$ 30 & 36 * IN HIGH COURT OF DELHI AT NEW DELHI + ITA 1066/2017 COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-3 ..... Appellant Through: Mr. Rahul Chaudhary, Sr. Standing Counsel with Mr. Sanjay Kumar, Jr. Standing Counsel versus BANK OF TOKYO MITSUBISHI UFJ LTD. ..... Respondent Through: Mr. Sparsh Bhargava, Adv. + ITA 1072/2017 COMMISISONER OF INCOME TAX (INTERNATIONAL TAXATION)-3 ..... Appellant Through: Mr. Rahul Chaudhary, Sr. Standing Counsel with Mr. Sanjay Kumar, Jr. Standing Counsel versus BANK OF TOKYO-MITSUBISHI UFJ LTD. ..... Respondent Through: Mr. Sparsh Bhargava, Adv. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE SANJEEV SACHDEVA ORDER % 28.11.2017 CM No. 43180/2017 (condonation of delay in filing appeal) and 43181/2017 (condonation of delay in re-filing appeal) in ITA 1066/2017 CM No. 43182/2017 (condonation of delay in re-filing appeal) ITA 1066/2017 & 1072/2017 Page 1 in ITA No. 1072/2017 For reasons stated in applications, delay in filing and re-filing appeals are condoned. applications stand disposed of. ITA Nos. 1066/2017 & 1072/2017 1. present appeals urge five questions of law. assessee concededly is Permanent Establishment (PE). Returns filed were assessed under Section 143(3), for AY 2010-11 in present case. AO made certain disallowances i.e. on account of salary paid to expatriate employees based in Japan where assessee s Head Office is located; and also held that Section 115JB of Income Tax Act applied. Furthermore, AO also sought to apply Section 234(B) of Income Tax Act charging interest, on basis that, deducter was bound to ensure that TDS payments were retained. 2. Upon analysis of provisions of Income Tax Act, 1961 and relevant stipulations in India Japan Double Taxation Avoidance Agreement and various sub-articles, ITAT was of opinion that all said income sought to be brought to tax could not be sustained and accordingly deleted them. 3. This Court notices that so far as first two questions i.e. payments made to expatriate employees in assessee s Head Office and applicability of Section 115JB are concerned, common order for AY 2007-08 and 2008-09 (In ITA 604-605/2015) in Commissioner of Income Tax Vs. Bank of Tokyo Mitsubishi UFJ Ltd. ITA 1066/2017 & 1072/2017 Page 2 was decided on 08.04.2016. Court had then observed as follows:- 9. first question urged concerns payment of salaries to expatriates. In deciding this issue in favour of Assessee, ITAT has in impugned common order referred to and relied upon decision of its coordinate bench at Kolkata in ABN Amor Bank v. JCIT (2005)97 ITD 1(ITAT [Kol]). Further ITAT followed decision of Bombay High Court in CIT v. Emirates Commercial Bank Ltd. (2003) 262 ITR 55 (Bom.) where Bombay High Court approved view taken by ITAT. ITAT agreed that expenses have been incurred wholly and exclusively by Indian branch and therefore no part of these expenses can be allocated to any other branch of HO and that there was no dispute with regard to non-applicability of Section 44C of Act. 10. This Court has perused order of Bombay High Court in Emirates Commercial (supra) where on identical facts, issue was decided in favour of Assessee. This order of Bombay High Court has been affirmed by Supreme Court by order dated 26th August 2008 in Commissioner of Income Tax v. M/s Emirates Commercial Bank Ltd., which in turn referred to order of same date in Commissioner of Income Tax. v. Deutsche Bank AG (CA No. 1544 of 2006). ITA 1066/2017 & 1072/2017 Page 3 11. In that view of matter, this Court declines to frame question on this issue. ***** ***** ***** 20. Applicability of Section 115JB 20. ITAT has after elaborate discussion had come to conclusion that Assessee's claim for lower tax will have to be accepted because Section 115JB is subject to Section 90(2) of Act and taxable income of Assessee would have to be computed in terms of Article 7(3) of DTAA. What is significant is that profit and loss account of Assessee has not been prepared in terms of Part II of Schedule VI of Companies Act, 1956 and in fact could not have been prepared in terms thereof. Consequently, question of applicability of Section 115JB did not arise. As rightly pointed out till insertion of Section 115JB, banking companies were required to prepare their accounts in terms of special acts that they were governed by, and therefore there were no computation provisions as regards such banking companies. change brought out by Section 115JB was therefore not retrospective. 4. In view of above positions, two questions do not arise. 5. So far as applicability of Section 234B goes, Court notices that issue is covered by judgment of Division Bench in JE ITA 1066/2017 & 1072/2017 Page 4 Packaged Inc. Vs. Commissioner of Income Tax (2015) 373 ITR 365 against Revenue, consequently no such question of law arises. 6. After hearing counsel, Court is of opinion that following two questions arise for consideration:- 1. Did ITAT fall into error, in facts and circumstances, with respect to additions relating to interest received by assessee s Permanent Establishment in India of deposits made by it with Head Office/Overseas Branch; 2. Whether deletion of Rs. 1,97,68,23,304/- i.e. interest received on external commercial borrowings; to Indian borrowers was justified in facts and circumstances of case? 7. We admit appeals on above questions. Mr. Sparsh Bhargava, Advocate accepts notice. These appeals shall be tagged along with ITA 191-192/2015. 8. List on 14.03.2018. S. RAVINDRA BHAT, J SANJEEV SACHDEVA, J NOVEMBER 28, 2017 rs ITA 1066/2017 & 1072/2017 Page 5 Commissioner of Income-tax (International Taxation)-3 v. Bank of Tokyo Mitsubishi UFJ Ltd