2015 (1) TMI 1418 - HC - Income Tax

DTAA benefit - Proof of establishments abroad - Permanent establishments or branches outside India generated income - HELD THAT - AO was satisfied that the benefit of the Double Taxation Avoidance Agreement is admissible provided the proof is produced in relation to payment of taxes by the Assessee abroad. If the Assessee has permanent establishment abroad, then, the Assessee would have to produce evidence regarding payment of taxes pertaining to the income of these establishments abroad. On production of such evidence, the Assessee would be entitled to the benefit. That evidence was always available and as noted by the CIT (Appeals) and the Tribunal. The authorities did nothing but follow their earlier orders based on identical facts and circumstances. The finding of fact, therefore, cannot be termed as perverse or vitiated by any error of law apparent on the face of the record.

Summary

Issues:
1. Whether the income attributable to a bank's branch in foreign countries can be taxed in India.
2. Whether the benefit of the Double Taxation Avoidance Agreement is admissible to the assessee.

Analysis:
Issue 1: The appellant challenged the order of the Income Tax Appellate Tribunal regarding the taxation of income from the respondent bank's operations in foreign countries. The appellant argued that the Tribunal erred in considering the bank's foreign branches as permanent establishments outside India, leading to the conclusion that the income from these branches cannot be taxed in India. The appellant contended that this conclusion was reached without proper consideration of factual evidence and proof of tax payments related to the foreign establishment. However, the respondent's counsel highlighted previous tribunal orders in similar cases where income from foreign branches was subjected to foreign tax laws, and the benefit of the Double Taxation Avoidance Agreement was rightfully extended. The tribunal found that the assessing officer was satisfied with the proof of tax payments by the assessee for income generated from permanent establishments abroad, as required by the agreement. The tribunal concluded that the authorities followed established precedents based on similar facts, and the appellant's appeal did not raise any substantial legal questions. Consequently, the appeal was dismissed.

Issue 2: The crux of the matter revolved around the admissibility of the benefit of the Double Taxation Avoidance Agreement to the assessee concerning income from permanent establishments abroad. The tribunal emphasized the importance of providing evidence of tax payments related to foreign income, which the assessing officer found satisfactory in this case. The tribunal noted that the authorities consistently applied this requirement based on past orders and factual circumstances. The respondent's counsel relied on the tribunal's findings in the impugned order, particularly paragraph 28, to support the extension of the agreement's benefits to the assessee. Ultimately, the tribunal determined that the assessee met the necessary criteria for the agreement's benefits, and the appeal lacked merit, leading to its dismissal without costs.

In conclusion, the judgment highlighted the significance of factual evidence and adherence to tax payment requirements for income from foreign establishments in determining tax liability. The tribunal's decision to extend the benefits of the Double Taxation Avoidance Agreement to the assessee was supported by past orders and factual consistency, leading to the dismissal of the appellant's appeal.