The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Bajaj Eco Tec Products Ltd. v. ITO held that if ICICI Bank Ltd. Singapore branch is a lender of External Commercial Borrowing (ECB) then there is no default in deduction of TDS. The Tribunal directed the matter back to the AO to reconsider the matter on the basis of present evidences.
The facts of the case are that the assessee had borrowed 20 million USD External Commercial Borrowings (ECB) by an agreement with the arranger ICICI Bank Ltd., Singapore Branch. The assessee paid interest on the ECB to ICICI Bank Ltd., Singapore branch. The Assessing Officer (AO) held that the assessee as an assessee in default u/s. 201(1)/201(1A) of the Act, on the ground that the assessee has paid interest to a non resident entity located outside India which comes within the provision of section 195 of the Act. The Assessing Officer further observed that since the assessee has failed to deduct tax at source u/s. 195, he held the assessee as an assessee in default and computed short deduction of tax and interest u/s. 201(1)/201(1A) of the Act.
The AO contended that, although the assessee claims to have made payment to a resident entity, he failed to file any evidences to justify its arguments other than the agreement dated 15.03.2007.
The Tribunal after considering the evidences presented by the assessee, the arguments made by both the parties before the present Tribunal and the arguments advanced before the lower authorities was of the opinion that “there is no dispute with regard to the residential status of ICICI Bank Ltd., including its offshore branches at Singapore, Hongkong. The office of Jt. CIT(OSD)-3(1), Mumbai has clarified vide its letter dated 24.01.2011 that ICICI Bank Ltd is an Indian resident company in terms of section 6(3)(iii) of the Act, and the global income of the ICICI Bank Ltd including the offshore branch is chargeable to tax in India and is assessed to tax in India.”
Furthermore, the Tribunal held that other as per the assessee’s own record. Therefore, we are of the considered opinion that the issue needs to be reexamined by the Assessing Officer in light of the claim of the assessee that ICICI Bank Ltd., Singapore branch is the main lender. The assessee was hence directed to substantiate its case with further evidences.
The Tribunal further set the standard for adjudication by the AO mentioning that in case, the Assessing Officer found that ICICI Bank Ltd. Singapore branch is a lender of ECB then there is no default in deduction of TDS. Hence the issue to the file of AO was set aside with a direction to reconsider the issue in light of evidences filed by the assessee and pass a proper order as per law.
