BNP PARIBAS,MUMBAI vs. ACIT (IT), CIRCLE 1(3)(1), MUMBAI

3 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas. the purpose of sub-section (2) of section 143 of the Act, in respect of returns furnished under section 139 or in response to a notice issued under subsection (1) of section 142 of the said Act, for the purpose of issuance of notice under sub section (2) of section 143 of the said Act.” 9. It is clear from the aforesaid notification and provision of the Act that the prescribed authority i.e NaFAC is only authorised to issue a notice under the said section in accordance with provision of the Act. 10. We have also perused the decision of Hon’ble Karnataka High Court in the Writ Petition No. 1109/2023 Adarsh Developers wherein the following question of law was considered by the Hon’ble High Court which is reproduced as under: “[a] Whether the Additional Commissioner of Income Tax NaFAC-1(1)(2) could have assumed jurisdiction in respect of the petitioner's case which belongs to Central Charge for issuance of notice under Section 143(2) of the Income Tax Act, 1961; and if the aforesaid officer could not have so assumed jurisdiction, whether the proceedings must fail for want of due notice 3 326 ITR 492 [GUJ] under Section 143(2) of the Income Tax Act, 1961.” The Hon’ble High Court has rejected the petition of the assessee holding as under: “39. This Court must opine that there is a transition from a Scheme notified under the provisions of the IT Act to a Scheme under the IT Act incorporation all the essential without material changes insofar as assessments generally and assessments in the cases of Central Charges and International Taxation Charges and there is nothing in this transition, including the provisions of Section 144B or the CBDT's Order, to infer exclusion of the operation of CBDT's order dated 13.08.2020. This Court must therefore conclude that the operation of the CBDT's order dated 13.08.2020 is saved by the application of the Section 24 of the General Clauses Act, 1897.” 11. We consider that the cases referred by the ld. Counsel are entirely distinguishable from the fact of the cases of the assessee on the issue of issuing of notice u/s 143(2) by the prescribed authority i.e NaFAC with the introduction of faceless scheme by the CBDT. In the light of the above facts and finding we consider that notice issued u/s 143(2) of the Act in the case of the assessee by the prescribed authority i.e NaFAC is in accordance with the provision of the Act , therefore, we don’t find any merit in this ground of appeal of the assessee and the same stand dismissed.” 4. On finding parity of facts, respectfully following the decision of the co- ordinate Bench (supra), this ground is dismissed.

4 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas. and it is coming from A.Y. 2001-2002 to A.Y. 2020-2021 and in all these years this issue has been decided against the assessee and in favour of the Revenue. In ITA Nos.3416/Mum/2023 for A.Y. 2020-2021, this Tribunal has considered this issue as under:- “12. During the course of appellate proceedings before us the ld. Counsel submitted that this issue has been decided against the assessee by the decision of coordinate benches of the Tribunal in the proceeding assessment years. The ld. D.R relied on the order passed by the coordinate benches of the ITAT in the earlier assessment years. 13. Heard both the sides and perused the material on record. With the assistance of ld. representative we have perused the decision of ITAT vide ITA no.1076/Mum/2021 for A.Y.2017-2018 as under: “7. We have considered the rival submissions and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee’s own case in BNP Paribas vs DCIT, in ITA no.7458/Mum/2018, vide order dated 04/01/2021, for the assessment year 2014-15, decided a similar issue against the assessee by following the judicial precedents in assessee’s own case. The relevant findings of the coordinate bench of the Tribunal, in the aforesaid decision, are as under: “10. We have perused the various orders of the coordinate benches of the Tribunal in context of the aforesaid issue under consideration and are persuaded to subscribe to the claim of the Id. A.R that the aforesaid issue had consistently been decided by the coordinate benches against the assessee. On a perusal of a recent order of the Tribunal passed in the assessee's own case for A.Y, 2013-14 in ITA No. 552/Mum/2018, dated 22.04.2019, we find, that the Tribunal by relying on its earlier order for AY. 1996-97 in ITA No. 2760/Mum/2008, dated 28.08.2013 had therein concluded that the tax levied at a higher rate in the case of a foreign company is not to be regarded as a violation of the nondiscrimination clause. For the sake of clarity the view taken by the Tribunal in context of the aforesaid issue is reproduced as under: "We find that while deciding the appeal for AY 1996-97 (ITA No. 2760/Mum/ 2008 dated 28.08.2013), the Tribunal has decided the issue as under: 4.The third issue is relating to tax rate. The assessee has submitted that the tax levied at higher rate in the case of foreign companies is discriminatory in nature and, accordingly, relief has been sought on this account. The claim has been rejected by the authorities below. 4.1 We have heard both the parties in the matter. We find that this issue has already been examined by the Tribunal in the case of M/s BNP Paribas, decided in ITA Nos, 4601 & 4602/M/ 2004,vide order dated 1-7-2013. In that case also the tax rate applied in the case of the assessee, a foreign company was 48% compared to 38% 4

5 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas. applied in case of domestic companies. The assessee had argued that it was discriminatory and not in accordance with law Reference was made to non- discrimination clause in the Treaty, as per which there should not be any discrimination between the domestic and the non-resident company. The Tribunal, however, referred to the Explanation in the Section 90, inserted in the IT Act with retrospective effect from 01-04- 1962 as per which the higher tax rate in case of foreign company, should not be regarded as violation of nondiscrimination clause. The Tribunal also referred to the judgment of the Hon'ble Supreme Court in the case of ACIT Vs. J.K. Synthetics The Tribunal accordingly, rejected the ground raised by the assessee. The facts in the present appeal are identical and, therefore, respectfully following the decision of the Tribunal in the case of M/s BNP Paribas(supra), we dismiss this ground raised by the assessee.” Following the same, we uphold the order of the Ld. CIT(A) and dismiss the 1 ground of appeal. As the facts and the issue in the present appeal of the assessee remains the same, therefore, we respectfully follow the aforesaid order of the Tribunal. Accordingly, the Ground of appeal No. 1 is dismissed.” 8. Thus, from the above, it is evident that this issue is recurring in nature and has been decided against the assessee by the coordinate bench of the Tribunal in preceding assessment years. Therefore, respectfully following the decision of the coordinate bench of the Tribunal cited supra, ground no.1 raised in assessee’s appeal is dismissed.” 14. It is evident that the issue is recurring in nature and it is squarely covered by the decision of the ITAT in the proceeding assessment year as discussed supra in this order, therefore, following the decision of the coordinate bench of the Tribunal as referred above this ground of appeal no. 2 of the assessee is dismissed.” 6. Respectfully following the decision of the co-ordinate Bench (supra), this ground is dismissed.

“15. During the course of appellate proceedings before us the ld. Counsel submitted that identical issue on similar fact has been adjudicated by the coordinate bench of the ITAT in favour of the assessee. On the other hand, the ld. D.R supported the order of lower authorities. 5

6 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas.

7 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas. Singapore branch (service agent) to the tune of Rs 40.78 10,733/ under Article 13 of the India-France Tax Treaty. We find that the Tribunal while disposing off the appeal of the assessee for A.Y. 2013- 14 in ITA No. 552/Mum/2018, dated 22.04.2019 had adjudicated the said issue by relying on its earlier order passed in the assessee's own case for AY. 2009-10 in ITA No. 3541/Mum/2014, dated 31.03.2016, observing as under:– "In the above ground of appeal, the issue is about data processing fees paid by Indian Branch Office of the assessee to Singapore Branch to the tune of Rs 325,963,282/- under Article 13 of the India-France treaty. We find that while deciding the appeal for AY 2009-10 (ITA No. 3541/Mum/2014 dated 31.03 2016), the Tribunal has decided the issue as under. 5. Ground No.3 pertains to subjecting the data processing charges paid to the Singapore branch of the assessee amounting to Rs. 132,335,594/- applying the provisions of Article 13(Royalties, fees for technical services and payments for use of equipment) of the India-France Tax Treaty. This issue is also covered by the order of the Tribunal in assessee's own case for AY 2001-02 to 2003- 04 wherein interest paid by assessee to Head Office/overseas branches was held to be not liable to tax, following was the precise observation of the Tribunal in its order dated 20-6- 2012 for AY 2002-03:- “3. The solitary issue involved in the appeal of the assessee for, the AY 2002-03 relates to the addition of Rs 1,48,30,613/- made by the A.O. and confirmed by the Ld CIT (A) on account of "interest" paid by the Indian Branches of the assessee bank to its head office and other overseas branches. 4. The assessee, in the present case is a commercial bank having its Head Office in France. It cames on the normal banking activities Including financing of foreign trade and foreign exchange transactions in India through its eight branches situated at Mumbai, New Delhi, Kolkata, Bangalore. Pune Ahmedabad, Chennai and Hyderabad During the previous year relevant to AY 2002-03, the Indian Branches of the assessee bank have paid total interest of Rs 1.48,30,613/- to its Head office and overseas branches and the same was claimed as a deduction while determining the profits attributable to Indian Branches, which was chargeable to tax in India. The said interest was treated by the AO as income of the assessee's Head office/overseas branches chargeable to tax in India. This decision of the A.O. was challenged by the assessee in the appeal filed before the Ld CIT(A) and the contention raised before the Ld. CIT (A) in this regard was that the Head office of the assessee bank as well as all its branches being the same person and one taxable entity as per the Indian Income tax Act, interest paid by Indian Braches head office and other overseas Branches was payment to se which did not give rise to any income as per the income-tax Act. In support of this contention, reliance was placed on behalf of the assessee on the decision of Hon'ble Supreme Court in the case of Sir Kikabhai Premchand CIT (Central) 24 (TR 506 as well as the decision of Kolkata Special Bench of the ITAT in the case of ABN Amro Bank NV vs. Asst. Director of Income-tax 98 TTJ 295. The contention of the assessee, however, was not accepted by the Ld CIT (A) and relying on the decision of Mumbai Bench of the ITAT in the case of Dresdner Bank AG vs Add1. CIT 108 ITD 375, he held that the 7

8 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas. interest paid by the Indian branches of the assessee bank to its head office and overseas branches was chargeable to tax in India. Accordingly, the addition made by the A.O. on this issue was confirmed by the Ld. CIT(A). 5. We have heard the arguments of both the sides and perused the relevant material on record. As agreed by the Ld. Representatives of both the sides. the issue involved in this appeal of the assessee now stands squarely covered by the decision of Special Bench of the ITAT in the case of Sumitomo Banking Corp Mumbai wherein it was held, after elaborately discussing the legal position emanating from the interpretation of relevant provisions of Indian Income tax Act as well as treaty, that interest paid to the head office of the assessee bank as well as its overseas branches by the Indian branch cannot be taxed in India being payment to self which does not give rise to income that is taxable in India as per the domestic law or even as per the relevant 'tax treaty' Respectfully following the said decision of Special Bench of the ITAT which is directly applicable in the present case, we delete the addition of Rs. 1.48.30.613/- made by the AO. and confirmed by the Ld. CIT (A) on this issue and allow the appeal of the assessee.” 5.1 The issue has also been dealt by the Special Bench of the Tribunal in the case of Sumitomo Mitsui Banking Corporation (supra), wherein the observation of the Bench at para 88 is as under:- “88. Keeping in view all the facts of the case and the legal position emanating from the interpretation of the relevant provisions of domestic law as well as that of the treaty as discussed above, we are of the view that although interest paid to the head office of the assessee bank by its Indian branch which constitutes its PE in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to, the PE which is taxable in India as per the provisions of art. 7(2) and 7(3) of the Indo-Japanese Treaty read with, para 8 of the Protocol which are more beneficial to the assessee. The said interest. however, cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law. Even otherwise, there is no express provision contained in the relevant tax treaty which is contrary to the domestic law in India on this issue, This position applicable in the case of interest paid by Indian branch of a foreign bank to its head office equally holds good for the payment of interest made by the Indian branch of a foreign bank to its branch offices abroad as the same stands on the same footing as the payment of interest made to the head office. At the time of hearing before us, the learned representatives of both the sides have also not made any separate submissions on this aspect of the matter specifically. Having held that the interest paid by the Indian branch of the assessee bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of s. 195 would not be attracted and there being no failure to deduct tax at source from the said payment of interest made by the PE. the question of disallowance of the said interest by invoking the provisions of s 40 (a)(i) does not arise. Accordingly we answer question No. 1 referred to this Special Bench in the negative ie in favour of the assessee and question No. 2 in affirmative Le again in favour of the assessee.”

9 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas. As the facts and circumstances of the case during the year under consideration are perimateria, where payment made by assessee to Singapore Branch for data processing was brought to tax. Respectfully following the order of the Tribunal in assessee's own case as well as the order of the Special Bench of the Tribunal in the case of Sumitomo Mitsu Banking Corporation (supra), we hold that the department was not justified in taxing the data processing charges to the Singapore Branch of the assessee by applying the provisions of Article 13 of the India-France Tax Treaty." 13. In effect thus, reversing the stand of the DRP, the coordinate bench has come to the conclusion that the payment on account of data processing charges paid to BNP Singapore cannot be taxed in the hands of the assessee. The conclusion arrived at by the coordinate bench, whatever may have been the path traversed by the coordinate bench to reach this point, are the same as arrived at by us. Of course, our reasons are different, as set out earlier in this order, but that does not really matter as of now. We fully agree with the conclusions arrived at by the coordinate bench. We, therefore, direct the Assessing Officer to delete the impugned disallowance of Rs 13.10,97,790 The assessee gets the relief accordingly. 14. Ground no 2 is thus allowed." 6. We see no reasons to take any other view of the matter than the view so taken in assessee's own case in assessment year 2008-09. Respectfully following the same, we direct the Assessing Officer to delete the impugned disallowance of Rs.18,53,83,446/- The assessee gets the relief accordingly." Also, the above order has been followed by ITAT 'L' Bench, Mumbai in assessee's own case in A.Y.2010-11 (ITA No. 1182/Mum/2015). Further, the Bombay High Court has not admitted the Department's appeal on this ground for AYS 2006- 07 and 2007-08. Facts being identical, we follow the above orders of the Coordinate Bench and allow the 2 ground of appeal." As the facts in context of the aforesaid issue under consideration remains the same as was there before the Tribunal in the assessee's own case for A.Y. 2013-14, therefore, we respectfully follow the view therein taken. Accordingly. we herein direct the AO to delete the impugned addition of Rs 40,78,10.733/- The Ground of appeal No. 2 is allowed.” 13. We further find that the Hon’ble jurisdictional High Court dismissed the appeal filed by the Revenue against the order passed by the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2009-10 on a similar issue. The relevant findings of the Hon’ble jurisdictional High Court in CIT vs BNP Paribas SA, in ITAs No.825 and 826 of 2017, vide order dated 27/08/2019, in this regard, are as under:– “4. The Tribunal placed reliance upon the orders of its Coordinate Bench for the Assessment Year 2006-07 in respect of the same Assessee raising the same issue 9

10 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas. while allowing the appeal of the Assessee. We are informed that from the order of the Co-ordinate bench of the Tribunal for Assessment Year 2006-07, Revenue filed an appeal to this Court being Tax Appeal No.1192 of 2015 raising this very issue. This Court's order did not entertain this question as proposed therein on the grounds that the same in the facts of the case was academic in nature. This for the reason what was being paid by the Indian entity to its Singapore branch was only in the nature of reimbursement of expenses. This finding of fact was not challenged in the Revenue's appeal for Assessment Year 2006-07 or in these appeals for Assessment Year 2008-09 and 2009-10. The Revenue has not been able to show any difference in facts and/or in law in the subject Assessment Years to that in Assessment Year 2006- 07. Therefore, the above decision of this Court for Assessment Year 2006-07 will apply in these two Appeals. 5. Therefore in view of the reasons stated in our order dated 20 March 2018 passed in Income Tax Appeal No.1192 of 2015 relating to Assessment Year 2006-07, the identical question as proposed in the two appeals do not give rise to any substantial question of law. Thus not entertained.” 14. We find that this issue is recurring in nature and has been decided in favour of the assessee in the preceding assessment years. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was precedents in assessee’s own case cited supra, ground no.2 raised in assessee’s appeal is allowed.” 17. We consider that this issue is recurring in nature and same has been decided in favour of the assessee in the earlier assessment years as cited supra in this order, therefore, following the decision of ITAT as discussed supra the ground no. 3 of appeal of the assessee is allowed.” 8. Respectfully following the decision of the co-ordinate Bench (supra), this ground is allowed.

11 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas. establishment interest on such money paid to the head office can be reduced from the income attributable to the permanent establishment. The provision of Article 12 and 7 of the India-France DTAA demonstrate that interest payment made by the permanent establishment to the head office are not taxable in the hands of the head office as provided in Article 12(5) of the treaty and it also provide that in such cases income of the permanent establishment only to be taxed as per provision of Article 7 of DTAA. As per the provision of Sec.90(2) of the Act the assessee can opt for the taxability of its income as per the Double Taxation Avoidance Agreement between India and France (DTAA) or the Act which is more beneficial, accordingly even though the interest paid by the branches (PE) to the head office are taxable as per the provision of Sec. 9(1)(5)(c) of the Act, however, because of beneficial provision of DTAA i.e Article 12(5) as discussed supra will lead to the conclusion that such interest received by the overseas head office is not taxable under the provision of DTAA. It is clear from the provision of DTAA that interest income of the non- resident (head office) shall be taxable under Article 12 of the DTAA only when such head office shall not having any PE in India wherein branch (PE) is established in India then the provision of Article 7 only shall apply and Article 7 deal with taxability of only profit attributable to the PE branches of such overseas head office. Further, the debt regarding claim mean the some money due from one person to another. Since, in the case of the assessee branch has borrowed from the overseas head office, therefore, debt claim of the head office is connected to the PE branch in India, therefore, in the present case interest received by head office from its branches in India is not taxable in the hands of the head office in view of the provision of DTAA as discussed above.” 11. Respectfully following the decision of the co-ordinate Bench (supra), this ground is decided in favour of the assessee. Since ground No.5 has been decided in favour of the assessee, Ground No.6 becomes infructuous.

Order pronounced on this 21st day of June, 2024.

Sd/- Sd/- (Anikesh Banerjee) (Narendra Kumar Billaiya) Judicial Member Accountant Member Mumbai; Dated: 21st June, 2024 Devadas G*

12 ITA No.4449/Mum/2023 (AY 2021-22) M/s.BNP Paribas.

Copy to: 1. The Appellant. 2. The Respondent. 3. The CIT(Appeals). 4. The CIT concerned. Asst.Registrar 5. The Sr. DR, ITAT, Mumbai. ITAT, Mumbai 6. Guard File.