Bank of America National Association Vs CIT (ITAT Mumbai)
Summary: Bank of America National Association, a resident of the United States of America carrying on banking business through branches across the world, had five Indian branches at Mumbai, New Delhi, Kolkata, Chennai and Bangalore during AY 2013-14. The assessee filed its return of income on 25 November 2013 declaring total income of ₹817,13,21,220. The return was selected for scrutiny, and the Assessing Officer issued a draft assessment order dated 22 February 2017 under section 144C read with section 143(3) of the Income-tax Act, 1961.
The Commissioner of Income Tax (International Taxation)-I, Mumbai subsequently examined the assessment record and initiated proceedings under section 263 through notice dated 20 March 2019. The CIT considered the assessment order erroneous and prejudicial to the interests of the Revenue on the ground that the Assessing Officer had not made the required inquiry regarding interest paid by the Indian branches to the head office and overseas branches. The CIT also considered the Explanation introduced to section 9(1)(v)(c) by the Finance Act, 2015, effective from 1 April 2016, to be retrospective and held that the interest was taxable in India.
The CIT accordingly set aside the assessment order and directed the Assessing Officer to make a fresh assessment for AY 2013-14 and examine the taxability of interest paid by the Indian branch permanent establishments to the head office and overseas branches. The CIT observed that such interest was taxable at 10% under section 9(1)(v)(c) read with Articles 11(2)(a) and 14(3) of the India-USA DTAA.
