ADIT (IT) 2(1), MUMBAI v. SHINHAN BANK, MUMBAI

ITA 2205/MUM/2010 | 2005-2006
Pronouncement Date: 11-01-2011 | Result: Dismissed

Appeal Details

RSA Number 220519914 RSA 2010
Bench Mumbai
Appeal Number ITA 2205/MUM/2010
Duration Of Justice 9 month(s) 23 day(s)
Appellant ADIT (IT) 2(1), MUMBAI
Respondent SHINHAN BANK, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 11-01-2011
Assessment Year 2005-2006
Appeal Filed On 19-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI. BEFORE SHRI R.V.EASWAR PRESIDENT AND SHRI P.M. JAGTAP AM I.T.A. NO.2205/MUM/2010 (ASSESSMENT YEAR : 2005-06) THE ASSISTANT DIRECTOR OF INCOME TAX (IT)-2(1) R.NO.120 1 ST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M.ROAD MUMBAI-400 038. VS. M/S. SHINHAN BANK 42 JOLLY MAKER CHAMBERS-II 225 NARIMAN POINT MUMBAI-400 021. PAN:AAACC2144A (APPELLANT) (RESPONDENT) APPELLANT BY : MR. SUMEET KUMAR DR RESPONDENT BY : MR. SANJEEV M.SHAH O R D E R PER R.V.EASWAR PRESIDENT: THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE DEPARTMENT IN THIS APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) WAS ERRED IN HOLDING THAT SALARY PAID TO EXPATRIATE EMPLOYEES DEPUTED FROM HEAD OFFICE TO THE INDIAN BRANCH IS AN EXPENDITURE TO BE ALLOWED IN FULL WITHOUT THE RESTRICTION OF SECTION 44C OF THE INCOME TAX ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) WAS ERRED IN HOLDING AS ABOVE WITHOUT APPRECIATING THE FACT THAT SINCE THE EXPENDITURE HAS NOT BEEN DEBITED IN THE ACCOUNTS OF INDIAN BRANCH THE SAID EXPENDITURE CANNOT BE HELD TO HAVE BEEN INCURRED BY THE INDIAN BRANCH. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2. THE ASSESSEE IS A NON-RESIDENT BANK. THE APPEAL RELATES TO THE ASSESSMENT YEAR 2005-06. WHILE COMPLETING THE A SSESSMENT THE ASSESSING OFFICER OBSERVED FROM THE DETAILS FIL ED BY THE ASSESSEE THAT THE ASSESSEE HAS CLAIMED A DEDUCTION OF ITA NO.2205/MUM/10 2 RS.53 18 939/- ON ACCOUNT OF SALARIES PAID IN KOREA TO TWO EXPATRIATES. IT WOULD APPEAR THAT THESE EXPATRIATES WERE DEPUTED FROM THE ASSESSEES HEAD OFFICE TO THE INDIAN BRANC H. ACCORDING TO THE ASSESSEE THE HEAD OFFICE EXPENSES WERE NOT COVERED BY SECTION 44C OF THE INCOME TAX ACT WHICH REGULATED T HE DEDUCTION OF HEAD OFFICE EXPENDITURE IN THE CASE OF NON- RESIDENTS. IT WAS THE ASSESSEES STAND THAT THE PAY MENTS WERE MADE IN KOREA AND WERE ALLOWABLE AS A DEDUCTION UND ER SECTION 37(1) BECAUSE IT WAS INDIRECTLY ATTRIBUTABLE TO THE BUSINESS OPERATIONS OF THE ASSESSEE IN INDIA. IT WAS ALSO SU BMITTED THAT THE EXPATRIATES WERE ACTUALLY WORKING IN INDIA AND THE DEDUCTION IS AKIN TO REIMBURSEMENT OF AN EXPENSE TO THE HEAD OFFICE. THESE CONTENTIONS DID NOT FIND FAVOUR WITH THE ASSE SSING OFFICER WHO HELD THAT THE PAYMENT OF THE SALARY TO THE EXPA TRIATES WAS IN THE NATURE OF HEAD OFFICE EXPENSES AND THEREFORE CANNOT BE ALLOWED AS A DEDUCTION IN THE ASSESSMENT OF THE AS SESSEE. HIS DECISION HAVING BEEN REVERSED BY THE CIT(A) THE DE PARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF THE HEARING IT WAS BROUGHT TO OU R NOTICE ON BEHALF OF THE ASSESSEE THAT THE ISSUE IS DIRECTLY C OVERED BY THE ORDER PASSED BY THE TRIBUNAL ON 25 TH JUNE 2009 IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1997-9 8 AND 1999-2000 TO 2002-03. A COPY OF THE ORDER WAS FILED . WE FIND FROM PARAGRAPHS 2 TO 4 THEREFROM THAT IN THAT YEAR ALSO THE REVENUE HAD RAISED A SIMILAR GROUND TO THE EFFECT T HAT THE DIRECTION OF THE CIT(A) TO ALLOW THE SALARY PAID TO EXPATRIATES AS A DEDUCTION UNDER SECTION 37(1) WITHOUT BEING RESTR ICTED UNDER SECTION 44C IS WRONG. THE TRIBUNAL NOTED THAT THE EXPATRIATES WERE ACTUALLY WORKING WITH THE ASSESSEE IN INDIA TH OUGH THE SALARIES WERE PAID TO THEM OUTSIDE INDIA BY THE HEA D OFFICE OUTSIDE INDIA. THE TRIBUNAL FURTHER FOUND THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY AN EARLIER ORD ER DATED ITA NO.2205/MUM/10 3 17.03.2006 IN THE ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 1998-99 IN ITA NO.6299/MUM/2002. RESPECTFULLY FOLLO WING THE EARLIER ORDER AS ALSO THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. EMIRATES COMMERCIAL BA NK LTD. (2003) 262 ITR 55 THE TRIBUNAL DISMISSED THE REVEN UES GROUND. IT WAS ALSO BROUGHT TO OUR NOTICE AT THE T IME OF THE HEARING THAT THE ORDER OF THE TRIBUNAL HAS BEEN CON FIRMED BY THE HONBLE HIGH COURT BY JUDGEMENT DATED 21.12.201 0 COPY OF WHICH WAS FILED. 4. SINCE THE GROUNDS RAISED IN THE PRESENT APPEAL B Y THE REVENUE ARE DIRECTLY COVERED BY THE ORDERS OF THE T RIBUNAL FOR THE EARLIER YEARS SOME OF WHICH HAVE BEEN CONFIRMED BY THE HONBLE BOMBAY HIGH COURT WE UPHOLD THE DECISION OF THE CI T(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. NO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF JANUARY 2011. SD/- ( P.M. JAGTAP ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 11 TH JANUARY 2011. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-8 MUMBAI. 4. THE CIT(A)-18 MUMBAI 5. THE DR F BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR I.T.A.T MUMBAI