Case Law Details
MUFG Bank Ltd. Vs ACIT (International Taxation) (ITAT Delhi)
With respect to the addition on account of the interest received by Indian branches from head office and other overseas branches amounting to ₹ 3,499,476/–. During the year , assessee has received an interest of ₹ 3,499,476 from its head office and overseas branches. The assessee has included this income in its computation of total income however during the assessment proceedings it is claimed that this amount should be excluded from its income being payment to self and hence same is not taxable. It was submitted by the assessee that since Indian branches in head office and other overseas branches of the assessee are one assessee for the purpose of taxation Under the act and the interest received by the Indian branches of the assessee from its head office and other overseas branches cannot be taxed in the hands of the assessee being payment to self which cannot give rise to the income that is taxable in India as per the domestic laws of India. The assessee relied on the several judgments of the High Court and coordinate benches. Assessee also submitted that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench dated 25 January 2017 in assessee‟s own case for assessment year 2010 – 11 where the issue is squarely decided in favour of the assessee. The learned assessing officer held that head office and the permanent establishment of the assessee are treated as two different distinct entities for tax purposes and therefore interest income in question is income received by its permanent establishment from head office and other branches. The learned AO further stated that the order of the coordinate bench for assessment year 2000 – 11 and 2011 – 12 on this issue has not been accepted by the revenue and an appeal has been filed before the honourable Delhi High Court. Accordingly he rejected the contention of the assessee.
The learned authorised representative submitted that income earned from head office and overseas branches is not taxable in the hands of the PE in India since they are not separate legal entities and are part of the same foreign company therefore no income can arise when the transactions are carried out by different parts of the same legal entity. It is a settled principle of law that no man can make profit out of himself. Therefore, the interest income of Rs. 34,99,476 earned from head office and overseas branches is not chargeable to tax. It is also submitted that the Tribunal for A.Y. 2010-11 has decided this issue in favour of the assessee as under:-
“It is a settled principle of law that in the absence of decision of the Hon’ble jurisdictional High Court on an issue, the order of the non-jurisdictional High Court should be followed by the Tribunal. Besides, Tribunal while passing the order on the issue in the appeals for the assessment year on 19.09.2014 was having no benefit of the decision of Hon’ble Bombay High Court in the case of DIT vs. Credit Agricole Indosuez (supra) dated 17.06.2015. In view of this position we are bound to follow the decision of Hon’ble Bombay High Court in the case of DIT vs. Credit Agricole Indosuez (supra) on the issue. We thus respectfully following the ratio laid down in the decision, hold that the authorities below were not justified in taxing the interest received by the Indian PE/branches of the assessee from its head office/other overseas branches of the assessee from its head office / other overseas branches as no person can make profit out of itself. The Assessing officer is, therefore, directed to delete the addition in question. Ground No.5 is accordingly allowed.”
It was further submitted that above order was followed subsequently by the Tribunal in A.Y. 2003-04 (Para 20 Page 101 of Compilation), A.Y. 2009-10 (Para 23 Page 161 of Compilation) and in A.Y. 2013-14 (Para 12 Page 116 of Compilation).
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