NAT WEST MARKETS PLC- INDIA BRANCH ,KOLKATA vs. ACIT(I.T)-1(2), KOLKATA. , KOLKATA
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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the ld. Dispute Resolution Panel (hereinafter referred to as the “Ld. DRP”] dated 26.09.2023 for the AY 2021-22.
The only issue raised in ground no.1 is against the order of ld. AO passed in pursuance to the direction of the ld. Dispute Resolution Panel adding the interest on income tax refund amounting to ₹62,12,73,000/- to the income of the assessee by ignoring the fact that the same is related to the erstwhile Indian Branches of The Royal Bank of Scotland NV, (RBS NV) acquired by the assessee under the
The facts in brief are that The Royal Bank of Scotland NV, (RBS NV) was amalgamated with NWM Plc ( the assessee) u/s 44A of the Banking Regulation Act, 1949 through the Reserve Bank of India (RBI) approved scheme of amalgamation. The effective date of amalgamation was 27.02.2017. As per the submission of the assessee in the computation of income it has deducted the interest on tax refund belonging to RBS NV amounting to ₹62,12,73,000/-from the gross total income. The said income has been assessed in the hands of the RBS NV as is apparent from the copy of acknowledgement of ITR return filed by the said entity, wherein it has shown income of ₹62,12,72,670/- and paid tax thereon at the rate of 10%. The said interest was taxed in accordance with the ld. Dispute Resolution Panel direction as contained in para 8.4 of the order which is extracted below:-
“(i) It is observed that post amalgamation, income tax refund has been accounted for by the assessee company in its books of accounts. In this background the onus was on the assessee company to prove its case, which it has failed to discharge. The issue of double taxation is a real issue which requires to be addressed by claiming credit in hands of the right concern, which in this case will be the parent Company rather than the branch which merged with another concern to become a new entity taking over all the assets and liabilities of the former entity because of the amalgamation process. This being the case, there is no infirmity found with the conclusion in the draft order as was also the finding of DRP for AY 2020-21. The Assessing Officer is directed to pass a well-reasoned speaking order in this regard.” 04. After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered by the decision of the co-ordinate Bench in assessee’s own case in ITA No. 273/KOL/2023 for A.Y. 2020-21, vide order dated 27.11.2024, wherein similar issue has been decided in favour of the assessee. So far as the facts of the present case before us are concerned, we note
“8. The ld. AO thereafter passed the final assessment order u/s 143(3) read with section 144C(13) of the Act dated 27.01.2023, wherein the ld. AO reiterated the finding given by him in the draft assessment order, save and except that he held that interest of ₹6,18,50,000/- could not be added to the assessee’s income u/s 68 of the Act but it should be added u/s 56 of the Act as income from other sources and thereafter, applied rate of 40% plus the educational cess and surcharge to bring the said amount under tax. Aggrieved assessee preferred the appeal before the Tribunal against he said final order. 9. The ld. AR vehemently submitted that having regard to the factual scenario as narrated hereinabove it is clear that no part of the interest granted under section 244A of the Act accrued to the assessee as the refund and interest was determined in the case of Netherlands Entity and not to the assessee. The ld. AR submitted that the assessee had taken over all assets and liabilities of the Indian branches that were in existence on 27.02.2017 and any amount which accrued thereafter to the Netherlands entity solely belonged to the Netherlands entity. The ld. AR submitted that the only reason why it was credited to the bank account and reflected in the books of account of the assessee was that because of Indian bank accounts of Netherlands entity that existed on 27.02.2017 vested in the assessee consequent to amalgamation and accordingly, as the said amount got credited to the profit and loss account. The ld. AR submitted that the said fact was neutralized by the assessee by reducing the same from the income of the assessee while filing the income tax return and copy of which is available in the paper book as stated hereinabove.The ld. AR placed reliance on the judgement of the Hon'ble Apex Court in Sutlej Cotton Mills Ltd. Vs. CIT 116 ITR 1 (SC) and Tuticorin Alkali Chemicals and Fertilizers Limited Vs. CIT 93 Taxmann502 (SC).
The facts in brief are that the provisions created on account of long service award and bonus in the earlier years were disallowed and added back at the time of filing of the return under provisions of Section 43B of the Act as these were not paid on or before the due date of filing of return of income. The said fact was corroborated by the tax audit report for the A.Y. 2020-21, a copy of which is available at page nos. 220 to 235 and in particular page no.228 of Para no.26(i)(A)(b), which relates to any sum referred to any clause (a) to (g) of section 43B and it is mentioned in serial no.9 that provisions for long service award were amounting to ₹10,83,680/-. Therefore, these provisions were already disallowed, whereas as per report, Willis towers Wason, in respect of long service award scheme under AS 15 (revised in 2005), which is an actuary valuation for the year ending 31st March, 2021, it was stated at page no.194 that under table 4 titled as “ Change in Obligation and Assets over the period ended 31 March, 2021”, in item no.9 that benefit payments were ₹32,41,57,000/- during the year. Thereafter in page no. 179 of the Paper Book, the assessee also replied to the ld. AO vide letter dated 26.12.2022, submitting in Para 1 that during the year under consideration, the assessee has claimed deduction of the aforesaid amount of ₹10,84,000/- on account of payment of long service awards and of ₹2,58,03,000/- in respect of payment of deferred award bonus u/s 43B of the Act on the payment basis. It was also stated that the
On 28th December, 2022, the assessee submitted before the ld. AO substantiating the payments based on the actuarial valuation report issued by third party evidencing the payment of ₹32,41,570/-. In the assessment order the ld. AO noted that the assessee has not submitted the details of payment of ₹32,41,570/- comprising payment of ₹10,84,000/- in respect of long service award and therefore, same was not allowed. Similarly, in Para no.5.9, the assessee has not submitted the bifurcation of payment of ₹2,91,51,550/-under the head benefits payment which according to the assessee included 2,58,03,000/- on account of bonus payment. After taking into account the aforesaid facts the tax audit report and actuarial valuation report issued by the third party as referred above, we note that these provisions were credited in the earlier assessment years and claimed during the current assessment year as deduction on payment. The assessee has also closed down its operation and accordingly, these grounds of the assessee are academic in nature and has no effect in the subsequent assessment years as the assessee’s business stood closed down and the loss resulting during the current year could not be claimed against the subsequent income. However, these are argued for the reason that the ld. AO initiated the penalty proceeding and whatever the document/ records were available have been furnished before the ld. Assessing Officer. Considering the nature and the facts filed by the assessee such as the tax audit report, actuarial valuation report, replies to the ld. AO, we are of the view that the assessee has substantially established its bonafide that these
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 31.01.2025.
Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 31.01.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata
