Case Law Details
Standard Chartered Grindlays Bank Vs ACIT (ITAT Delhi)
The assessee is a non-resident banking company which carries on the business of banking and other related activities through its branches in India in accordance with the provisions of Banking Regulation Act, 1949. During the year, Indian Permanent Establishment (in short PE) of the assessee bank in India incurred NRI expenses for soliciting and mobilization of deposits in foreign currency from Non Resident Indian (NRIs) to be placed in India. As these expenses were related wholly and exclusively to the Indian PE of the assessee’s business, it had claimed the expense as deduction in the computation of Business Income of the PE earned in India.
The Assessing Officer rejected this claim for deduction of expenses holding that this expenditure was not reflected in the assessee’s Indian books of accounts that this expenditure was in the nature of ‘head office expenses’ in respect of which deduction under section 44C has already been allowed. The AO placed reliance on the judgment of the Calcutta High Court in the case of UCO Bank Vs. CIT, 200 ITR.
The ld. CIT (A) directed to re-compute the disallowance @80% of NRI deposit mobilization expenses u/s 37(1) of the Income Tax Act, 1961 and 20% of NRI expenses u/s 44C.
We have carefully considered the rival submissions: The xxxxxx abroad were brought to India in foreign currency xxxx and kept in India for the Indian business of the assessee bank. The benefits reaped by the India branch or Permanent Establishment in India have been accounted for as Indian income. We, therefore, see no reason as to why the deduction of expenditure· should not allowed.
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