ACIT TDS 1(2), MUMBAI vs. DEUTSCHE BANK AG, MUMBAI

आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

ITA No. 4029/M/15 for AY 2012-13. 3. First of all we take up revenue’s appeal in for AY 2012-13 on the grounds mentioned herein below:- 1. Grounds of appeal:- i) "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to compute interest for delay in deposit of tax deducted at source u/s 201(IA) of the I.T. Act from the due date,

3 & 3842/Mum/2015 Deutsche Bank AG without appreciating that as per clause (ii) to section 201(IA) of the I.T. Act, interest for delay should be calculated from the date on which such tax was deducted to the date on which the tax is actually paid." ii) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to levy interest for two months instead of three months for delay in deposit of tax deducted at source, without appreciating the legal provisions of clause (ii) of Section 201(IA), which clearly states that any person, principal officer or company, as referred to in that sub-section, who after deducting tax fails to pay the whole or any part of the tax as required by or under the Act, is liable to pay simple interest at one and on- half percent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid." iii) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that while processing TDS statement flied by the assessee uls 154, the system has rightly charged interest as per the provisions of section 201(IA) of the I.T. Act."

4 & 3842/Mum/2015 Deutsche Bank AG 2. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary at the time of the hearing of the case or thereafter.

3. The order of the CIT(A) being erroneous be set aside and Ld. A.O's order be restored.

5 & 3842/Mum/2015 Deutsche Bank AG from the payment made to non resident entity. The issue of taxability of the said amount is not in appeal before me and therefore the adjudication of the said issue is not warranted. The amount of tax deducted becomes the property of the Government. The appellant is neither entitled for refund of tax deducted nor is, eligible for adjustment of the same against other short ion deductiOflifl: view of Honble ITAT decision in case of ITO (TDS) \ India Vision Satellite Communication Limited 7 taxmann,com 65 whereinitis held that once tax :is-deducted at source, amount becomes money due to Central Government and either deductor or deduc tee cannot appropriate amount so deducted on any ground. However, the AO is directed to recompute the interest of 2 months instead of 3 months. The argument of the appellant that no tax was deductible stands dismissed.

by the Revenue stands dismissed.

7. In the net result the appeal filed by the revenue stands dismissed.

1. The Commissioner of Income-tax (Appeals)-59 (hereinafter referred as "CIT(A)") erred in upholding the action of the Deputy Commissioner of Income Tax, Centralized Processing Cell —TDS (hereinafter referred as "AO") in levying interest of Rs.4,486,473 under section 201(IA) of the Income tax Act, 1961 (the Act) on account of alleged late payment of tax deducted at source on provision made for various charges payable to head office and overseas branches.

2. The CIT(A) erred in not appreciating that no tax was deductible at source on provision made for various charges payable to head office and overseas branches since this represents payment to self and therefore not taxable in India, consequentially no interest was leviable under section 201(IA) of the Act.

The appellants crave leave to add to, alter, amend, vary, omit or substitute the aforesaid grounds of

10 & 3842/Mum/2015 Deutsche Bank AG made by the assessee could not be verified, that the purpose of introduction of section 44C of the Act was to cover these types of expenses,that acceptance of the claim made by the assessee would defeat the very purpose of the section 44C of the Act. Relying upon the order of the American Express Bank Ltd. (ITA/7072/ Bom/1990),he held that assessee was not entitled to claim the said expenditure. Finally,he made an addition of Rs.12.17Crores(IT related expenditure - Rs.10.93 Crores, System Application and Products (SAP) implementation charges- Rs.3.36 Crores, SAP operating charges- Rs.17.55 lacs,Global e-mail charges payable to APHO,H.O. and certain overseas branches- Rs.52.43 lacs) to the income of the assessee. 3.1.Assessee filed an appeal before the First Appellate Authority (FAA).After considering the submissions of the assessee and the assessment order as well as the letters of the assessee dated 19.12.03,he held that expenditure amounting to Rs. 10.93 Crores pertain to IT application, that expenditure of Rs. 52.43 lacs was incurred for centralized e- mail communication system, that expenditure to 11 & 3842/Mum/2015 Deutsche Bank AG the tune of Rs. 3.54 crore was assessee share on acquisition of SAP and its utilisa -tion,that appellant was allowed to use the computer system of the H.O. at various places for various computer applications because of the said expenditure.FAA was of the view that payme -nt made by the assessee bank had to be treated as royalty and that provisions of section 40 (a)(i) of the Act was applicable in the case under consideration.He further held that section 195 of the Act required deduction of tax at source not only at payment as such but also at incurrence of liability.Finally,he held that provisions of section 40(a)(i) were attracted in the case under consid -eration,that assessee had not deducted any tax at source,that the appellant’s contention for allow -ability of the said expenses was not as per law.He further directed that AO shall not consider these expenses even for the purpose of allowance of H.O. expenses u/s 44C of the Act. 3.2.Before us, Authorised Representative(AR) submitted that Indian Branch was not a separate entity or a separate enterprises, that SAP was acquired long ago.He relied upon the case of Sumi -tomo Mitsui Banking Corporation. he also referred

12 & 3842/Mum/2015 Deutsche Bank AG to judgment delivered by the Hon’ble High Court of Delhi in the case of (332ITR342).Departmental Representative (DR) submitted that assessee had claimed the exemption u/s 37 of the Act, that the payment to Headquarter was not to be considered a payment towards carrying out business of the assessee .He referred to the case of First Advantage Pvt.Ltd. (ITA/3029/3030/ Mum - 18.05.12).In the rejoinder,AR submitted that facts of the case of First Advantage Pvt. Ltd. (supra) were a totally different,that in said case there was question of reimbursement of expenditure, that in the matter under consideration payment had been made, that out of the 50 crore expenditure claimed in the P & L Account, AO had allowed Rs. 38 Crores (approximately) while finalising the assessment. 3.3.We have heard the rival submissions and perused the material on record.We find that while disallowing the claim made by the assessee,AO had held that assessee-bank has not debited the expenses to P & L Account, that the expenses were claimed to have been incurred by the H.O. We further find that 13 & 3842/Mum/2015 Deutsche Bank AG expenditure was part of P & L Account.FAA has recorded a categorical finding that assessee had debited these expenses to its book of accounts.FAA,while upholding the additions, held that provisions of section 40(a)(i) of the Act were applicable in the case under consideration,that assessee had not deducted tax at source for the said payments.We find that assessee vide it letter dated 14.02.2002 had submitted before the AO the details of other expendi -ture amounting to Rs.50.68Crores including the expenditure incurred for IT related expenditure, SAP Implementation Charges,SAP Operating Charges, GEC and Global E-mail Charges.From the said letter, it is clear that H.O. had rendered services to the assessee and divided the same amount various among various branches,including the assessee.Perusal of page No. 28 to 31 of the paper book reveal that these expenses were part of the expenditure incurred by the assessee for carrying out business in an organised and systematic manner.In these circumstances, the only issue was to be decided is whether non- deduction of TDS with regard to said payments would result in disallowance of the said

14 & 3842/Mum/2015 Deutsche Bank AG expenditure or not ? We find that in the matter of First Advantage Pvt. Ltd.(supra),relied upon by the DR, facts of were different.In that matter question of reimbursement of certain expenditure between two independent entities was discussed and decided,whereas in the case under consideration there is no question of reimbursement.We find that in the case of Sumitomo Mitsui Banking Corporation the special bench of Mumbai Tribunal(19 taxmann.com364),had discussed the issue at length. In that case,AO had disallowed the claim of the assessee for non-deduction tax on account of interest payable to the H.O. by invoking the provisions of section 40(a)(i) r.w.s.195 of the Act. Finally,it was held that the interest paid by the Indian Branch of assessee bank to its H.O. and other branches outside of India was not chargeable to tax in India,that the provisions of section 195 would not be attracted, that there was no failure to deduct tax at source from the said payment of interest made by the assessee,that the question of disallowance of said interest by invoking the provisions of section 40(a)(i) did not arise. We, respectfully following the order of the Special