TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 1355
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.... 1. In not accepting the claim that the rate of tax applicable to domestic companies and/or co-operative banks for Assessment Year 2008-09 is also applicable to the Appellant, in accordance with the provisions of Article 26 (Non-discrimination) of the India-France tax treaty. 2. In subjecting to tax, the data processing fees paid by Indian branch offices of the appellant to its Singapore branch, as income of the appellant to the tune of Rs. 18,53,83,446/- under Article 13 (Royalties and fees for technical services and payments for the use of equipment) of the India-France tax treaty." 2. Learned Representatives fairly agree that whatever we decide in ITA No.3540/Mum/2014 for the assessment year 2008-09, which we have heard along with this appeal, will apply, mutatis mutandis, to this assessment year as well, as the grievances raised by the assessee in this assessment year are identical. It is an agreed position that all the relevant material facts are the same in this assessment year as well. 3. As far as the first ground of appeal is concerned, vide our order of even date, and in assessee's own case for the assessment year 2008-09, we have observed as follows:- "3. Learn....
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....of actual costs and not the mark up. The mark up of 5% has already been offered as a suo motu disallowance in the computation of taxable income. Effectively thus, what has been added as income by the Assessing Officer is only the actual expense incurred for rendition of these services to the BNP India. 9. The fundamental question, however, is whether an internal charge on the PE can result in income in the hands of the GE or an intra GE unit. 10. In our considered view, a deduction, in respect of an internal charge, as is the inherent nature of an intra GE payment for data processing services, being allowed in the computation of income attributable to the permanent establishment in the hands does not result in an income arising in the hands of the GE. It is a notional adjustment which is allowed in the computation of profit attributable to the permanent establishment. Explaining this hypothesis, Prof. Kees Van Raad, a well known international tax academician, in his preface to "The Attribution of Profits to Permanent Establishments - The taxation of intra-company dealings [ISBN 90-76078-84-X; published by IBFD, Amsterdam]", has stated that "Since my early days of teaching int....
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....132,335,594/- applying the provisions of Article 13(Royalties, fees for technical services and payments for use of equipment) of the India-France Tax Treaty. This issue is also covered by the order of the Tribunal in assessee's own case for AY 2001-02 to 2003-04 wherein interest paid by assessee to Head Office/overseas branches was held to be not liable to tax, following was the precise observation of the Tribunal in its order dated 20-6-2012 for AY 2002- 03:- 3. The solitary issue involved in the appeal of the assessee for, the A.Y. 2002-03 relates to the addition of Rs. 1,48,30,613/- made by the A.O. and confirmed by the Ld. CIT (A) on account of "interest" paid by the Indian Branches of the assessee bank to its head office and other overseas branches. 4. The assessee, in the present case is a commercial bank having its Head Office in France. It carries on the normal banking activities Including financing of foreign trade and foreign exchange transactions in India through its eight branches situated at Mumbai, New Delhi, Kolkata, Bangalore, Pune, Ahmedabad, Chennai and Hyderabad. During the previous year relevant to A.Y. 2002-03, the Indian Branches of the assessee bank hav....
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....e said decision of Special Bench of the ITAT I which is directly applicable in the present case, we delete the addition of Rs. 1,48,30,613/- made by the A.O. and confirmed by the Ld. CIT (A) on this issue and allow the appeal of the assessee. 5.1 The issue has also been dealt by the Special Bench of the Tribunal in the case of Sumitomo Mitsui Banking Corporation (supra), wherein the observation of the Bench at para 88 is as under :- "88. Keeping in view all the facts of the case and the legal position emanating from the interpretation of the relevant provisions of domestic law as well as that of the treaty as discussed above, we are of the view that although interest paid to the head office of the assessee bank by its Indian branch which constitutes its PE in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to, the PE which is taxable in India as per the provisions of art. 7(2) and 7(3) of the Indo-Japanese Treaty read with, para 8 of the Protocol whish are more beneficial to the assessee, The said interest, however, cannot be taxed in India in the hands of assessee bank, a fo....