High Court at Calcutta · Judgments and reasoned final orders
The Royal Bank of Scotland, N.V. v. Director of Income Tax, International Taxation, Kolkata
ITA 439 of 2007 with GA 1 of 2014 (Old No. 3329 of 2014) ·
Automated Teller Machines (ATMs) qualify as 'computers' under Item 2B of Appendix I to the Income-tax Rules for higher depreciation (Question 4 answered for assessee), while foreign-bank tax rate, branch-to-HO interest disallowance u/s 40(a)(i), and HO-to-branch interest taxability are answered for Revenue (Questions 1–3).
1. FACTS OF THE CASE
The appellant, Royal Bank of Scotland N.V. (formerly ABN Amro Bank N.V., a Netherlands banking company operating in India through a branch PE), appealed against the ITAT Kolkata 'C' Bench order dated 09.03.2007 for AY 2002-03 on four admitted substantial questions of law: (1) applicability of domestic-company tax rate under section 2(22A), section 90 and Article 24(2) of the India-Netherlands DTAA; (2) deductibility of interest paid by the Indian PE to its head office and overseas branches without TDS under section 40(a)(i); (3) exclusion of interest received by the Indian PE from its head office and overseas branches; and (4) entitlement to higher depreciation rate on Automated Teller Machines (ATMs) by treating ATMs as 'computers' under Item 2B of Appendix I to the Income-tax Rules, 1962.
2. DISCUSSION BY THE COURT
The Division Bench answered Questions (1), (2) and (3) in the affirmative in favour of the Revenue (holding that a foreign company taxed only on Indian-source income is not in the 'same circumstances' as a domestic company under Article 24(2) read with Explanation 1 to section 90; that branch-to-HO interest claimed under the separate-entity fiction of Article 7(3) attracts section 40(a)(i) disallowance if section 195 TDS is not deducted; and that HO-to-branch interest received by the PE is taxable business income). However, on Question (4) regarding ATM depreciation (paragraphs 21-23), the Court held in favour of the assessee: an ATM is not merely a mechanical cash dispenser, but a complex digital data-processing unit relying on internal processing hardware, specialised software and continuous network communication with central banking servers. Because its core functional utility in modern banking is electronic data processing and transmission, an ATM has functional parity with a 'computer' under Item 2B of Appendix I to the Income-tax Rules and qualifies for the higher depreciation rate.
3. JUDICIAL DECISION
Allowing the appeal in part, the High Court answered substantial questions (1), (2) and (3) in the affirmative in favour of the Revenue and substantial question (4) (ATM depreciation as computer) in the negative in favour of the appellant-assessee, modifying the ITAT order dated 09.03.2007 and directing the Assessing Officer to grant consequential relief for AY 2002-03.
4. OUTCOME
Partly in favour of the assessee (Royal Bank of Scotland, N.V.) and partly in favour of the Revenue: Question 4 answered for the assessee allowing higher computer depreciation on ATMs; Questions 1, 2 and 3 answered for the Revenue.
5. AKHB REVIEW POINT
AKHB analysis: paragraphs 21-23 provide a clear functional-utility test under section 32 and Appendix I Item 2B for classifying banking ATMs and similar network-linked automated terminals as 'computers' eligible for higher computer depreciation rather than general plant and machinery.
Source: AKHB analysis based on paragraphs 21-24 / PDF pp. 7-9
Source and verification
Nine-page official Calcutta High Court judgment PDF (Form No. J(2), Original Side) in ITA 439 of 2007; paragraphs 1-26 span PDF pages 1-9.
Original PDF: 9 pages · SHA-256: 21d302ce32ecf658b797a68aa9718e3460d64f9f69c63c0c9aad58b7bc8f021a
Supplied source-reviewed note retained; original bytes and identity validation checked in this release. Substantive re-review is not claimed for this record.
Applies sections 2(22A), 2(23A), 32, 40(a)(i), 90 Explanation 1 and 195 of the Income-tax Act, 1961 read with Item 2B of Appendix I to the Income-tax Rules, 1962 and Articles 7 and 24(2) of the India-Netherlands DTAA for AY 2002-03. Income-tax Act, 2025 equivalence is not verified.
Full judgment checked. Cites Royal Bank of Scotland N.V. v. CIT, (2026) 494 ITR 171 (Cal). Note also that companion appeal ITA 191 of 2006 (20260922_WBCHCO0021802006.pdf) decided on the same date involves identical AY 1999-2000 questions already covered in ITA 257 of 2007 (hc-cal-2026-09-22-royal-bank-of-scotland). Comprehensive subsequent judicial treatment has not been verified.
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