Barclays Bank PLC Vs ADIT (ITAT Mumbai)
Second ground of appeal is about disallowance of interest paid to the head office (HO)/overseas branches on deposits placed with the assessee under section 40(a)(i) of the Act. During the assessment proceedings, the assessing officer found that the assessee had paid interest of Rs. 2.99 crores to the HO/overseas branches (OBs) on deposit placed with it by those entities, that it had debited the interest payment to the P & L account for the year under appeal, that it had claimed a deduction in respect of the same. On being queried as to whether tax was deducted at source on the said interest payment, the assessee admitted that no tax was deducted on the payment made to HO/OBs. Referring to the Circular No. 740 of 1996, issued by the CBDT, the assessing officer disallowed the claim made by the assessee for non deduction of tax at source.
We find that in the case of ABN Amro Bank NV (2012) 343 ITR 81 (Cal.) the Hon’ble Calcutta High Court had dealt with the identical issue and held that Where overseas HO was not liable to pay any tax on interest remitted by assessee, there was no obligation to deduct TDS under section 195(1) on such remittance because TDS provisions are attracted only when such remittance results in taxable income.
