Income Tax Appellate Tribunal - Mumbai
Dcit (It) 1(3)(1), Mumbai vs Bnp Paribas Sa, Mumbai on 17 July, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
"I" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI G. MANJUNATHA, ACCOUNTANT MEMBER
ITA no.1689/Mum./2018
(Assessment Year : 2012-13)
Dy. Commissioner of Income Tax (I.T)
................ Appellant
Circle-1(3)(1), Mumbai
v/s
BNP Paribas S.A.
1, North Avenue Maker Maxity
Bandra Kurla Complex ................ Respondent
Mumbai 400 051
PAN - AAACB4868Q
ITA no.1232/Mum./2018
(Assessment Year : 2012-13)
BNP Paribas S.A.
1, North Avenue Maker Maxity
Bandra Kurla Complex ................ Appellant
Mumbai 400 051
PAN - AAACB4868Q
v/s
Dy. Commissioner of Income Tax (I.T)
................ Respondent
Circle-1(3)(1), Mumbai
Revenue by : Shri K.L. Kanak
Assessee by : Shri Farrokh Irani a/w
Shri Priyesh Shah
Date of Hearing - 19.06.2019 Date of Order - 17.07.2019
2
BNP Paribas S.A.
ORDER
PER SAKTIJIT DEY. J.M. Captioned cross appeals arise out of order dated 15th December 2017, passed by the learned Commissioner (Appeals)-55, Mumbai, for the assessment year 2012-13.
ITA no.1232/Mum./2018 Assessee's Appeal
2. The only ground raised by the assessee reads as under:-
"The learned CIT(A) erred in not accepting the claim of the appellant that the rate of tax applicable to domestic companies and/or co-operative banks for A.Y. 2012-13 is also applicable to the appellant in accordance with the provisions of Article-26 (Non-discrimination) of the India-France tax treaty."
3. As could be seen from the ground raised, it is the claim of the assessee that as per the non-discrimination clause contained in Article-26 of the India-France Double Taxation Avoidance Agreement (DTAA), the rate of tax (including surcharge) applicable to domestic companies and Co-operative Societies should be applicable to the assessee. The Departmental Authorities have rejected the aforesaid claim of the assessee by holding that the rate of tax applicable to non- resident companies would be applicable to the assessee.
4. Shri Farookh Irani, the learned Sr. Counsel for the assessee, fairly submitted that the issue has been decided against the assessee 3 BNP Paribas S.A. by the Tribunal consistently in the preceding assessment years and assessee's appeals on the issue is now pending before the Hon'ble Jurisdictional High Court. Thus, he submitted, following the earlier decisions of the Tribunal, the issue has to be decided against the assessee.
5. The learned Departmental Representative agreed with the aforesaid submissions of the learned Sr. Counsel for the assessee.
6. We have considered rival submissions and perused the material on record. As could be seen from the materials available on record, the issue whether the rate of tax applicable to domestic companies and Co-operative Bank is applicable to the assessee is a recurring dispute between the parties from the preceding assessment years. However, the Tribunal has consistently decided the issue against the assessee in the preceding assessment years. In the latest order passed for the assessment year 2011-12 in ITA no.444/Mum./2017, dated 29th August 2018, the Tribunal following its earlier decision decided the issue against the assessee. Of course, it is a fact that in some of the preceding assessment years, the Hon'ble Jurisdictional High Court has admitted the substantial question of law raised by the assessee on the disputed issue. However, there being no material difference in the facts of the present case, respectfully following the consistent view of the Tribunal on the disputed issue in assessee's own case for the 4 BNP Paribas S.A. preceding assessment years, we uphold the decision of learned Commissioner (Appeals) on this issue. Ground raised is dismissed.
7. In the result, assessee's appeal is dismissed.
ITA no.1689/Mum./2018 Revenue's Appeal
8. In grounds no.1 and 2, the Revenue has challenged the decision of learned Commissioner (Appeals) in holding that the amount received by the assessee from its Indian Branch towards data processing fee is not chargeable to tax in India due to principles of mutuality.
9. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee has made a provision of ` 23,83,82,776, towards data processing charges payable to BNP Paribas, Singapore, a Branch of the assessee. Noticing the above, the Assessing Officer called upon the assessee to show cause as to why data processing fee should not be treated as royalty / fee for technical services and considered as income of the Head Office, hence, brought to tax in India. Though, the assessee made detailed submissions before the Assessing Officer stating that the amount paid cannot be treated as royalty / fee for technical services and it is also not taxable applying the principle of mutuality, however, the Assessing Officer 5 BNP Paribas S.A. rejecting the contention of the assessee and following the directions of learned DRP for assessment year 2007-08, added back the amount of ` 22,26,89,390.
10. While deciding the appeal of the assessee, learned Commissioner (Appeals) having noticed that similar issue has been decided by the Tribunal in assessee's own case for the assessment year 2005-06, followed the same and deleted the addition made by the Assessing Officer on the reasoning that by applying the principle of mutuality the amount cannot be treated as income of the assessee.
11. At the outset, the learned Sr. Counsel for the assessee submitted, the issue has been consistently decided by the Tribunal in favour of the assessee in the preceding assessment years. Further, he submitted, Revenue's appeal on the issue in the assessment years 2006-07 and 2007-08 have been dismissed by the Hon'ble Jurisdictional High Court. Thus, he submitted, the issue stands covered in favour of the assessee.
12. The learned Departmental Representative agreed with the aforesaid submissions of the Learned Sr. Counsel for the assessee.
13. We have considered rival submissions and perused the material on record. As could be seen from the facts on record, the dispute between the parties relating to taxability of data processing fee at the 6 BNP Paribas S.A. hands of the assessee as royalty / fee for technical services is a recurring issue from the preceding assessment years. While deciding the issue in the year 2005-06 in assessee's own case the Tribunal in ITA no.339/Mum./2019, dated 16th July 2014, followed its earlier order and held that as per the Special Bench decision of the Tribunal, Mumbai Bench, in Sumitomo Mitsui Banking Corporation v/s DDIT, [2012] 163 ITD 66 (Mum.)(SB), the payment of data processing fee being a payment to self, is governed by the principles of mutuality, hence, not taxable. Accordingly, the Tribunal deleted the addition. The same view has been expressed in the subsequent assessment years as well and the latest order of the Tribunal on the issue is for the assessment year 2010-11 in ITA no.1182/Mum./2015, dated 16th October 2017. It is also relevant to observe, while deciding Revenue's appeal on the disputed issue in assessment year 2006-07 and 2007- 08, the Hon'ble Jurisdictional High Court upheld the decision of the Tribunal. Moreover, while deciding the issue in the assessment year 2008-09 in assessee's own case in ITA no.3540/Mum./2014, dated 31st March 2016, the Tribunal has also decided the issue in favour of the assessee though on different reasoning. Thus, it is evident, the Tribunal in assessee's own case for the preceding assessment years has consistently held that data processing fee is not chargeable to tax at the hands of the assessee in India. Respectfully following the aforesaid decisions of the Co-ordinate Bench, we uphold the decision 7 BNP Paribas S.A. of learned Commissioner (Appeals) on this issue. Grounds are dismissed.
14. In grounds no.3 and 4, the Revenue has challenged the decision of learned Commissioner (Appeals) in deleting the addition of interest income made at the hands of the Head Office by the Assessing Officer.
15. Grounds no.5 and 6 are offshoots of the issue raised in grounds no.3 and 4.
16. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has received interest from its Indian Branches called upon the assessee to explain why the same should not be treated as income at the hands of the assessee. Though, the assessee through elaborate submissions objected to the proposed addition, however, the Assessing Officer rejecting the submissions of the assessee proceeded to tax the interest income at the hands of the assessee.
17. However, while deciding assessee's appeal on the issue, learned Commissioner (Appeals) following the Special Bench decision of the Tribunal, Mumbai Bench, in Sumitomo Mitsui Banking Corporation (supra) held that interest paid by the Indian Branch to the Head Office being governed by the principle of mutuality is not taxable. Accordingly, she deleted the addition.
8
BNP Paribas S.A.
18. At the outset, the learned Sr. Counsel for the assessee submitted, the issue is covered by the decisions of the Tribunal in assessee's own case in preceding assessment years, wherein, the Tribunal following the Special Bench decision in Sumitomo Mitsui Banking Corporation (supra) has held that the interest paid by the Indian Branch to the Head Office being a payment to self is governed by the principles of mutuality, hence, not taxable. In this context, he drew our attention to the latest order of the Tribunal passed for the assessment year 2011-12 in ITA no.444/ Mum./2017, dated 29th August 2018.
19. The learned Departmental Representative, though, agreed that in the preceding assessment years, the Tribunal has decided the issue in favour of the assessee, however, he submitted that certain aspects have not been considered by the Tribunal and learned Commissioner (Appeals) while deciding the issue. He submitted, as per section 9(1)(v)(c) of the Act, interest income is chargeable at the hands of the non-resident irrespective of the fact whether it is the Head Office of Indian Branch. He submitted, the aforesaid provision being a charging section, has to be given full effect. Thus, he submitted, the earlier orders passed by the appellate authorities having ignored the provision of section 9(1)(v)(c) of the Act, they do not lay down the correct proposition of law. Further, he submitted, learned Commissioner 9 BNP Paribas S.A. (Appeals) has decided the issue without considering the provision contained under Article-12(6) of the India France Tax Treaty. Thus, he submitted, the issue requires to be re-examined again.
20. In rejoinder, the learned Sr. Counsel for the assessee submitted, the applicability of section 9(1)(v)(c) of the Act was examined by the Special Bench of the Tribunal in case of Sumitomo Mitsui Banking Corporation (supra). Hence, it is not correct on the part of the learned Departmental Representative to submit that this aspect was not examined. Further, he submitted, even the applicability of the provisions of the Act and the treaty provisions were also examined while deciding the issue in the preceding assessment years. Thus, he submitted, consistent view taken by the Tribunal in preceding assessment years have to be followed as there is no difference in facts in the impugned assessment year.
21. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Undisputedly, the issue relating to the taxability of interest paid by the Indian Branch to the Head Office is a recurring dispute between the assessee and the Revenue from preceding assessment years. While deciding the issue in the preceding assessment years, the Tribunal following the Special Bench decision in case of Sumitomo Mitsui Banking Corporation (supra) has consistently held that interest paid by 10 BNP Paribas S.A. the Indian Branch to the Head Office being a payment made to self is governed by the principles of mutuality, hence, not taxable. In the latest order passed by the Tribunal in assessee's own case in assessment year 2011-12, vide ITA no.444/Mum./2017, dated 29th August 2018, the Tribunal again reiterated the same view. Thus, as could be seen from the facts on record, the issue has been consistently decided by the Tribunal in favour of the assessee up to the assessment year 2011-12. As regards the contention of the Department that as per the provision contained under section 9(1)(v)(c) of the Act interest income is taxable in India and the applicability of such provision has been ignored by the appellate authority, we must observe, this particular aspect relating to the applicability of section 9(1)(v)(c) of the Act was also under consideration of the Special Bench in case of Sumitomo Mitsui Banking Corporation (supra) and the Special Bench clearly and categorically held that since the interest payable by the Indian Branch to the Head Office is a payment to self, it cannot be brought to tax by relying upon the provision of section 9(1)(v)(c) of the Act. Therefore, insofar as the applicability of the aforesaid provision is concerned, it stands settled in favour of the assessee by the decision of the Tribunal, Special Bench, referred to above. Moreover, by virtue of explanation to section 9(1)(v)(c) of the Act, it is provided that in case of non-resident engaged in banking business any interest payable by the PE in India to the Head Office would be 11 BNP Paribas S.A. chargeable to tax in India. However, the aforesaid explanation has been inserted by Finance Act, 2015, w.e.f. 1st April 2016. From the notes and memorandum as well as CBDT Circular explaining the object and purport of introducing such explanation, it is evident that such explanation was introduced to overcome the effect and implication of the Special Bench decision of the Tribunal in case of Sumitomo Mitsui Banking Corporation (supra). However, it has been made clear by the CBDT that such amendment by way of explanation will apply from the assessment year 2016-17 onwards. That being the case, as per the relevant statutory provisions applicable to the impugned assessment year and as per the ratio laid down by the Tribunal, Special Bench in case of Sumitomo Mitsui Banking Corporation (supra), which is applicable to the impugned assessment year, the interest income received by the assessee from its Indian Branch being a payment made to self, is not taxable at the hands of the assessee. Therefore, respectfully following the Special Bench decision of the Tribunal, Mumbai Bench, in Sumitomo Mitsui Banking Corporation (supra) and the decisions of the Co-ordinate Bench in assessee's own case in the preceding assessment years, which we are bound to follow adhering to the norms of judicial discipline in the absence of any material difference in facts, we have no hesitation in upholding the decision of the learned Commissioner (Appeals) on the issue. Grounds are dismissed.
12
BNP Paribas S.A.
22. In the result, Revenue's appeal is dismissed.
23. To sum up, assessee's as well as Revenue's appeals are dismissed.
Order pronounced in the open Court on 17.07.2019 Sd/- Sd/-
G. MANJUNATHA SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 17.07.2019
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy
By Order
Pradeep J. Chowdhury
Sr. Private Secretary
Assistant Registrar
ITAT, Mumbai