2013 (2) TMI 890 - HC - Income Tax

Summary

Issues involved: The judgment addresses the following substantial questions of law:
a) Whether interest payable by the Indian Permanent Establishment of a foreign bank to its Head Office and overseas branches is deductible in computing the total income?
b) Whether the interest income payable by the Indian Permanent Establishment of a foreign bank to its Head Office and branch Offices abroad can be taken into account for the purpose of accounting the income of the Head Office liable to be taxed in India?

Summary:

Issue a): The Tribunal's decision on the deductibility of interest payable by the Indian Permanent Establishment of the foreign bank to its Head Office and overseas branches was challenged. The High Court examined the facts and circumstances of the case along with the relevant legal provisions. The Tribunal's justification for holding the interest as deductible in computing the total income was a key point of contention.

Issue b): The High Court also considered whether the Tribunal erred in holding that the interest income payable by the Indian Permanent Establishment of a foreign bank to its Head Office and branch Offices abroad cannot be considered for accounting the income of the Head Office subject to taxation in India. The implications of this decision on the taxation of the foreign bank's income in India were thoroughly analyzed.

The counsel for the revenue emphasized the significance of the issues raised in the impugned order, affecting a large number of matters in dispute before the authorities. Consequently, an early date for the final hearing of the appeal was requested and agreed upon by consent, scheduling the appeal for hearing on 15/4/2013.