction of tax at source qua interest payments made to ABN Amro. In the result, ground of appeal no. 2 is dismissed being devoid of any merit.
8. The next issue in appeal is with regard to non-deduction of tax at source on the interest payment made to Holstein, again an alleged resident of Sweden. It is an undisputed fact that the assessee had made interest payment to the said alleged Swedish Company in August 2008. The TRC furnished by Holstein to the assessee was in the year 2009. The assessee cannot and by no means in 2008 could have reason to believe much less bonafide reason about the tax residency status of Holstein as Swedish. Thus, the plea of the assessee that the TDS provisions of section 195 of the Act were not complied with on the bonafide belief based on TRC furnished by the Holstein in 2009 is without any substance. No material has been placed on record by the assessee to substantiate that at the time of making payment in August 2008 any documentary evidence was furnished by Holstein to substantiate its Tax Residence status in Sweden. The assessee had no reason to believe that Holstein was tax resident of Sweden within the meaning of Article 4 of India-Sweden DTAA. Therefore, we find no merit in ground no. 3 of the assessee’s appeal. Accordingly, the same is dismissed.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on Tuesday the 06th day of January, 2026.
Sd/- Sd/- (MANISH AGARWAL) (VIKAS AWASTHY) लेखाकार सदस्य/ACCOUNTANT MEMBER न्यानयक सदस्य/JUDICIAL MEMBER धिल्ली/Delhi, ददिांक/Dated 06.01.2026 NV/- प्रतिलिपि अग्रेपििCopy of the Order forwarded to : अपीलार्थी/The Appellant , 1. प्रनिवादी/ The Respondent. 2. 3. The PCIT/CIT(A) ववभागीय प्रनिनिथि, आय.अपी.अथि., दिल्ली /DR, ITAT, धिल्ली 4. गार्ड फाइल/Guard file. 5.
BY ORDER, //True Copy//
(Asstt. Registrar) ITAT, DELHI