2005-VIL-375-ITAT-MUM

Equivalent Citation: [2005] 4 SOT 122 (MUM.)

Income Tax Appellate Tribunal MUMBAI

IT APPEAL NOS. 5842 & 6402 (MUM.) OF 1996, 649, 751, 5514 & 5895 (MUM.) OF 1998, 2501 & 2297 (MUM.) OF 1999 AND 3787, 3899, 4908 AND 5340 (MUM.) OF 2000 AND CROSS OBJECTION NOS. 147 & 148 (MUM.) OF 1999 AND 122 (MUM.) OF 2002

Date: 28.06.2005

BRITISH BANK OF MIDDLE EAST

Vs

JOINT COMMISSIONER OF INCOME-TAX, SPECIAL RANGE 27

BENCH

PRAMOD KUMAR AND MS. SUSHMA CHOWLA, JJ.

JUDGMENT

1. All these twelve appeals and three cross objections pertain to the same assessee, involve some common issues and were heard together. As a matter of convenience, therefore all the twelve appeals and three cross objections are being disposed of by way of this consolidated order. The twelve appeals consist of six set of cross appeals for the assessment years 1992-93 to 1997-98. The three cross objections are for the assessment years 1993-94, 1994-95 and 1995-96.

2. We will first take up the cross appeals for the assessment year 1992-93.

3. In assessee’s appeal (i.e. ITA No. 2297/Mum. 97) only one ground is pressed before us and this ground consist of assessee’s grievance against CIT(A)’s sustaining the disallowance of Rs. 86,75,496 being expenditure incurred on mobilization of deposits abroad. This is ground No. 3; ground numbers 1 and 2 were not pressed before us. Ground Nos. 1 and 2 are therefore dismissed as withdrawn.

4. The reason of disallowance being sustained is that the expenses incurred abroad on mobilization of NRI deposits have been treated as head office expenditure within meanings of section 44C, which can only be allowed subject to the limitations placed in that section, and that the same have not been accounted for in the books of account of the Indian branches. A plain reading of the orders of the authorities below shows that the details of expenditure, along with certification by the auditors, were duly furnished at the assessment stage.

5. Having heard the rival contentions and having perused the material on record, we find that the objections taken to the deduction of the said expenditure are devoid of legally sustainable reasons. As far as the question of the expenses incurred abroad being hit by the provisions of section 44C is concerned, the law is now settled by the Hon’ble Bombay High Court in the case of CIT v. Emirates Commercial Bank Ltd. [2003] 262 ITR 55 wherein Their Lordships have held that "the expenditure which is covered by section 44C is of a common nature, which is incurred for various branches or which is incurred for the purpose of head office and the branch". Their Lordships held that the expenditure incurred exclusively for the purposes of a branch cannot be covered by section 44C. It would thus follow that the provisions of section 44C will hit only such expenditure which are not being capable of being allocable to any particular profit centre and which are required to be allocated on some general basis. The expenses on mobilization of NRI deposits cannot be said to fall in this category because these expenses are for the purpose of India specific operations where non-resident Indian deposits are of relevance. These expenses, therefore, cannot be allocated to operations in other countries or to the head office. This kind of an expenditure, in our considered view, does not fall under the scope of head office expenditure under section 44C of the Act. In the case of American Express Bank Ltd. in which a different view was taken by the Tribunal has since been reversed by the Hon’ble Bombay High Court vide judgment dated 17th July, 2003 and a copy of the said judgment was placed before us at pages 16 to 18 of the paper book. Learned counsel has invited our attention to Tribunal decisions, in favour of the assessee, on the same issue in the cases of Abu Dhabi Commercial Bank, and ABM Amro Bank as well. Copies of these decisions were also placed before us in the paper book. In the light of these discussions, we are of the considered view that the objection of the revenue is devoid of legally sustainable merits. As far as the question of expenditure not being debited in the books of account of India operations is concerned, this is not really relevant in the light of law laid down by the Hon’ble Supreme Court in the case of Kedarnath Jute Mills Co. Ltd. [1971] 82 ITR 363. As long as the expenditure is really incurred and is otherwise deductible, the deduction cannot be declined on the ground that it has not been debited in the books of account. We have also noted that as noted in the Assessing Officer’s order itself, the requisite details were duly furnished by the assessee. Keeping all these factors in mind, as also entirety of the case, we deem it fit and proper to delete the impugned disallowance of Rs. 86,75,496. The assessee gets relief accordingly.

6. Ground No. 3 is thus allowed.

7. In the result, assessee’s appeal for the assessment year 1992-93 is partly allowed in the terms indicated above.

8. We now take up revenue’s appeal for the assessment year 1992-93 i.e., ITA No. 2501/Mum./99.

9. In the first ground of appeal, revenue is aggrieved of CIT(A)’s deleting the disallowance in respect of club subscriptions.

10. Learned representatives fairly agreed that the issue is covered by the judgment of Hon’ble Bombay High Court in the case of Otis Elevator Co. India Ltd. v. CIT [1992] 195 ITR 682 and in assessee’s own case for the assessment year 1989-90. Learned Departmental Representative, however, dutifully relied upon the order of the Assessing Officer. Respectfully following Hon’ble Bombay High Court and respectfully following co- ordinate bench in assessee’s own case, we confirm the order of the CIT(A) and decline to interfere in the matter.

11. Ground No. 1 thus fails.

12. In the second ground of appeal, revenue is aggrieved of CIT(A)’s deleting the addition on account of interest receipt from its overseas branches.

13. This issue is also covered, in favour of the assessee, by Tribunal’s decisions for the assessment years 1982-83 and 1989-90. We see no reasons to take any other view of the matter than the view so taken by the co-ordinate benches. We, therefore, confirm the order of the CIT(A) on this issue as well and decline to interfere in the matter.

14. Ground No. 2 is also therefore dismissed.

15. In ground No. 3, revenue is aggrieved of CIT(A) deleting the disallowance under section 40A(9)/37(2A) on account of holiday home and amount paid to staff sports club.

16. This issue is also covered in favour of the assessee by Tribunal’s decision in the case of Banque Nationale De Paris v. IAC [1991] 39 ITD 224 (Bom.) and by Hon’ble Bombay High Court’s judgment in the case of CIT v. Bharat Petroleum Corpn. Ltd. [2001] 252 ITR 43 . We agree with the authorities below that payment made for rent of holiday home cannot be construed in the nature of entertainment, and that since the payments made to the sports club are reimbursements in character, provisions of section 40A(9) will not be attracted. Revenue’s grievance is not sustainable in law, and, accordingly, we reject the same.

17. Ground No. 3 is also dismissed.

18. In fourth ground of appeal, revenue is aggrieved that the CIT(A) erred in deleting the disallowance of salaries in respect of expatriate staff posted in India.

19. There is no dispute that the expatriate employees in question were working exclusively for the India operations. Following the discussions in paragraph 5 above, these expenses cannot be treated as head office expenses and have to be allowed in computation of income of India operations which is taxable in India. This view is also directly approved by Tribunals decision in the case of ABM Amro Bank v. JCIT a copy of which was placed before us at page 13 of the compilation. In this view of the matter, and having heard rival contentions on the issue, we see no reasons to disturb the findings of the CIT(A). We confirm the same and decline to interfere in the matter.

20. Ground No. 4 is also thus dismissed.

21. In the result, revenue’s appeal is dismissed.

22. We now take up the cross appeals for the assessment year 1993-94.

23. First, ITA No. 6402/Mum./96, i.e. assessee’s appeal for the assessment year 1993-94.

24. Ground No. 1 is not pressed. It is therefore dismissed for want of prosecution.

25. In ground No. 2, the assessee has challenged CIT(A)’s confirming the disallowance of Rs. 1,48,45,709 on account of NRI finds mobilization as head office expenses.

26. Following the view taken by us for the assessment year 1992-93, as elaborated in paragraph 5 above, we deem it fit and proper to delete the disallowance. The assessee gets relief accordingly.

27. Ground No. 2 is thus allowed.

28. In ground No. 3, assessee is aggrieved of CIT(A) confirming the disallowance under section 37(2A) on account of holiday home expenses.

29. Following the view taken by us for the assessment year 1992-93 earlier in this order, we direct the Assessing Officer to delete the disallowance. The assessee gets the relief accordingly.

30. In ground No. 4, the assessee is aggrieved that the CIT(A) erred in upholding the Assessing Officer’s action in adjusting the closing provision under section 36(1)(viia) against the bad debts written off during the year.

31. Learned representatives agree that this issue is also a covered issue by the order dated 27th November, 2003 in the case of Oman International Bank, Saog v. Dy. CIT [2005] 92 ITD 76 (Mum.) which was authored by one of us (i.e. the Accountant Member). Learned DR however dutifully relies upon the orders of the authorities below. We, however, see no reasons to take any other view of the matter than the view so taken by the co-ordinate Bench. Following the same, we reverse the action of the CIT(A) and direct the Assessing Officer to recompute the admissible deduction under section 36(1)(viia) in the light of the principles laid down in Oman International Bank’s case (supra). The assessee gets the relief accordingly.

32. Ground No. 4 is thus allowed.

33. In the fifth ground of appeal, the assessee has raised a grievance that the CIT(A) erred in not entertaining a ground of appeal regarding deduction for interest credited in suspense account in respect of the bad debts written off and allowed as deduction.

34. Having heard the rival contentions and having perused the material on record, we are of the considered view that the appellant deserves to succeed on this issue as well. It is no longer res integra that an issue can be raised for the first time in the appellate proceedings. The authority, if needed, is contained in Hon’ble Supreme Court’s judgment in the case of Jute Corpn. of India Ltd. Once the debts have been considered to be bad and written off, it is only a natural corollary to such a write off that the interest debited in the suspense account in respect of such a write off is also be allowed as an admissible deduction. We, therefore, deem it fit and proper to remit this issue to the file of the Assessing Officer for adjudication de novo, in the light of the above observations and on merits. The ground is to be treated as allowed for statistical purposes.

35. Ground No. 5 is allowed for statistical purposes.

36. Ground No. 6 is not pressed and is dismissed as such.

37. In the result, assessee’s appeal for the assessment year 1993-94 is partly allowed.

38. We now take up ITA No. 5842/Mum./96, i.e., revenue’s appeal for the assessment year 1993-94.

39. In the first ground of appeal, revenue is aggrieved of CIT(A)’s deleting the disallowance in respect of club subscriptions.

40. Learned representatives fairly agreed that the issue is covered by the judgment of Hon’ble Bombay High Court in the case of Otis Elevator Co. India Ltd. (supra) and in assessee’s own case for the assessment year 1989-90. Learned Departmental Representative, however, dutifully relied upon the order of the Assessing Officer. Respectfully following Hon’ble Bombay High Court and respectfully following co-ordinate bench in assessee’s own case, we confirm the order of the CIT(A) and decline to interfere in the matter.

41. Ground No. 1 thus fails.

42. In the second ground of appeal, revenue is aggrieved of CIT(A)’s deleting the addition on account of interest receipt from its overseas branches.

43. This issue is also covered, in favour of the assessee, by Tribunal’s decisions for the assessment years 1982-83 and 1989-90. We see no reasons to take any other view of the matter than the view so taken by the co-ordinate benches. We, therefore, confirm the order of the CIT(A) on this issue as well and decline to interfere in the matter.

44. Ground No. 2 is also therefore dismissed.

45. In third ground of appeal, revenue is aggrieved that the CIT(A) erred in deleting the disallowance of salaries in respect of expatriate staff posted in India.

46. There is no dispute that the expatriate employees in question were working exclusively for the India operations. Following the discussions in paragraph 5 above, these expenses cannot be treated as head office expenses and have to be allowed in computation of income of India operations which is taxable in India. This view is also directly approved by Tribunals decision in the case of ABM Amro Bank v. J CIT, a copy of which was placed before us at page 13 of the compilation. In this view of the matter, and having heard rival contentions on the issue, we see no reasons to disturb the findings of the CIT(A). We confirm the same and decline to interfere in the matter.

47. Ground No. 3 is also thus dismissed.

48. In the result, revenue’s appeal is dismissed.

49. We now take up the cross appeals for the assessment year 1994-95.

50. First, ITA No. 649/Mum./98 i.e. assessee’s appeal for the assessment year 1994-95.

51. In ground No. 1, the assessee has challenged CIT(A)’s confirming the disallowance of Rs. 1,73,81,797 on account of NRI finds mobilization as head office expenses.

52. Following the view taken by us for the assessment year 1992-93, as elaborated in paragraph 5 above, we deem it fit and proper to delete the disallowance. The assessee gets relief accordingly.

53. Ground No. 1 is thus allowed.

54. In ground No. 4, the assessee is aggrieved that the CIT(A) erred in upholding the Assessing Officer’s action in adjusting the closing provision under section 36(1)(viia) against the bad debts written off during the year.

55. Learned representatives agree that this issue is also a covered issue by the order dated 27th November, 2003 in the case of Oman International Bank, Saog (supra) which was authored by one of us (i.e. the Accountant Member). Learned DR however dutifully relies upon the orders of the authorities below. We, however, see no reasons to take any other view of the matter than the view so taken by the co-ordinate bench. Following the same, we reverse the action of the CIT(A) and direct the Assessing Officer to recompute the admissible deduction under section 36(1)(viia) in the light of the principles laid down in Oman International Bank’s case. The assessee gets the relief accordingly.

56. Ground No. 2 is thus allowed.

57. In the third ground of appeal, the assessee has raised a grievance that the CIT(A) erred in not entertaining a ground of appeal regarding deduc- tion for interest credited in suspense account in respect of the bad debts written off and allowed as deduction.

58. Having heard the rival contentions and having perused the material on record, we are of the considered view that the appellant deserves to succeed on this issue as well. It is no longer res integra that an issue can be raised for the first time in the appellate proceedings. The authority, if needed, is contained in Hon’ble Supreme Court’s judgment in the case of Jute Corpn. of India Ltd. Once the debts have been considered to be bad and written off, it is only a natural corollary to such a write off that the interest debited in the suspense account in respect of such a write off is also be allowed as an admissible deduction. We, therefore, deem it fit and proper to remit this issue to the file of the Assessing Officer for adjudication de novo, in the light of the above observations and on merits. The ground is to be treated as allowed for statistical purposes.

59. Ground No. 3 is allowed for statistical purposes.

60. In the result, assessee’s appeal for the assessment year 1994-95 is partly allowed.

61. ITA No. 751/Mum./98 is revenue’s appeal for the assessment year 1994-95.

62. In the first ground of appeal, revenue is aggrieved of CIT(A)’s deleting the disallowance in respect of club subscriptions.

63. Learned representatives fairly agreed that the issue is covered by the judgment of Hon’ble Bombay High Court in the case of Otis Elevator Co. India Ltd. (supra) and in assessee’s own case for the assessment year 1989-90. Learned Departmental Representative, however, dutifully relied upon the order of the Assessing Officer. Respectfully following Hon’ble Bombay High Court and respectfully following co-ordinate bench in assessee’s own case. We confirm the order of the CIT(A) and decline to interfere in the matter.

64. Ground No. 1 thus fails.

65. In the second ground of appeal, revenue is aggrieved of CIT(A)’s deleting the addition on account of interest receipt from its overseas branches.

66. This issue is also covered, in favour of the assessee, by Tribunal’s decisions for the assessment years 1982-83 and 1989-90. We see no reasons to take any other view of the matter than the view so taken by the co-ordinate benches. We, therefore, confirm the order of the CIT(A) on this issue as well and decline to interfere in the matter.

67. Ground No. 2 is also therefore dismissed.

68. In ground No. 3, revenue is aggrieved of CIT(A) deleting the disallowance under section 40A(9) on account of holiday home expenses paid to the employees’ staff union.

69. This issue is also covered in favour of the assessee by Tribunal’s decision in the case of Banque Nationale De Paris and by Hon’ble Bombay High Court’s judgment in the case of Bharat Petroleum Corpn. Ltd. (supra). We agree with the authorities below that payment made for rent of holiday home is reimbursements in character, provisions of section 40A(9) will not be attracted. Revenue’s grievance is not sustainable in law, and, accordingly, we reject the same.

70. Ground No. 3 is also dismissed.

71. In fourth ground of appeal, revenue is aggrieved that the CIT(A) erred in deleting the disallowance of salaries in respect of expatriate staff posted in India.

72. There is no dispute that the expatriate employees in question were working exclusively for the India operations. Following the discussions in paragraph 5 above, these expenses cannot be treated as head office expenses and have to be allowed in computation of income of India operations which is taxable in India. This view is also directly approved by Tribunals decision in the case of ABM Amro Bank v. JCIT, a copy of which was placed before us at page 13 of the compilation. In this view of the matter, and having heard rival contentions on the issue, we see no reasons to disturb the findings on the CIT(A). We confirm the same and decline to interfere in the matter.

73. Ground No. 4 is also thus dismissed.

74. In the result, revenue’s appeal is dismissed.

75. We now take up cross appeals for the assessment year 1995-96.

76. First, assessee’s appeal i.e. ITA No. 5895/Mum./98.

77. In assessee’s appeal only one ground is pressed before us and this ground consist of assessee’s grievance against CIT(A)’s sustaining the disallowance of Rs. 1,33,05,615 being expenditure incurred on mobilization of deposits abroad. This is ground No. 1; ground number 2 was not pressed before us. Ground No. 2 is therefore dismissed as withdrawn.

78. The reason of disallowance being sustained is that the expenses incurred abroad on mobilizaton of NRI deposits have been treated as head office expenditure within meanings of section 44C, which can only be allowed subject to the limitations placed in that section, and that the same have not been accounted for in the books of account of the Indian branches. A plain reading of the orders of the authorities below shows that the details of expenditure, along with certification by the auditors, were duly furnished at the assessment stage.

79. Having heard the rival contentions and having perused the material on record, we find that the objections taken to the deduction of the said expenditure are devoid of legally sustainable reasons. As far as the question of the expenses incurred abroad being hit by the provisions of section 44C is concerned, the law is now settled by the Hon’ble Bombay High Court in the case of Emirates Commercial Bank Ltd. (supra) wherein Their Lordships have held that "the expenditure which is covered by section 44C is of a common nature, which is incurred for various branches or which is incurred for the purpose of head office and the branch". Their Lordships held that the expenditure incurred exclusively for the purposes of a branch cannot be covered by section 44C. It would thus follow that the provisions of section 44C will hit only such expenditure which are not being capable of being allocable to any particular profit centre and which are required to be allocated on some general basis. The expenses on mobilization of NRI deposits cannot be said to fall in this category because these expenses are for the purpose of India specific operations where non-resident Indian deposits are of relevance. These expenses, therefore, cannot be allocated to operations in other countries or to the head office. This kind of an expenditure, in our considered view, does not fall under the scope of head office expenditure under section 44C of the Act. In the case of American Express Bank Ltd. in which a different view was taken by the Tribunal has since been reversed by the Hon’ble Bombay High Court vide judgment dated 17th July, 2003 and a copy of the said judgment was placed before us at pages 16 to 18 of the paper book. Learned counsel has invited our attention to Tribunal decisions, in favour of the assessee, on the same issue in the cases of Abu Dhabi Commercial Bank, and ABM Amro Bank as well. Copies of these decisions were also placed before us in the paper book. In the light of these discussions, we are of the considered view that the objection of the revenue is devoid of legally sustainable merits. As far as the question of expenditure not being debited in the books of account of India operations is concerned, this is not really relevant in the light of law laid down by the Hon’ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. (supra). As long as the expenditure is really incurred and is otherwise deductible, the deduction cannot be declined on the ground that it has not been debited in the books of account. We have also noted that as noted in the Assessing Officer’s order itself, the requisite details were duly furnished by the assessee. Keeping all these factors in mind, as also entirety of the case, we deem it fit and proper to delete the impugned disallowance of Rs. 86,75,496. The assessee gets relief accordingly.

80. Ground No. 1 is thus allowed.

81. The assessee’s appeal for the assessment year 1995-96 is thus partly allowed in the terms indicated above.

82. ITA No. 5514/Mum./98 is revenue’s appeal for the assessment year 1995-96.

83. In the first ground of appeal, revenue is aggrieved of CIT(A)’s deleting the disallowance in respect of club subscriptions.

84. Learned representatives fairly agreed that the issue is covered by the judgment of Hon’ble Bombay High Court in the case of Otis Elevator Co. India Ltd. (supra) and in assessee’s own case for the assessment year 1989-90. Learned Departmental Representative, however, dutifully relied upon the order of the Assessing Officer. Respectfully following Hon’ble Bombay High Court and respectfully following co-ordinate bench in assessee’s own case, we confirm the order of the CIT(A) and decline to interfere in the matter.

85. Ground No. 1 thus fails.

86. In ground No. 2, revenue is aggrieved of CIT(A) deleting the disallowance under section 40A(9) on account of holiday home expenses paid to the employees’ staff union.

87. This issue is also covered in favour of the assessee by Tribunal’s decision in the case of Banque Nationale De Paris (supra) and by Hon’ble Bombay High Court’s judgment in the case of Bharat Petroleum Corpn. Ltd. (supra). We agree with the authorities below that payment made for rent of holiday home is reimbursements in character, provisions of section 40A(9) will not be attracted. Revenue’s grievance is not sustainable in law, and, accordingly, we reject the same.

88. Ground No. 2 is also dismissed.

89. In third ground of appeal, revenue is aggrieved that the CIT(A) erred in deleting the disallowance of salaries in respect of expatriate staff posted in India.

90. There is no dispute that the expatriate employees in question were working exclusively for the India operations. Following the discussions in paragraph 5 above, these expenses cannot be treated as head office expenses and have to be allowed in computation of income of India operations which is taxable in India. This view is also directly approved by Tribunals decision in the case of ABM Amro Bank v. JCIT a copy of which was placed before us at page 13 of the compilation. In this view of the matter, and having heard rival contentions on the issue, we see no reasons to disturb the findings of the CIT(A). We confirm the same and decline to interfere in the matter.

91. Ground No. 3 is also thus dismissed.

92. In the result, revenue’s appeal for the assessment year 1995-96 is dismissed.

93. We now take up cross appeals for the assessment year 1996-97.

94. First, assessee’s appeal i.e. ITA No. 3787/Mum./2000.

95. Ground No. 1 consists of assessee’s grievance against CIT(A)’s sustaining the disallowance of Rs. 1,04,41,025 being expenditure incurred on mobilization of deposits abroad.

96. The reason of disallowance being sustained is that the expenses incurred abroad on mobilization of NRI deposits have been treated as head office expenditure within meanings of section 44C, which can only be allowed subject to the limitations placed in that section, and that the same have not been accounted for in the books of account of the Indian branches. A plain reading of the orders of the authorities below shows that the details of expenditure, along with certification by the auditors, were duly furnished at the assessment stage.

97. Having heard the rival contentions and having perused the material on record, we find that the objections taken to the deduction of the said expenditure are devoid of legally sustainable reasons. As far as the question of the expenses incurred abroad being hit by the provisions of section 44C is concerned, the law is now settled by the Hon’ble Bombay High Court in the case of Emirates Commercial Bank Ltd. (supra) wherein Their Lordships have held that "the expenditure which is covered by section 44C is of a common nature, which is incurred for various branches or which is incurred for the purpose of head office and the branch". Their Lordships held that the expenditure incurred exclusively for the purposes of a branch cannot be covered by section 44C. It would thus follow that the provisions of section 44C will hit only such expenditure which are not being capable of being allocable to any particular profit centre and which are required to be allocated on some general basis. The expenses on mobilization of NRI deposits cannot be said to fall in this category because these expenses are for the purpose of India specific operations where non-resident Indian deposits are of relevance. These expenses, therefore, cannot be allocated to operations in other countries or to the head office. This kind of an expenditure, in our considered view, does not fall under the scope of head office expenditure under section 44C of the Act. In the case of American Express Bank Ltd. in which a different view was taken by the Tribunal has since been reversed by the Hon’ble Bombay High Court vide judgment dated 17th July, 2003 and a copy of the said judgment was placed before us at pages 16 to 18 of the paper book. Learned counsel has invited our attention to Tribunal decisions, in favour of the assessee, on the same issue in the cases of Abu Dhabi Commercial Bank, and ABM Amro Bank as well. Copies of these decisions were also placed before us in the paper book. In the light of these discussions, we are of the considered view that the objection of the revenue is devoid of legally sustainable merits. As far as the question of expenditure not being debited in the books of account of India operations is concerned, this is not really relevant in the light of law laid down by the Hon’ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. (supra). As long as the expenditure is really incurred and is otherwise deductible, the deduction cannot be declined on the ground that it has not been debited in the books of account. We have also noted that as noted in the Assessing Officer’s order itself, the requisite details were duly furnished by the assessee. Keeping all these factors in mind, as also entirety of the case, we deem it fit and proper to delete the impugned disallowance of Rs. 86,75,496. The assessee gets relief accordingly.

98. Ground No. 1 is thus allowed.

99. Ground No. 2 is not pressed and the same is, accordingly, dismissed for want of prosecution.

100. In second ground of appeal, the assessee is aggrieved that the CIT(A) erred in upholding the disallowance of loss on revaluation of Rs. 4,73,527.

101. Learned representatives have agreed that the issue in appeal is covered in favour of the assessee by Tribunal’s decision in the case of Deutsche Bank v. DCIT [2003] 86 ITD 431 . Learned Departmental Representative, however, dutifully relied upon the orders of the authorities below. We see no reasons to take any other view of the matter than the view so taken by the co-ordinate bench. We have also noted that in the other years in assessee’s own case, the relief given on this issue by the CIT(A) has been accepted by the revenue and is not challenged in further appeal. There cannot be any good reasons for the revenue to take a different stand for this year. In view of these discussions, as also bearing in mind entirety of the case, we deem it fit and proper to delete the impugned disallowance. The assessee gets relief on this issue as well.

102. Ground No. 3 is thus allowed.

103. In the result, assessee’s appeal is partly allowed for the assessment year 1996-97 as well.

104. The assessee’s appeal for the assessment year 1995-96 is thus partly allowed in the terms indicated above.

105. ITA No. 3899/Mum./2000 is revenue’s appeal for the assessment year 1996-97.

106. In the only ground of appeal, revenue is aggrieved that the CIT(A) erred in deleting the disallowance of salaries in respect of expatriate staff posted in India.

107. There is no dispute that the expatriate employees in question were working exclusively for the India operations. Following the discussions in paragraph 5 above, these expenses cannot be treated as head office expenses and have to be allowed in computation of income of India operations which is taxable in India. This view is also directly approved by Tribunals decision in the case of ABM Amro Bank v. JCIT a copy of which was placed before us at page 13 of the compilation. In this view of the matter, and having heard rival contentions on the issue, we see no reasons to disturb the findings of the CIT(A). We confirm the same and decline to interfere in the matter.

108. In the result, revenue’s appeal for the assessment year 1996-97 is dismissed.

109. We now take up cross appeals for the assessment year 1997-98.

110. First, assessee’s appeal i.e. ITA No. 5340/Mum./2000.

111. In assessee’s appeal only one ground is pressed before us and this ground consist of assessee’s grievance against CIT(A)’s sustaining the disallowance of Rs. 72,62,537 being expenditure incurred on mobilization of deposits abroad. This is ground No. 1; ground number 2 was not pressed before us. Ground No. 2 is therefore dismissed as withdrawn. Learned counsel states that the additional ground filed by the assessee is not being pressed. The same is also, therefore, dismissed as not pressed.

112. The reason of disallowance being sustained is that the expenses incurred abroad on mobilization of NRI deposits have been treated as head office expenditure within meanings of section 44C, which can only be allowed subject to the limitations placed in that section, and that the same have not been accounted for in the books of account of the Indian branches. A plain reading of the orders of the authorities below shows that the details of expenditure, along with certification by the auditors, were duly furnished at the assessment stage.

113. Having heard the rival contentions and having perused the material on record, we find that the objections taken to the deduction of the said expenditure are devoid of legally sustainable reasons. As far as the question of the expenses incurred abroad being hit by the provisions of section 44C is concerned, the law is now settled by the Hon’ble Bombay High Court in the case of Emirates Commercial Bank Ltd. (supra) wherein Their Lordships have held that "the expenditure which is covered by section 44C is of a common nature, which is incurred for various branches or which is incurred for the purpose of head office and the branch". Their Lordships held that the expenditure incurred exclusively for the purposes of a branch cannot be covered by section 44C. It would thus follow that the provisions of section 44C will hit only such expenditure which are not being capable of being allocable to any particular profit centre and which are required to be allocated on some general basis. The expenses on mobilization of NRI deposits cannot be said to fall in this category because these expenses are for the purpose of India specific operations where non-resident Indian deposits are of relevance. These expenses, therefore, cannot be allocated to operations in other countries or to the head office. This kind of an expenditure, in our considered view, does not fall under the scope of head office expenditure under section 44C of the Act. In the case of American Express Bank Ltd. in which a different view was taken by the Tribunal has since been reversed by the Hon’ble Bombay High Court vide judgment dated 17th July, 2003 and a copy of the said judgment was placed before us at pages 16 to 18 of the paper book. Learned counsel has invited our attention to Tribunal decisions, in favour of the assessee, on the same issue in the cases of Abu Dhabi Commercial Bank, and ABM Amro Bank as well. Copies of these decisions were also placed before us in the paper book. In the light of these discussions, we are of the considered view that the objection of the revenue is devoid of legally sustainable merits. As far as the question of expenditure not being debited in the books of account of India operations is concerned, this is not really relevant in the light of law laid down by the Hon’ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. As long as the expenditure is really incurred and is otherwise deductible, the deduction cannot be declined on the ground that it has not been debited in the books of account. We have also noted that as noted in the Assessing Officer’s order itself, the requisite details were duly furnished by the assessee. Keeping all these factors in mind, as also entirety of the case, we deem it fit and proper to delete the impugned disallowance of Rs. 86,75,496. The assessee gets relief accordingly.

114. Ground No. 1 is thus allowed.

115. The assessee’s appeal for the assessment year 1997-98 is thus partly allowed in the terms indicated above.

116. ITA No. 4908/Mum./2000 is revenue’s appeal for the assessment year 1997-98.

117. In first ground of appeal, revenue is aggrieved that the CIT(A) erred in deleting the disallowance of salaries in respect of expatriate staff posted in India. The quantum of disallowance is Rs. 58,72,169.

118. There is no dispute that the expatriate employees in question were working exclusively for the India operations. Following the discussions in paragraph 5 above, these expenses cannot be treated as head office expenses and have to be allowed in computation of income of India operations which is taxable in India. This view is also directly approved by Tribunals decision in the case of ABM Amro Bank v. JCIT, a copy of which was placed before us at page 13 of the compilation. In this view of the matter, and having heard rival contentions on the issue, we see no reasons to disturb the findings of the CIT(A). We confirm the same and decline to interfere in the matter.

119. Ground No. 1 is thus dismissed.

120. In the second ground of appeal, revenue is aggrieved of CIT(A)’s deleting the disallowance in respect of club subscriptions.

121. Learned representatives fairly agreed that the issue is covered by the judgment of Hon’ble Bombay High Court in the case of Otis Elevator Co. India Ltd. (supra) and in assessee’s own case for the assessment year 1989-90. Learned Departmental Representative, however, dutifully relied upon the order of the Assessing Officer. Respectfully following Hon’ble Bombay High Court and respectfully following co-ordinate bench in assessee’s own case, we confirm the order of the CIT(A) and decline to interfere in the matter.

122. Ground No. 2 also thus fails.

123. In ground No. 3, revenue is aggrieved that the CIT(A) ought to have held that the exemption under section 10(15) is on net income and not the gross receipts.

124. Having heard the rival contentions and having perused the material on records, we find that this issue is also covered, in favour of the assessee, by Tribunal’s order dated 6th June, 2002 in the case of State Bank of India v. Jt. CIT, a copy of which was placed before us at page 29 of the compilation of papers. In any event, the provisions of section 10(15)(iv) are very clear and unambiguous. What is exempt under the said section is ‘interest payable’ and not the income by way of the interest. Revenue’s grievance is devoid of any substance and we reject the same.

125. Ground No. 3 is also dismissed.

126. In the result, revenue’s appeal for the assessment year 1997-98 is dismissed.

127. That leaves us with the three cross objections filed by the assessee for the assessment years 1993-94, 1994-95 and 1995-96. None of these cross objections are pressed before us.

128. In the result, all the three assessee’s cross objections are dismissed.

 

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