ORDER SHEET IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE ITA No. 175 of 2004 BANK OF TOKYO MITSUBISHI LTD Versus DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, MUMBAI BEFORE: Hon'ble JUSTICE SOUMITRA PAL Hon'ble JUSTICE ARINDAM SINHA Date : 17th November, 2014. Mr.Nageswar Rao,Adv. with Mr. Arijit Basu, Adv. Md. Nizamuddin, Adv. Court : This appeal has been preferred under section 260A of Income Tax Act, 1961 against order dated 13.1.2003 passed by learned Income Tax Appellate Tribunal Bench, Kolkata in M.A. No. 218/Kol/2002 arising out of ITA No. 635/Cal/99 filed by Joint Commissioner of Income tax, Special Range-3, Kolkata in case of Bank of Tokyo-Mitsubishi Limited relating to assessment year 1995-96. assessee in its appeal has raised several questions for adjudication as stated in paragraph-9 of stay application. Heard Mr. Nageswar Rao, learned Advocate for appellant and Md. Nizamuddin, learned Advocate for Revenue. They submitted that issue is 2 covered by judgment in ABN Amro Bank NV-vs-CIT, WB-III, Kolkata and Another: 343 ITR 81 (Cal). We accordingly admit appeal on following questions : 1. Whether interest payment made by Indian Branch of appellant to its head office abroad was to be allowed as deduction in computing profits of appellant s branch in India ? 2. Whether making such payment to head office, appellant s said branch was required to deduct tax at source under section 195 of Income Tax Act, 1961 ? By consent of parties, appeal is taken up for hearing. We are in respectful agreement with reasoning given in ABN Amro (supra) wherein it has been held as under : unnecessary complication has been created by interpretation made of section 40(a)(i) of Income Tax Act read with section 195 of Act by both appellant and respondents. First of all, proper meaning has to be ascribed to expression chargeable under provisions of this Act. Section 195(1) says that, if any interest is paid by person to foreign company, which interest is chargeable under provisions of this Act tax should be deducted at source. word chargeable is not to be taken as qualifying only phrase any other sum only but it qualifies word interest also. This interpretation is supported by phrase in parenthesis, namely, not being income chargeable under head salaries . Therefore, meaning of this section is that such interest must be 3 chargeable under provisions of this Act. To simplify matter, this interest must be accounted for or credited in account of some person who is chargeable under Act. In other words, this remittance of interest must result in income which is chargeable under Act. In those circumstances tax may be deducted at source. But where this interest is not so chargeable, no tax is deducted. In this case, by virtue of above convention, head office of appellant is not liable to pay any tax under Act. Therefore, in our opiniion, there was and still is no obligation on part of appellant s said branch to deduct tax while making interest remittance to its head office or any other foreign branch. issues raised by questions above stand settled by aforesaid judgement. It has been brought to our notice that Special Leave Petition preferred from judgement in ABN Amro (supra) to Hon ble Supreme Court was dismissed by order dated 3rd August, 2012. We answer first question in positive and second in negative both in favour of appellant. For reasons given above appeal is allowed. (SOUMITRA PAL, J.) (ARINDAM SINHA, J.) km/ssaha AR(CR) Bank of Tokyo Mitsubhi Ltd. v. Director of Income-tax, International Taxation, Mumbai