ABN AMRO BANK N.V.,KOLKATA vs. DDIT, INTERNATIONAL TAXATION - 1(1), KOLKATA, KOLKATA

SHRI M.BALAGANESH, AM

These appeals of the assessee arise out of separate orders of Learned CIT(A)- XII, Kolkata/ld. DRP in Appeal No.630/XII/08-09 dated 28.07.2009 for Asst Year 2005-06 ; Appeal No. Nil dated 27-08-2010 for Asst Year 2006-07 ; Appeal No. Nil dated 10-03-2011 for Asst Year 2007-08 and Appeal No. Nil dated 14-09-2012 for Asst Year 2008-09 against the orders of assessment framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

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The facts in assessment year 2005-06 are stated herein and they remain the same for other assessment years also except change in figures and tax rates.

The assesee bank is incorporated in Netherlands and is engaged in banking operations across the globe through various branches worldwide, including India. In India, the assessee (branches / permanent establishment) is registered as a Scheduled Bank in terms of Schedule II of the Reserve Bank of India Act, 1034. Article 7 of the Double Taxation Avoidance Agreement (DTAA) provides for taxation in India of a foreign enterprise in respect of profits attributable to its Permanent Establishment (PE) in India. Since the assessee (The Royal Bank of Scotland ) is having a PE in India, the assessee is liable to tax in respect of income attributed to the PE. The assessee charged tax at 36.5925% on its profits on the ground that in view of Article 24 of DTAA with Netherlands, the tax rate applicable to it is the rate applicable to domestic companies i.e at 36.5925%. However, the Learned AO held that assessee being non- resident foreign company, the applicable tax rate as per the relevant Finance Act would be 40% plus surcharge. This action was upheld by the Learned CIT(A) in first appeal.

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3.1. Before us, the Learned AR fairly agreed that this issue is covered against the assessee by the order of this tribunal in assessee’s own case for Asst Year 2004-05 in ITA No. 1762/Kol/2008 dated 30.6.2010. Respectfully following the same, this ground for various asst years (supra) is dismissed.

GROUND NO. 2 IN ASST YEAR 2005-06 GROUND NO. 2 IN ASST YEAR 2006-07

The facts in Asst Year 2005-06 are stated herein and they remain the same for Asst Year 2006-07 also except change in figures.

During the asst year under consideration, the Head office of the assessee paid a sum of Rs. 32,21,980/- as offshore remuneration to the expatriate employees rendering services in Indian branches of the assessee. The Learned AO has referred to the decision of this tribunal in the assessee’s owncase for the A.Y. 1992-93 to 1995-96 wherein it has been principally held that such payment of remuneration to expatriate employees is an allowable deduction subject to the condition that such claim of remuneration has not been taken into account while working out the deduction u/s 44C of the Act by the branch office. The Learned AO held that the assessee has not been able to provide evidences to substantiate that the claim of remuneration has not been taken into account while working out the deduction u/s 44C of the Act. Before the Learned CITA, the assessee replied that the offshore remuneration pertains to the expatriate working wholetime in India and the same has been included in taxable salary of the expatriate in India and even in respect of such component of salary paid to him in the Netherlands. The expense incurred on expatriate’s remuneration is specifically for the Indian branch and thus are specific expenses incurred for the Indian

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operations. Article 7(2) and 7(3) of India Netherlands DTAA specify the manner in which the profits of the PE are to be computed and thereby provide that expenses which are incurred for the purpose of PE are to be computed and thereby provide that expenses which are incurred for the purpose of PE whether in India or elsewhere are to be allowed as a deduction in determining profits of the PE. It was further stated that this issue has been decided in favour of the assessee by this tribunal from Asst Years 1992-93 to 1996-97. The Learned CITA however found that this issue has been held against assessee for the Asst Years 1999-2000 to 2002-03 & 2004-05 and accordingly upheld the action of the Learned AO. Aggrieved, the assessee is in appeal before us.

4.1. Before us, the Learned AR stated that this issue is covered by the order of this tribunal in assessee’s own case for Asst Year 2004-05 in ITA No. 1762/Kol/2008 dated 30.6.2010. We have gone through the said tribunal order, wherein it was held as under:-

We find that the same direction is required to be given for the asst years under appeal before us. Respectfully following the aforesaid tribunal order, this ground for various asst years (supra) is allowed for statistical purposes.

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The facts in Asst Year 2005-06 are stated herein and they remain the same for other years also except change in figures and tax rates.

The Learned AO observed that the assessee has debited its profit and loss account with a sum of Rs. 86,43,870/- representing interest paid to Head office and other branches outside India and claimed the same as deduction. According to Learned AO, the assessee being a distinct and separate entity, the remittance of interest to overseas branches and Head office by the assessee is a payment of interest by one person to another and thus by not deduction tax at source on such payments, the assessee violated the provisions of section 40(a)(i) of the Act. The Learned AO also relied on the CBDT Circular No. 740 dated 17.4.96 that the branch of a foreign company in Idnia is a separate entity for the purposes of taxation. The Learned AO also observed that this issue has been held against the assessee by the Special Bench of Kolkata Tribunal for Asst Years 1997-98 & 1998-99 in assessee’s own case and accordingly disallowed the claim of deduction made thereon. This action of the Learned AO was upheld by the Learned CIT(A). Aggrieved, the assessee is in appeal before us.

5.1. Before us, the Learned AR stated that this issue is covered by the order of the Hon’ble Jurisdictional High Court in assessee’s own case reported in (2012) 343 ITR 81 (Cal) dated 23.12.2010. It was stated that the Special Leave Petition filed by the revenue against this order has been dismissed vide order dated 3.8.2012. The Learned AR further stated that no disallowance was made by the Learned AO from

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Asst Year 2009-10 onwards. In respect of disallowance made in Asst Year 2008-09, the same was deleted by the Hon’ble Dispute Resolution Panel (DRP). In response to this, the Learned DR fairly conceded that the issue is covered by the decision of the Hon’ble Calcutta High Court in assessee’s own case reported supra.

5.2. We have heard the rival submissions. We find that the issue is squarely covered by the decision of the Hon’ble Calcuta High Court (supra) wherein the facts and questions raised before the Hon’ble Calcutta High Court and the decision rendered thereon are as below:- Under article 5(2) of the Double Taxation Avoidance Agreement between India and the Netherlands, defining permanent establishment, a branch is to be taken as a permanent establishment and if it is further read with article 7, this permanent establishment or branch is to be treated as a separate unit. Article 7(2) specifically states that it is to be considered as a distinct and separate enterprise and its profits are to be so computed as profit properly attributable to such a permanent establishment. In the calculation of such profit by a banking enterprise interest paid can be taken as a deduction by virtue of article 7(3) read with article 11 (7).

The assessee was a Netherlands company· and its principal branch office was in India. In the course of its banking activities, the branch office in India remitted substantial funds to its head ·office as interest. On appeal, two questions were raised (i) whether interest payment made by the branch office in India to its head office abroad was to be allowed as a deduction in computing the profits of the assessee's branch in India, and (ii) whether in making such payments to the head office, the branch office in India was required to deduct tax at source under section 195 of the lncome-tax Act; 1961.

Held, allowing the appeal, that there is no conflict between the Agreement between India and the Netherlands and the Act : The assessee's branch office in India and the head office in the Netherlands had to be taken as separate entities for all purposes. But in the making of payment of interest, no tax had to be deducted under section 195(1) for the reason that the head office was not chargeable to tax on such interest payments by virtue of the Agreement between India and the Netherlands. Hence, there was no obligation on the branch office in India to deduct tax while making interest

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remittance to its head office or any other foreign branch. If no tax had deducted under section 195(1) section 40(a)(i) had no application.”

Respectfully following the aforesaid decision, this ground for various asst years (supra) is allowed.

ADDITIONAL GROUND NO.1 FOR ASST YEAR 2005-06 ADDITIONAL GROUND NO.1 FOR ASST YEAR 2006-07 ADDITIONAL GROUND NO.1 FOR ASST YEAR 2007-08 GROUND NO. 3 FOR ASST YEAR 2008-09

This ground pertains to the claim of refund of tax deducted at source for the various asst years in respect of interest payments made by the assessee (Indian branch) to its Head Office and various branches outside India on inter bank borrowings. The assessee claimed that due tax has been deducted at source and remitted to the account of the central government on these interest payments, even though the Hon’ble Calcutta High Court in assessee’s own case reported in (2012) 343 ITR 81 (Cal) dated 23.12.2010 had held that no tax need to be deducted at source on the said payments. The Learned AR also prayed for admission of the additional ground raised for the Asst Years 2005-06 to 2007-08 as otherwise the assessee would lose its legitimate cash flow and government would be unjustly enriched. The Learned DR stated that no tax has been deducted by the assessee and hence the question of granting refund of TDS does not arise. In response to this, the Learned AR argued that let the fact as to whether the assessee branch had indeed deducted the TDS and remitted the same could be verified by the Learned AO and on this count, he prayed for set aside to the file of the Learned AO. He also stated that this issue has been held in favour of the assessee

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by the Hon’ble DRP for the Asst Years 2009-10 to 2011-12 by allowing the relief for TDS claim.

6.1. We have heard the rival submissions. We find that the Hon’ble Calcutta High Court had held in asesssee’s own case reported in 343 ITR 81 that no tax need to be deducted on interest payments made by the assessee (Indian Branch) to its Head Office and various branches outside India. We feel that the assessee had duly made out of a case for admission of its additional ground and hence the same are admitted herein for adjudication. However, in case the assessee had deducted taxes thereon and remitted to the account of Central Government, then the assessee is rightly entitled for refund of the same. However, as conceded by the Learned AR, this limited aspect requires factual verification by the Learned AO as Learned DR had raised a doubt about the same. Hence we deem it fit and appropriate to set aside this issue to the file of the Learned AO for the limited aspect of verification of deduction of tax at source and remittance thereon by the assessee. Respectfully following the decision of the Hon’ble Calcutta High Court (Supra) , we hold that there is no need to deduct tax at source on interest payments made by the assessee. Accordingly, the additional ground raised by the assessee for the Asst Years 2005-06 to 2007-08 and ground no. 3 raised by the assessee for Asst Year 2008-09 are allowed subject to the directions contained hereinabove.

The Learned AR fairly conceded that this ground is interlinked with the ground raised on Interest paid to Head Office (discussed hereinabove at para 5). He stated that in

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case the aforesaid ground is held in favour of the assessee, then this ground may be treated as not pressed. The Learned DR also accepted to the same.

We have heard the rival submissions. We find that in ground no.5 , we have held that interest paid to Head office and various branches outside India are allowable as deduction while computing the profits attributable to PE in India. Hence as agreed by the Learned AR , the ground no. 4 raised for Asst Years 2005-06 & 2006-07 and ground no. 3 raised for Asst Year 2007-08 are dismissed as not pressed.

The assessee claimed depreciation on ATM at 60% being the rate of depreciation prescribed under the sub-heading “Computers including Computer Software” as given in IT Rules. The Learned AO classified ATM machines as “other office machines” and applied the depreciation rate of 25% being the rate of depreciation on “plant and machinery”. The Learned AO further observed that similar disallowance was made in Asst Years 2002-03 to 2004-05. On first appeal, the Learned CIT(A) upheld the action of the Learned AO as the tribunal in assesse’s own case for Asst Year 2004-05 had held this issue against the assessee. Aggrieved, the assessee is in appeal before us.

8.1. The Learned AR stated that though this issue has been decided against the assessee in Asst Year 2004-05 by this tribunal, he argued that the same issue has been held in favour of the assessee by the following decisions:-

• Decision of Delhi Tribunal in the case of DCIT vs Global Trust Bank Limited in ITA No. 474/Del/2009 dated 20.4.2011

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• Decision of Hon’ble Bombay High Court in the case of CIT vs Saraswat Infotech Ltd in ITA NO. 1243 of 2012 dated 15.1.2013 • Decision of Mumbai Tribunal in the case of Saraswat Infotech Ltd vs CIT in ITA No. 3606/Mum/2011 dated 14.3.2012

Hence he prayed that the decision of Bombay High Court be followed which is also binding on this tribunal. In response to this, the Learned DR argued that the issue before the Delhi Tribunal was totally different from the fact before us. He further argued that ATM is only an Electronic Telecommunication Device. It is not similar to computers. He also presented the pictorial representation of functioning of ATM and Computer. He stated that the ATM does not contain Mother Board. He stated that once the ATM card is inserted , on reading the magnetic code thereon, it gets verified from Back End Processing Centre , whereas, the Computer does it automatically. Hence ATM cannot be construed as Software. He further relied on the decision of the Mumbai Tribunal in the case of HDFC Bank Ltd dated 7.1.2010. In Defence, the Learned AR stated that the decision of the Hon’ble Bombay High Court had been rendered on 15.1.2013 which is after the decision of Mumbai Tribunal in HDFC Bank Ltd case and hence pleaded for following the High Court decision.

8.2. We have heard the rival submissions. We find that the ATM machines are nothing but computers as they deal with the functions of decoding the information, processing the same and giving the output. The Learned AR submitted that ATM is a computer terminal activated by a magnetically encoded debit card that allows a person to make depsoits to and withdrawals from his accountm pay bills, transfers money between his account at any time. The inbuilt computer software therein allows the person to make financial transactions and check the account balances. It was the submission of the Learned AR that inside every ATM there is a computer which is not very different from any other personal computer but the basic function of connecting a person to the bank ATM network and accessing his account information are done by 10 ITA Nos. 1738/K/09, 1926/K/2010,519/K/11 & 1805/K/12 ABN Amro Bank N.V The Royal Bank of Scotland N.V C-AM

the ATM and the software used in the ATM is also the same software which is used in the computer. We also find that similar issue has been addressed by the Special Bench of Mumbai Tribunal in the case of DCIT vs Datacraft India Ltd reported in (2010) 40 SOT 295 wherein the definition of ‘computer’ given by the Information Technology Act, 2000 has been discussed and it has been held that the computer is to perform logical, arithmetical and memory functions on data etc and it is not only the equipment which perform such functions that could be called as computer but includes all input and output devices which are connected to or related to it. The Special Bench accordingly held that routers and switches are also to be included in the block of computers entitled to depreciation at the rate of 60%. We find that the ATM machine is doing the logical, arithmetic and memory functions by manipulations of electronic magnetic or optical impulses giving debit or credit cash and thereafter dispenses the case and gives a printed receipt and hence it could be safely concluded that computer is an integral part of ATM machine and on the basis of the information processed by the computer in the ATM machine only, the mechanical functions of the dispensation of cash or deposit of cash is done.

8.2.1. We find that the issue is dealt with by the co-ordinate bench of Delhi Tribunal in the case of DCIT vs Global Trust Bank Ltd in ITA No. 474/Del/2009 dated 20.4.2011, wherein it was held that :-

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8.2.2. We find that the impugned issue before us is covered by the decision of the Hon’ble Bombay High Court in the case of CIT vs Saraswat Infotech Ltd in ITA No. 1243 of 2012 dated 15.1.2013, wherein the question raised before their Lordships and decision rendered thereon are as below:- a) Whether on the facts and circumstances of the case the ITAT was right in holding that depreciation on UPS is allowable @ 60% ignoring the fact that UPS is an electrical appliance for temporary supply of electricity therefore is in nature of plant and machinery and therefore, depreciation should be provided @ 15%? b) Whether on the facts and circumstances of the case the ITAT was right in holding that depreciation on ATM is allowable @ 60% ignoring the fact that ATM is a cash dispensing machine with a projector and therefore is in nature of plant and machinery and therefore depreciation should be provided @ 15%? c) Whether on the facts and circumstances of the case the ITAT was right in holding that depreciation on purchase of software is to be allowed ignoring the fact that assessee has failed to prove that assessee has physically received the licence by 31/3/2008?

The High Court observed that the Tribunal had held that –

Similarly, so far as ATMs are concerned, the Tribunal on finding of fact concluded that ATM cannot function without the help of computer and would be a part of the computer used in the banking industry. Reliance was placed by the Tribual upon the decision of the Delhi Bench of Tribunal in the matter of DCIT vs Global Trust Bank (ITA No. 474/D/09) wherein it has been held that ATM was a computer equipment and depreciation @ 60% was allowed. 12 ITA Nos. 1738/K/09, 1926/K/2010,519/K/11 & 1805/K/12 ABN Amro Bank N.V The Royal Bank of Scotland N.V C-AM

Held that – We note that the Tribunal has arrived at a finding of fact on all the three questions. The revenue has not been able to show that the above finding of fact is perverse. Thus, we do not see any reason to entertain question (i), (ii) and (iii) above.

Accordingly, the appeal is dismissed with no order as to costs.

8.2.3. In respect of the case relied on by the Learned DR on the decision rendered by this tribunal in assessee’s own case for Asst Year 2004-05, we find that this decision was rendered on 30.6.2010 and thereafter much water has flown on the impugned issue by the decisions of Delhi and Mumbai Tribunal and the decision of Bombay High Court. Respectfully following the aforesaid judicial precedents, we have no hesitation in directing the Learned AO to allow depreciation at the rate of 60% on ATMs. Accordingly, the ground no. 5 raised by the assessee for the Asst Years 2005- 06 and 2006-07 are allowed.

GROUND NO. 6 IN ASST YEAR 2005-06 GROUND NO. 6 IN ASST YEAR 2006-07 GROUND NO. 4 IN ASST YEAR 2007-08 GROUND NO. 2 IN ASST YEAR 2008-09

The facts in Asst Year 2005-06 are stated herein and they remain the same for other years also except change in figures.

The assessee has obtained Vehicles on lease and paid lease rental amounting to Rs. 3,73,53,644/- during the subject assessment year. Out of total amount of lease rentals of Rs. 3,73,53,644/-, lease rentals amounting to Rs. 46,28,067/- were already charged to profit and loss account as they pertained to the period prior to the introduction of 13 ITA Nos. 1738/K/09, 1926/K/2010,519/K/11 & 1805/K/12 ABN Amro Bank N.V The Royal Bank of Scotland N.V C-AM

Accounting Standard 19 (AS-19) issued by The Institute of Chartered Accountants of India (ICAI). However, lease rentals amounting to Rs. 3,27,25,577/- were separately claimed by the assessee as deduction in the computation of income as fair value of vehicles for such lease were capitalized in the books as per AS 19. For income tax purposes, the assessee has not capitalized the fair value of the leased vehicles in the additions to the block of assets and thus no tax depreciation was claimed thereon. Instead, the entire lease rentals were claimed as a revenue deduction in view of the CBDT Circular No. 2 dated 9.2.2001. However, the Learned AO held that the principal component of lease was capital in nature and cannot be allowed as deduction. The Learned AO also observed that the vehicles are registered in the name of the assessee through which ownership rights are bestowed on the assessee. According to Learned AO, the assessee remains both the legal and beneficial owner of the leased vehicles regardless of whatever clauses to the contrary were contained in the lease agreement. This action of the Learned AO was upheld by the Learned CIT(A) in first appeal. Aggrieved, the assessee is in appeal before us.

9.1. The Learned AR stated that though this issue has been decided against the assessee in Asst Year 2004-05 by this tribunal vide its order dated 30.6.2010, he argued that the same issue has been held in favour of the assessee by the decision of the Hon’ble Apex Court in the case of I.C.D.S. Ltd vs CIT reported in (2013) 29 taxmann.com 129 (SC). He also stated that the Hon’ble DRP vide its order dated 23.12.2013 on appreciating the said judgement of Hon’ble Apex Court had directed the Learned AO to delete the disallowance on this account for Asst Year 2009-10 . He further stated that the Learned AO himself had not made any disallowance on this issue from Asst Year 2010-11 onwards presumably appreciating the judgement of the Hon’ble Apex Court (supra). In response to this, the Learned DR stated that the assessee before the Hon’ble Apex Court was a leasing company, whereas the assessee before us is a banking company and argued that the said decision may not be made

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applicable to the case before us. He further argued that the issue before the apex court was – who is the legal owner of the asset . According to him, the apex court did not render any judgement on whether lease rental is a capital or revenue expenditure. In Defence, the Learned AR argued that there is absolutely no difference whether the assessee is a banking company or a leasing company. He pleaded that the ratio decidendi of supreme court (supra) would be squarely applicable to the facts before us. He referred to the relevant clauses of the lease deed wherein the property reverts back to lessor in the event of default by the assessee (lessee) and also stated that the assessee herein does not get any chance to retain the ownership of the vehicles at the end of the lease period by paying a nominal value for the asset. He stated that the lease deed does not contain any clause to this effect. He prayed for allowance of lease rentals as a revenue expenditure.

9.2. We have heard the rival submissions and perused the materials available on record. At the outset, we find that this issue has been held against assessee in assessee’s own case for Asst Year 2004-05 vide order of this tribunal dated 30.6.2010. However, the Hon’ble Apex Court decision in the case referred supra dated 14.1.2013 had been rendered after the decision of this tribunal in Asst Year 2004-05. We have gone through the relevant clauses in the lease deed and we find that the assessee herein (lessee) does not have power to retain the assets beyond the lease period by paying a nominal value. In the case before the Hon’ble Apex Court (supra), there was a clause to retain the assets at the end of the lease by allowing the lessee to pay 1% of original cost of vehicle as consideration. The conspicuous absence of this clause in the lease deed itself clearly proves that the assessee had to return the vehicles on expiry of lease period to the lessor. Moreover, the lessor has got every right to recover the vehicles during the tenure of the lease if the lessee defaults in payment of lease rentals. All these facts clearly prove that the assessee cannot claim ownership (both legal and beneficial) of the vehicles at any cost. Effectively the assessee herein gets only right

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to use the assets for which lease rentals are paid. The fact of registration of vehicles in the name of assessee under Motor Vehicles Act is only relevant for the purpose of Motor Vehicles Act and not otherwise. Under General Law, the ownership of the vehicles vests only with the lessor. It does not matter how the assessee treats the cost of vehicles in its books of accounts. The assessee has been treating the lease rentals as revenue expenditure for tax purposes. We find that the CBDT Circular No. 2/2001 dated 9.2.2001 has clarified that the AS-19 will have no implication on the allowance of depreciation on assets under the provisions of IT Act. Hence the same analogy could be applied for lease rentals also. Hence treatment given in books to comply with AS 19 issued by ICAI is of no relevance. We find that Circular No. 2/2001 dated 9.2.2001 stipulates that in a lease transaction, the owner of the assets is entitled to depreciation. In the instant case, the lessor being the owner had the right to claim depreciation and the assessee has not claimed any depreciation on the same for tax purposes. The assessee had claimed the entire lease rent as deductible expenditure. It is well settled that the CBDT Circulars are binding on the revenue authorities.

9.2.1. It is also not in dispute that the Hon’ble DRP vide its order dated 23.12.2013 on appreciating the said judgement of Hon’ble Apex Court had directed the Learned AO to delete the disallowance on this account for Asst Year 2009-10 . It is also not in dispute that the Learned AO himself had not made any disallowance on this issue from Asst Year 2010-11 onwards.

9.2.2. We find that the issue is squarely covered by the decision of the Hon’ble Supreme Court in the case of I.C.D.S. Ltd vs CIT reported in (2013) 350 ITR 527 (SC) wherein it was held that :- “Held, affirming the decision of the Tribunal, (i) that the assessee was a leasing company which leased out the trucks that it purchased. Therefore, on a combined reading of section 2(13) and (24) of the Act the income derived from leasing of the trucks would be business income, or income derived in the course of business, and had been 16 ITA Nos. 1738/K/09, 1926/K/2010,519/K/11 & 1805/K/12 ABN Amro Bank N.V The Royal Bank of Scotland N.V C-AM

so assessed. Hence, it fulfilled the requirement of section 32 of the Act, that the asset must be used in the course of business. The assessee did use the vehicles in the course of its leasing business. The fact that the trucks themselves were not used by the assessee was irrelevant for the purpose of section. (ii) That a scrutiny of the material facts at hand raised a presumption of ownership in favour of the assessee. The vehicle, along with its keys, was delivered to the assessee upon which, the lease agreement was entered into by the assessee with the customer. The fact that at the end of the lease period, the ownership of the vehicle was transferred to the lessee at a nominal value did not make the assessee in effect a financier. No inference could be drawn from the registration certificate as to ownership of the legal title of the vehicle. If the lessee was in fact the owner, he would have claimed depreciation on the vehicles, which, as specifically recorded in the order of the Tribunal, was not the case. (iii) That the entire lease rent received by the assessee was assessed as business income in its hands and the entire lease rent paid by the lessee been treated as deductible revenue expenditure in the hands of the lessee. This reaffirmed the position that the assessee was in fact the owner of the vehicle, in so far as section 32 of the Act is concerned. (iv) That, therefore, the assessee was the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of section 32 of the Act and, hence, was entitled to claim depreciation in respect of additions made to the trucks, which were leased out. (v) That for purposes of the assessee's claim to the higher rate of depreciation, the interpretation of the term "purposes of business", used in second proviso to section 32(1) of the Act would not be any different from that ascribed to it under section 32(1) of the Act. Therefore, the assessee fulfilled even the requirements for a claim of a higher rate of depreciation and was entitled thereto.”

Though this decision has been rendered on the allowability of depreciation on leased assets from the angle of the lessor, the principle laid down could be made very much applicable to the facts of the instant case for allowability of lease rentals in the hands of the assessee (lessee).

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9.2.3. We also find that the issue is squarely covered by the decision of the Hon’ble Rajasthan High Court (Jaipur Bench) in the case of Rajshree Roadways vs Union of India & Ors reported in (2003) 263 ITR 206 (Raj) wherein it was held that :- Held, that under the agreement there was a clause that after completion of lease period, if one per cent. of the total consideration of the trucks was paid, the lessee would be the owner of those trucks. However, the agreement dealt with the ownership of the trucks under the agreement. There was a clear provision that the said machinery shall at all times remain sole and exclusive property of the lessor and the lessee shall have no right, title or interest thereon. It further that irrecoverable undertaking of the lessee that at no time during the currency of the lease agreement, which shall be non-cancellable, would the lessee attempt to capitalise the leased assets in its balance-sheet. As per clause 8, it had been agreed that the ownership of the said assets during the tenure of the lease and inclusive of any renewal options that the lessor may concur indisputably rested with the lessor. So in clear terms, the agreement provided that during the lease period, only the lessor shall be treated as owner of the trucks and not the lessee. Moreover, the lessor had been allowed depreciation on the trucks. Therefore, considering the terms and conditions of the lease agreement and the fact that depreciation on these trucks had been allowed to the lessor, the lease rent was deductible as revenue expenditure”-

In the aforesaid case, there was a clause in the lease agreement giving an option to the lessee to buy back the asset on termination of the lease agreement. In the instant case, the assessee (lessee) falls in a better footing , in as much as there is no clause in the lease agreement, enabling the lessee to buy back the assets on termination of the lease arrangement.

9.2.4. In view of the aforesaid facts and findings and respectfully following the judicial precedents relied upon hereinabove, we hold that the assessee is entitled for deduction towards lease rentals. Accordingly, the ground no. 6 raised for Asst Years

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2005-06 & 2006-07 ; ground no. 4 raised for Asst Year 2007-08 and ground no. 2 raised for Asst Year 2008-09 are allowed.

During the course of hearing, the Learned AR stated that the assessee is not willing to press this ground. The same is taken as the statement from the Bar. Hence the ground nos. 7 raised by the assessee for Asst Years 2005-06 & 2006-07 and ground no. 5 for Asst Year 2007-08 raised by the assessee are dismissed as not pressed.

GROUND NO. 8 IN ASST YEAR 2005-06 GROUND NO. 8 IN ASST YEAR 2006-07 GROUND NO. 6 IN ASST YEAR 2007-08

During the course of hearing, the Learned AR stated that the assessee is not willing to press this ground. The same is taken as the statement from the Bar. Hence the ground nos. 8 raised by the assessee for Asst Years 2005-06 & 2006-07 and ground no. 6 for Asst Year 2007-08 raised by the assessee are dismissed as not pressed.

GROUND NOS. 9 TO 11 IN ASST YEAR 2005-06 GROUND NOS. 9 & 10 IN ASST YEAR 2006-07

19 ITA Nos. 1738/K/09, 1926/K/2010,519/K/11 & 1805/K/12 ABN Amro Bank N.V The Royal Bank of Scotland N.V C-AM

GROUND NOS. 7 TO 10 IN ASST YEAR 2007-08 GROUND NOS. 4 & 5 IN ASST YEAR 2008-09

These grounds are only consequential in nature and does not require separate adjudication.

Sd/- Sd/- ( Mahavir Singh, Judicial Member ) (M. Balaganesh, Accountant Member) Date:

Date 13-4 -2016

Copy of the order forwarded to:-

1.. The Appellant/Assessee: M/s. ABN Amro Bank N.V/M/s. The Royal Bank of Scotland N.V (formerly known as ABN Amro Bank N.V Azimganj House, 7 Camac Street, Unit 3,4 & 5 Kolkata-17 2 The Respondent/Department: Deputy Director of Income Tax/Dy. Commissioner Of Income Tax, International Taxation 1(1), Aaykar Bhawan P-7 Chowringhee Square, Kol-69. 3 /The CIT, 4.The CIT(A)

**PRADIP SPS

20 ITA Nos. 1738/K/09, 1926/K/2010,519/K/11 & 1805/K/12 ABN Amro Bank N.V The Royal Bank of Scotland N.V C-AM