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2017 (10) TMI 1467 - AT - Income TaxClaim about rate of taxes - assessee had objected to the rate of tax applicable to domestic companies and co-operative banks were also applicable to it in accordance with the provisions of Article-26 (non discrimination) of Indo French Tax Treaty - HELD THAT - As decided in own case Reference was made to non-discrimination clause in the Treaty, as per which there should not be any discrimination between the domestic and the non-resident company. The Tribunal, however, referred to the Explanation in the Section 90, inserted in the IT Act with retrospective effect from 01-04- 1962 as per which the higher tax rate in case of foreign company, should not be regarded as violation of non-discrimination clause. The Tribunal also referred to the judgment of the Hon ble Supreme Court in the case of ACIT Vs. J.K. Synthetics 2001 (2) TMI 17 - SUPREME COURT . The Tribunal accordingly, rejected the ground raised by the assessee. The facts in the present appeal are identical and, therefore, respectfully following the decision of the Tribunal in the case of M/s BNP Paribas 2014 (7) TMI 1305 - ITAT MUMBAI we dismiss this ground raised by the assessee. Payment made by India Branch to Overseas Branch / HO - data processing fees paid by Indian Branch office of the assessee to its Singapore branch under Article-13 of the India France tax Treaty - HELD THAT - As decided in 2016 (3) TMI 1355 - ITAT MUMBAI as held since the issue under consideration is covered not only by the order of the Tribunal in assessee s own case for the AY 2001-02 to 2003-04 but also by the order of the ITAT s Special Bench in the case of Sumitomo Mitsui Banking Corporation 2012 (4) TMI 80 - ITAT MUMBAI we hold that the department was not justified in subjecting to tax the interest paid by the Indian Branch of the assessee to its head office and overseas branches applying the provisions of Article 12 of India-France Tax Treaty.
Issues Involved:
1. Rate of tax applicable to the assessee under Article-26 of Indo-French Tax Treaty. 2. Taxability of data processing fees paid by the Indian Branch to its Singapore branch under Article-13 of the India-France Tax Treaty. 3. Taxability of interest paid by Indian Branch offices to the Head Office and overseas branches under Article-12 of the India-France Tax Treaty. Issue-Wise Detailed Analysis: 1. Rate of Tax Applicable to the Assessee under Article-26 of Indo-French Tax Treaty: The assessee argued that the tax rate applicable to domestic companies and co-operative banks should also apply to it under the non-discrimination clause of the Indo-French Tax Treaty. The Tribunal noted that this issue had been previously examined in the case of M/s BNP Paribas, where the higher tax rate for foreign companies was not considered discriminatory due to the Explanation in Section 90 of the IT Act, which was inserted with retrospective effect from 01-04-1962. This explanation clarified that a higher tax rate for foreign companies does not violate the non-discrimination clause. The Tribunal also referenced the Hon’ble Supreme Court's judgment in ACIT Vs. J.K. Synthetics, ultimately rejecting the assessee's ground. Consequently, the Tribunal dismissed the assessee's appeal on this issue. 2. Taxability of Data Processing Fees Paid by the Indian Branch to its Singapore Branch under Article-13 of the India-France Tax Treaty: The AO contended that data processing fees paid by the Indian Branch to the Singapore branch were taxable under Article-13 (Royalties, fees for technical services, and payments for use of equipment) of the India-France Tax Treaty. The Tribunal, however, found that this issue had been previously decided in favor of the assessee for AY 2001-02 to 2003-04 and AY 2009-10, where it was held that such payments do not give rise to taxable income in India as per the domestic law and relevant tax treaties. The Tribunal referred to the Special Bench decision in Sumitomo Mitsui Banking Corporation, which held that payments between a branch and its head office or other branches are not taxable as they are considered payments to self. The Tribunal reversed the AO's decision and directed the deletion of the disallowance, granting relief to the assessee. 3. Taxability of Interest Paid by Indian Branch Offices to the Head Office and Overseas Branches under Article-12 of the India-France Tax Treaty: The AO argued that interest paid by the Indian Branch to its Head Office and overseas branches should be taxable under Article-12 (Interest) of the India-France Tax Treaty. The Tribunal noted that this issue had been previously decided in favor of the assessee for AY 2001-02 to 2003-04 and was also covered by the Special Bench decision in Sumitomo Mitsui Banking Corporation. The Tribunal reiterated that interest payments between a branch and its head office or other branches are not taxable as they are considered payments to self, which do not generate taxable income under domestic law or the relevant tax treaty. The Tribunal dismissed the AO's appeal on this issue, affirming the non-taxability of such interest payments. Conclusion: The Tribunal upheld the previous decisions regarding the rate of tax, data processing fees, and interest payments, dismissing the appeals filed by both the assessee and the AO. The order was pronounced in the open court on 16th October 2017.
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