DBS Bank Limited Vs ADIT (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) disposed of cross-appeals filed by DBS Bank Limited for Assessment Years 2010-11, 2011-12 and 2012-13 against orders of the CIT(A), with the common issues being heard together. The assessee, a Singapore-based non-resident banking company operating in India through a Permanent Establishment (PE), challenged, among other matters, transfer pricing adjustments relating to guarantee commission, the tax treatment of gains from cancellation of foreign exchange forward contracts, and the tax rate applicable to interest received on income-tax refunds. The Revenue challenged, inter alia, the allowability of interest paid by the Indian PE to its Head Office/overseas branches and the determination of guarantee commission.
For AY 2010-11, the Tribunal dismissed the Revenue’s challenge against deletion of the disallowance of interest paid to the Head Office/overseas branches. It followed earlier decisions in the assessee’s own case and the Special Bench decision in Sumitomo Mitsui Banking Corporation v. DCIT, holding that the issue was covered in favour of the assessee. The assessee’s corresponding ground concerning interest received from the Head Office became academic.
The Tribunal rejected the assessee’s broad contention that transfer pricing provisions could not apply to transactions between the foreign enterprise/Head Office or overseas branches and the Indian PE merely because they constituted the same person. Relying on TBEA Shenyang Transformer Group Company Ltd. v. DCIT, the Tribunal held that such transactions could, subject to statutory conditions, constitute international transactions requiring arm’s length determination under Chapter X.
