2019 (4) TMI 2099 - AT - Income Tax

Tribunal grants relief on tax rates and deductions under India-France treaty

BNP Paribas Versus Deputy Commissioner of Income Tax (International Taxation) -1 (3) (1), Mumbai

BNP Paribas Versus Deputy Commissioner of Income Tax (International Taxation) -1 (3) (1), Mumbai - TMI Issues Involved:1. Applicability of tax rate under India-France tax treaty for domestic companies and co-operative banks.2. Tax treatment of data processing fees paid by Indian Branch offices to Singapore branch under the India-France tax treaty.3. Levying surcharge and education cess on tax computed under the treaty.4. Recomputation of deduction under section 44C of the Income Tax Act.5. Short credit of taxes deducted at source.6. Charging of interest.7. Initiation of penalty under section 271(1)(c).Analysis:Issue 1:The first ground of appeal raised by the assessee pertains to the applicability of tax rates under the India-France tax treaty for domestic companies and co-operative banks. The Tribunal upheld the order of the Ld. CIT(A) based on previous decisions in similar cases, where it was ruled that the higher tax rate for foreign companies does not violate the non-discrimination clause. The Tribunal cited relevant legal provisions and precedents to dismiss the appeal on this ground.Issue 2:The second ground of appeal concerns the tax treatment of data processing fees paid by Indian Branch offices to the Singapore branch under the India-France tax treaty. The Tribunal, following its own precedent and a Special Bench decision, ruled in favor of the assessee. It held that such payments cannot be taxed in India as they do not give rise to income taxable under domestic law or the relevant tax treaty. The Tribunal directed the Assessing Officer to delete the impugned disallowance, providing relief to the assessee.Issue 3:Regarding the third and fourth grounds of appeal, which involve levying surcharge, education cess, and re-computing deductions under section 44C of the Act, the Tribunal deemed them academic in light of the decision on the second ground. These grounds were allowed accordingly.Issue 4:The fifth ground of appeal relates to a short credit of taxes deducted at source. The Tribunal directed the Assessing Officer to verify the facts and grant credit of taxes deducted at source as per the provisions of the Act, after affording the assessee a reasonable opportunity to be heard.Issue 5:The sixth ground of appeal concerning the charging of interest was considered consequential, and no specific action was taken as it was linked to other issues addressed in the judgment.Issue 6:As the penalty under section 271(1)(c) had only been initiated, the seventh ground of appeal was deemed premature by the Tribunal.In conclusion, the Tribunal partly allowed the appeal, providing relief to the assessee on certain grounds while deeming others as academic or premature. The judgment was pronounced on 22/04/2019.This detailed analysis covers each issue raised in the judgment, outlining the Tribunal's reasoning and decisions on each ground of appeal presented by the assessee.