AI Drafter 
TaxTMI 
TaxTMI 
2022 (11) TMI 719
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....(2)(1), Mumbai, ('AO') to reject the Appellant's claim for the benefit of the non-discrimination clause of the India-Korea Double Taxation Avoidance Agreement ('DTAA') and taxing the Appellant's income at the rate 40% (plus surcharge and education cess) instead of at the rate applicable to a resident tax payer (i.e 30% plus surcharge and education cess). The Appellant therefore, prays that the benefit of the Article 24 of the DTAA be granted and that its income be taxed at the rate 30% instead of 40% (plus surcharge and education cess). 3. Learned representatives fairly agree that this issue is now covered, against the assessee, by a coordinate bench decision in the assessee‟s own case for the assessment year 2007-08 [also reported as Shinhan Bank Vs DDIT (2022) 139 taxmann.com 563 (Mum)] wherein, speaking through one of us (i.e. the Vice President), the coordinate bench has, inter alia, observed as follows: 4. The assessee before us is a banking company incorporated in, and fiscally domiciled in, Korea. It is carrying on business, through its permanent establishment, in India as well. In the income tax return filed by the assessee....
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.... foreign company being higher than the tax rate on a domestic company cannot be considered to a less favourable charge or levy of tax in respect of such foreign company, and as such the provisions of Article 25(1) Article 25(2) of the then Indo Korean tax treaty do not come into play. The Assessing Officer proceeded to frame a draft assessment order accordingly. Aggrieved by the draft assessment order, the assessee raised the objections before the Dispute Resolution Panel, but without any success. The stand of the Assessing Officer was approved and reiterated. The Assessing Officer thus proceeded to levy the tax at the rate prescribed for a foreign company, i.e. a company which is not a domestic company. The assessee is not satisfied and is in appeal before us. 5. Learned counsel for the assessee invites our attention to the judgment dated 7th August 2019 passed by Hon'ble Calcutta High Court, in the case of Bank of Tokyo Mitsubishi Ltd Vs CIT [(2019) 108 taxmann.com 242 (Cal)] and submits that the issue is covered, in favour of the assessee, by the aforesaid decision of Hon'ble Calcutta High Court. However, when learned counsel's attention was invited to Explanation 1 to ....
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....come in India". It is important to bear in mind that it is by virtue of Section 90(2), which specifically provides that "Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee", that the provisions of the related double taxation avoidance agreement override the provisions of the Income Tax Act, 1961. As a corollary to this legal framework, it is only elementary that once a rider to this override is placed in the statute itself, to that extent the provisions of the Income Tax Act, 1961 will hold the field notwithstanding the more beneficial provisions in the tax treaties. In this light, when we look at the expression "less favourably levied" or "more burdensome...taxation and connected requirement", appearing in Articles 25(2) and 25(1) respectively, in the then applicable tax treaty, we find that unless such a for....
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.... the reason for charging different tax rates. In sharp contrast, under section 6(3) of the Income-tax Act, 1961, a company is said to be resident in India if either it is an Indian company or if control and management of its affairs is situated wholly in India. Thus, a non-resident company if it distributes dividends in India will be treated as a domestic company and will then be subjected to the same rate of tax as a resident company declaring and distributing dividends in India. If a non-resident company can make arrangements for the declaration and payment of dividends, out of income earned in India, in India, that non-resident company will be subjected to the same rate of tax which is levied on the Indian companies. The taxation of the foreign companies at a higher rate therefore at a higher rate vis-à-vis the domestic companies is thus not considered to be discriminatory vis-à-vis the foreign companies. The sharp contrast in the definition of a foreign company under section 2(23A) vis-à-vis the definition of a non-resident company under section 6(3) makes it clear that so far as the charge of tax is concerned, the critical factor is the situs of the contro....
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....domestic company. There is no dispute that an Indian company which was a domestic company would have been charged tax at a lower rate than the 65% imposed on the assessee by virtue of the assessee not being regarded as a domestic company. The disparity between the rates applicable to Indian and foreign companies is not in issue. However, since clause 24(2) of the agreement between the two countries provides that a permanent establishment of an entity of one country in the other country shall not be subjected to less favourable terms than an assessee carrying on similar activities in the other country, the assessee in this case was liable to pay tax at the same rate as Indian companies carrying on the same activities were liable to for the relevant assessment year. The effect of the legal fiction envisaged in Article 24(2) of the agreement was that for the purpose of applying the appropriate rate, the permanent establishment of the Japanese entity had to be regarded as a domestic company. That is the effect of the expression 'taxation...not be less favourably levied...than the taxation levied on enterprises of that other Contracting State carrying on the same activities,' in....
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....hips was exactly the same as the law at on now or for the period relevant to this appeal. Neither it was the case of the assessee that retrospectivity of the amendment was unconstitutional nor there are any observations in the judgments to read down the retrospectivity of this amendment which is specifically legislated as a retrospective amendment. It cannot, therefore, even be a reasonable justification, for any judicial forum where this judicial precedent has a binding effect, for not following the Hon'ble Calcutta High Court's judgment in the case of Bank of Tokyo Mitsubishi (supra), on the ground that the period for consideration before Their Lordships was a pre-amendment period. Such an approach, given the amendment being admittedly retrospective in effect w.e.f. 1st April 1962, will be superfluous. Therefore, the fact that reference before Their Lordships, which was disposed of vide the judgment dated 7th August 2019 in the case of Bank of Tokyo Mitsubishi (supra), was for the assessment year 1991-92 and in respect of a coordinate bench's order dated 24th November 1997, would not really make a difference. While dealing with judicial precedents from non-jurisdictional High Cou....
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.... within the framework of law, or something which cannot be, in deserving cases, deviated from. While on this aspect of the matter, it is also useful to bear in mind the following observations made in a Full Bench decision of Hon'ble Andhra Pradesh High Court, in the case of CIT Vs BR Constructions [(1993) 202 ITR 222 (AP-FB)]: 29. It may be noticed that precedent ceases to be a binding precedent- (i) if it is reversed or overruled by a higher court, (ii) when it is affirmed or reversed on a different ground, (iii) when it is inconsistent with the earlier decisions of the same rank, (iv) when it is sub silentio, and (v) when it is rendered per incuriam, 30. In paragraph 578 at page 297 of Halsbury's Laws of England, Fourth edn., the rule of per incuriam is stated as follows : "A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of co-ordinate jurisdiction which covered the case before it, in which case it must decide which case to follow; or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decisio....
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....appears that such a course of action was not approved by the House of Lords in Cassell & Co. Ltd v. Broome [1972] 1 All ER 801, wherein the House of Lords disapproved the judgment of the Court of Appeal treating an earlier judgment of the House of Lords as per incuriam Lord Hailsham observed: "It is not open to the Court of Appeal to give gratuitous advice to judges of first instance to ignore decisions of the House of Lords in this way." (p. 809) 33. It is recognised that the rule of per incuriam is of limited application and will be applicable only in the rarest of rare cases. [Emphasis, by underlining, supplied by us] 10. There is no dispute that Hon'ble Calcutta High Court's decision in the case of Bank of Tokyo Mitsubishi (supra) deals with the legal position prevailing prior to the retrospective insertion of Explanation 1 to Section 90, and that the applicable statutory provisions not having been brought to the notice of Their Lordships. 11. The fact that the Bank of Tokyo Mitsubishi decision (supra) is a judgment by the Hon'ble non-jurisdictional High Court and the fact that this decision does not take into account a provision of law which was o....
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..... This indeed is the ratio decidendi. [R.J. Walker & M.G. Walker: The English Legal System. Butterworths, 1972, 3rd Edn., pp. 123-24] It is not everything said by a judge when giving judgment that constitutes a precedent. The only thing in a judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. In the leading case of Qualcast (Wolverhampton) Ltd. v. Haynes [LR 1959 AC 743] it was laid down that the ratio decidendi may be defined as a statement of law applied to the legal problems raised by the facts as found, upon which the decision is based. The other two elements in the decision are not precedents. The judgment is not binding (except directly on the parties themselves), nor are the findings of facts. This means that even where the direct facts of an earlier case appear to be identical to those of the case before the court, the judge is not bound to draw the same inference as drawn in the earlier case." [Emphasis, by underlining, supplied by us] 12. In the case of Farhan A Shaikh Vs DCIT [(2021) 125 taxmann.com 253 (Bom FB)], a full bench of....
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....he rule of law "set forth" by the court, or the rule "enunciated", which necessarily constitutes the principle of the case. There may be no rule of law set forth in the opinion, or the rule when stated may be too wide or too narrow. Goodhart quotes from Oliphant's A Return to Stare Decisis (1927) that the predictable element in a case is "what courts have done in response to the stimuli of the facts of the concrete cases before them. Not the judges' opinions." 14. Viewed in the backdrop of these discussions also, and in the light of the undisputed position that retrospective insertion to Explanation to Section 90 did not come up for consideration before the Hon'ble Calcutta High Court, the Bank of Tokyo Mitsubishi judgement (supra) cannot be an authority for the proposition that dehors the insertion of Explanation (now Explanation 1) to Section 90, the levy of the income tax on the assessee company at a rate higher than the domestic companies can be regarded as less favourable charge. 15. In this backdrop, and having noted that this decision is from a non-jurisdictional High Court and without the benefit of analysis of the impact of retrospective insertion....
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...., because Their Lordships had no occasion to take a call on the same. 17. We must, therefore, be rather guided by the plain words of Explanation 1 to Section 90, as we do not have the benefit of Their Lordships' guidance on the scope of this Explanation being inserted in the statute, which is the core issue requiring our adjudication. Learned counsel for the assessee has no other argument in support of the plea raised in the first ground of appeal against the applicable higher rate of tax for foreign companies. 18. In view of these discussions, as also bearing in mind the entirety of the case, we hold that the applicable rate of taxation, under the Income Tax Act 1961, for the assessee company cannot be read down in the light of the provisions of a double taxation avoidance agreement, as is the specific mandate of Explanation 1 to Section 90 or even on the first principles without the benefit of this Explanation. 19. We may also add that as for the mention, in paragraph 7 of the Bank of Tokyo Mitsubishi decision (supra), of some clarification issued by the CBDT with respect to ABN Amro Bank, even if that be so, it is only elementary that Section 119(1)(a)....
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....of Rs 2,94,14,877 in respect of the salaries paid by its employees working for its permanent establishment in India. It was noted that this amount is not reflected in its Indian books of accounts, and, as such, the related expenditure is not incurred by the Indian PE of the assessee company. The Assessing Officer was thus of the view that this deduction can not be allowed in the computation of the profits of the PE in India, for the reason that the for the purpose of computation of profits, the PE is required to be treated as hypothetically independent of its head office, and when PE does not incur the expenditure, it cannot be allowed a deduction in respect of the same. He noted the contention of the assessee to the effect that this amount represents overseas salaries of eleven expatriate employees deputed exclusively to manage its Indian operations, and the management of the Indian branch consisted of these eleven expatriates deputed from Korea. He also noted the plea of the assessee that the salaries paid to these employees are in two parts- i.e. salaries paid in Korea and salaries paid in India, and that the entire salary, consisting of these two segments, is offered to tax in ....
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....icle 7(2), one has to visualize a situation of hypothetical independence of the source jurisdiction‟s PE vis-a-vis it's GE (i.e. the foreign company, which is also referred to a the "general enterprise‟) and other PEs outside the source jurisdiction, but then such a visualization of the state of things is only to compute the profits which the source jurisdiction PE might have made if such hypothetical independence was to exist. This fiction, however, is confined to the computation of profits attributable to the permanent establishment, and, in our considered view, it does not go beyond that. There is no dispute that the assessee company has a PE in India and therefore, the assessee is taxable in India in respect of the profits attributable to the PE. While the taxability is of the foreign company and as such tax subject is the foreign company, the taxation is only in respect of the profits attributable to the Indian PE, and the tax object, as such, is the profits that the PE might be expected to make it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the ente....
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...., for the benefit of the Indian PE, by the Korean HO. In our considered view it has no impact on income computation so far as PE profits are concerned, as a taxable unit is only the HO or the Korean company. Its importance, if at all, is only from the point of view of cash flow, but then a cash flow, or absence thereof, is not a critical factor from the taxation point of view since an intra-company cash flow simpliciter is tax neutral- unless it can be seen as a standalone transaction of funding. Quite contrary to the stand of the Assessing Officer, by treating non-reimbursement of expenses by the PE as a cause of action for independent income in the hands of the HO, the hypothetical fiction envisaged in article 7(2) is de facto negated. That is incongruous. There cannot be any purpose of expenses incurred by the HO, which are relatable to the Indian PE, being allowed as a deduction in the computation of income of the PE when non-reimbursement of that expenditure by the PE is treated as a source of income of the foreign company itself- particularly when, from the income tax perspective, the taxable unit is the foreign company and not the PE. It is also important to bear in mind the....
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.... 14. Learned counsel for the assessee submits that in the assessee‟s own case, the additional ground of appeal has been admitted and sent back to the Assessing Officer for adjudication on merits. He further points out that ground no. 3 is a connected issue and as the very application of 44C has been remitted to the file of the Assessing Officer, this issue may also be remitted to the file of the Assessing Officer. We are thus urged that, in accordance with the decision in the earlier years, the ground no. 3 as also the additional ground of appeal may be remitted to the file of the Assessing Officer for fresh adjudication on merits. Learned Departmental Representative graciously leaves the matter to us. 15. We find that a coordinate bench of the Tribunal, in the assessee‟s own case (supra) and dealing with an earlier assessment year, has observed as follows: 42. Learned counsel for the assessee submits that the issue now being raised is a purely legal issue which could not inadvertently be raised earlier. It is pointed out in the light of NTPC Vs CIT [(1999) 229 ITR 383 (SC)], such an issue can be legitimately raised even at this stage before the Tribunal.....
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....C(1) of the Act for benchmarking the aforesaid transaction and making an adjustment on an adhoc basis. The Appellant prays that the aforesaid adjustment amounting to Rs. 71,94,026 be deleted. Transfer pricing adjustment with respect to interest received from Head office 6. On the facts and circumstances of the case and in law, the AO, while giving effect to the directions of the Hon'ble DRP, erred in failing to appreciate the fact that the Appellant had made a suo-moto adjustment amounting to Rs. 17,896 in respect of interest earned on foreign currency lending from its AE and has offered the same to tax in its return of income. The Appellant prays that the aforesaid adjustment amounting to Rs. 17,896 be deleted. 20. So far as these grievances are concerned, these grievances pertain to ALP adjustments in respect of lending and borrowing transactions that the Indian PE had with its associated enterprise, namely Shihan Bank Europe GmbH. The assessee had several short term transactions, loans extended for a period between 1 to 13 days, and loans taken for a period between 1 to 178 days. While the PE has given loans at the rates of LIBOR+ mark ....
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....lant's income at the rate 40% (plus surcharge and education cess) instead of at the rate applicable to a resident tax payer (i.e 30% plus surcharge and education cess). The Appellant therefore, prays that the benefit of the Article 24 of the DTAA be granted and that its income be taxed at the rate 30% instead of 40% (plus surcharge and education cess). 26. Learned representatives fairly agree that whatever we decide for the assessment year 2012-13, the appeal for which was heard along with this appeal, will equally apply for this assessment year as well. Vide our discussions earlier in this order, in paragraphs 3 to 5, we have rejected the said plea of the assessee. We see no reasons to take any other view of the matter for the present assessment year. Respectfully following the view so taken for the assessment year 2012-13, we reject this grievance of the assessee. 27. Ground no. 1 is thus dismissed. 28. In ground no. 2, the assessee has raised the following grievance: Addition under section 28(iv) in relation to salary paid to expatriates 2. On the facts and the circumstances of the case, and in law, the Hon'ble DRP erred in directing t....
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....greement entered between the Government of India and Government of Korea. 33. We find that a coordinate bench of the Tribunal, in the assessee‟s own case (supra) and dealing with an earlier assessment year, has observed as follows: 42. Learned counsel for the assessee submits that the issue now being raised is a purely legal issue which could not inadvertently be raised earlier. It is pointed out in the light of NTPC Vs CIT [(1999) 229 ITR 383 (SC)], such an issue can be legitimately raised even at this stage before the Tribunal. He, however, fairly submits that as this aspect of the matter has not been examined by any of the authorities below at any stage, in all fairness, the additional ground is required to be remitted to the file of the Assessing Officer for adjudication on merits. Learned Departmental Representative fairly does not oppose the prayer so made by the learned counsel for the assesseee. 43. In view of the above discussions, as also bearing in mind the entirety of the case, we admit the additional ground of appeal but remit the matter to the file of the Assessing Officer for adjudication on merits. Ordered, accordingly. 44. The ad....
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....fully following the view so taken for the assessment year 2012-13, we reject this grievance of the assessee. 40. Ground no. 1 is thus dismissed. 41. In ground no. 2, the assessee has raised the following grievance: 2. On the facts and the circumstances of the case, and in law, the Hon'ble DRP erred in directing the AO to make an addition of Rs. 3,70,52,544 to the total income of the Appellant under section 28(iv) of the Act in respect of salary paid by the Shinhan Bank - Head office to expatriates exclusively working for India operations/branch during the year under consideration. The Appellant prays that the addition of Rs. 3,70,52,544 under section 28(iv) of the Act be deleted.. 42. Learned representatives fairly agree that whatever we decide for the assessment year 2012-13, the appeal for which was heard along with this appeal, will equally apply for this assessment year as well. Vide our discussions earlier in this order, in paragraphs 6 to 11, we have allowed the said plea of the assessee, and held that the impugned addition under section 28(iv) is bad in law. We see no reasons to take any other view of the matter for the present assessment year.....
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....ypothetical independence comes into play for the limited purposes of computing profits attributable to permanent establishment only and is set out under the specific provision, dealing with the computation of such profits, in the tax treaties, including in the then Indo-Korean DTAA. There is nothing, therefore, to warrant or justify the application of the same principle in the computation of GE profits as well. Clearly, therefore, the fiction of hypothetical independence is for the limited purpose of profit attribution to the permanent establishment. 33. To that extent, this approach departs from the separate accounting principle in the sense that the GE, to which PE belongs, is not seen in isolation with it's PE, and a charge, in respect of PE - GE transactions, on the PE profits is not treated as income in the hands of the GE. 34. As far as the treaty situations, as in the case of the then Indo-Korea tax treaty, are concerned, once an enterprise is found to be carrying on the related business or profession through a permanent establishment or a fixed base in the other contracting state, the scheme of taxability on the gross basis, as implicit in the taxation....
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....t, with regard to income attribution to PEs, the OECD Model does not require that a general enterprise is divided into two separate parts - a head office and a PE - and that, therefore, an internal charge borne by a PE will not yield income for anyone, but only produces a smaller amount of PE income to be taxed by the PE state and, correspondingly, a smaller amount of foreign income in respect of which the residence state needs to provide the relief I must admit that my attempts to get these views across have met with varying levels of success- particularly students with an accounting background tend to be on the sceptical side..............". [Emphasis, by underlining, supplied by us] 37. We are in considered agreement with the views so expressed by the eminent international tax scholar. Clearly, the principles for determining the profits of the PE and GE are not the same, and the fiction of hypothetical independence does not extend to the computation of profit of the GE. As regards the GE-PE interest being treated as interest income of the assessee, arising in the source jurisdiction, i.e. India, can only be taxed under Article 12 but then as provided in article 12 (5....
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....it may perhaps be too much to contend that the taxability of PE-GE interest receipt is required to be considered on the basis of the domestic law provisions, but even this discussion seems entirely academic in the light of our finding, as above, that an internal charge for the PE profit attribution does not amount to taxable income in the hands of the GE anyway. Be that as it may, having decided this aspect of the matter on the treaty principles so far as taxability of PE-GE interest in the hands of the GE is concerned, we need not examine that aspect any further. In our considered view, for the detailed reasons set out in this order, dehors this theory of tax neutrality for intra-GE transactions also, this PE-GE interest is not taxable in the hands of the assessee. Of course, we have reached the same destination by following a different path but then as long as reach the same destination, our traversing through a different path does not really matter at all. 39. In view of the above discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee that the interest of Rs 2,34,51,979 paid by the PE to the GE cannot be brought to tax in the h....
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.... respect of the loans given, and not loans received from the AE. Vide our order in paragraphs 19-22 earlier, we have upheld this plea of the assessee. We have no reasons to take any other view of the matter than the view so taken for the assessment year 2012-13. Respectfully following the same, we uphold the plea of the assesse, and direct the Assessing Officer to delete the impugned ALP adjustment of Rs. 29,31,131. The assessee gets the relief accordingly. 50. Ground no. 4 is thus allowed. 51. The assessee has also raised an additional ground of appeal which is as follows: Additional Ground Based on the facts and circumstances of the case and in law, the learned AO be directed to allow the deduction for entire expenses incurred at the head office as is attributable to the business of the Appellant in India, and not restrict the same by applying the provisions of section 44C of the Act, on the basis that the provisions of section 44C of the Act does not apply to the Appellant in accordance with the provisions of Article 25 - "Non-Discrimination' of the Double Taxation Avoidance Agreement entered between the Government of India and Government of Korea. ....
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.... by principles of mutuality, hence not taxable under the Act, then option of claiming the interest expenditure under the DTAA cannot be exercised n respect of the same transaction in view of the decision Hon'ble ITAT in Dresdner Bank 108 ITD 375 (mum) wherein the ITAT in para 78 has held that once the assessee accepts applicability of Act for one purpose, then it cannot go back to seek relief under the DTAA in respect of some other item from taxability under the Act. (c) By holding the interest received by HO from BO to be not taxable under the Act being covered by mutuality and at the same time allowing the deduction of very same interest while computing income of the BO under the DTAA, there is a manifest absurdity where in effect, the taxability of income will stand shifted from India to overseas, and the deductibility of related expenditure will stand shifted from overseas, and the deductibility of income will stand shifted from India to overseas, and the deductibility of related expenditure will stand shifted from overseas to India, which is neither intended under the Act nor under the scheme of attribution of income between Non-resident Head office and branch off....
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.... the Income Tax Act, 1961 for the assessment year 2015-16 62. In the first ground of appeal, the assessee has raised the following grievance: On the facts and the circumstances of the case, and in law, the Hon'ble Dispute Resolution Panel - II ('DRP') erred in directing the Deputy Commissioner of Income-tax (International Taxation)- 4(2)(1), Mumbai, ('AO') to reject the Appellant's claim for the benefit of the non-discrimination clause of the India-Korea Double Taxation Avoidance Agreement ('DTAA') and taxing the Appellant's income at the rate 40% (plus surcharge and education cess) instead of at the rate applicable to a resident tax payer (i.e. 30% plus surcharge and education cess). The Appellant therefore, prays that the benefit of the Article 24 of the DTAA be granted and that its income be taxed at the rate 30% instead of 40% (plus surcharge and education cess). 63. Learned representatives fairly agree that whatever we decide for the assessment year 2012-13, the appeal for which was heard along with this appeal, will equally apply for this assessment year as well. Vide our discussions earlier in this order, in paragra....
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....the enterprise of which it is a permanent establishment" This fiction of hypothetical independence comes into play for the limited purposes of computing profits attributable to permanent establishment only and is set out under the specific provision, dealing with the computation of such profits, in the tax treaties, including in the then Indo-Korean DTAA. There is nothing, therefore, to warrant or justify the application of the same principle in the computation of GE profits as well. Clearly, therefore, the fiction of hypothetical independence is for the limited purpose of profit attribution to the permanent establishment. 33. To that extent, this approach departs from the separate accounting principle in the sense that the GE, to which PE belongs, is not seen in isolation with it's PE, and a charge, in respect of PE - GE transactions, on the PE profits is not treated as income in the hands of the GE. 34. As far as the treaty situations, as in the case of the then Indo-Korea tax treaty, are concerned, once an enterprise is found to be carrying on the related business or profession through a permanent establishment or a fixed base in the other contracting state....
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...., as that of an egg and the yolk it contains. I have further explained that, with regard to income attribution to PEs, the OECD Model does not require that a general enterprise is divided into two separate parts - a head office and a PE - and that, therefore, an internal charge borne by a PE will not yield income for anyone, but only produces a smaller amount of PE income to be taxed by the PE state and, correspondingly, a smaller amount of foreign income in respect of which the residence state needs to provide the relief I must admit that my attempts to get these views across have met with varying levels of success- particularly students with an accounting background tend to be on the sceptical side..............". [Emphasis, by underlining, supplied by us] 37. We are in considered agreement with the views so expressed by the eminent international tax scholar. Clearly, the principles for determining the profits of the PE and GE are not the same, and the fiction of hypothetical independence does not extend to the computation of profit of the GE. As regards the GE-PE interest being treated as interest income of the assessee, arising in the source jurisdiction, i.e. India....
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....f GE-PE interest by the PE having been accepted on the treaty principles, it may perhaps be too much to contend that the taxability of PE-GE interest receipt is required to be considered on the basis of the domestic law provisions, but even this discussion seems entirely academic in the light of our finding, as above, that an internal charge for the PE profit attribution does not amount to taxable income in the hands of the GE anyway. Be that as it may, having decided this aspect of the matter on the treaty principles so far as taxability of PE-GE interest in the hands of the GE is concerned, we need not examine that aspect any further. In our considered view, for the detailed reasons set out in this order, dehors this theory of tax neutrality for intra-GE transactions also, this PE-GE interest is not taxable in the hands of the assessee. Of course, we have reached the same destination by following a different path but then as long as reach the same destination, our traversing through a different path does not really matter at all. 39. In view of the above discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee that the interest of....
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....43. In view of the above discussions, as also bearing in mind the entirety of the case, we admit the additional ground of appeal but remit the matter to the file of the Assessing Officer for adjudication on merits. Ordered, accordingly. 44. The additional ground of appeal is thus admitted and allowed for statistical purposes. 71. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Accordingly, we admit the additional ground of appeal but remit the matter to the file of the Assessing Officer for adjudication on merits. Ordered, accordingly 72. The additional ground of appeal is thus admitted and remitted to the file of the Assessing Officer for adjudication on merits. 73. In the result, the appeal is allowed. 74. In the cross-objections filed by the Assessing Officer, the following grievances are raised: Cross objection No. 1- On disallowance of Interest paid to Head office:- (a) If the decision of Special Bench in the case of Sumitomo Mitsui Banking Corporation 136 ITD 66 (Mum) (SB) holding that the interest received by Head office from its branch in India was covered by the principles of mutu....