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2024 (6) TMI 1139 - AT - Income TaxIssues Involved: 1. Validity of the assessment. 2. Rate of tax applicable to domestic companies under the non-discrimination clause of the India-France Tax Treaty. 3. Taxability of data processing fees paid by the assessee to its overseas branch. 4. Taxability of interest paid by the branch office to the Head Office/overseas branches. Detailed Analysis: 1. Validity of the Assessment: The assessee challenged the validity of the assessment on the grounds that the notice issued under Section 143(2) of the Income Tax Act, 1961, was not valid. The Tribunal found that the notice dated 29.06.2021 issued by the ACIT/NaFAC-1(2) Delhi was valid as per the amended provisions of Section 143(2) by the Finance Act 2016, which allowed prescribed income tax authorities to issue such notices. The Tribunal referred to CBDT Notification No. 25/2021 and Notification No. 79/2020, which authorized AC/DCIT (NaFAC) to act as prescribed income tax authorities. The Tribunal also considered the decision of the Karnataka High Court in the case of Adarsh Developers, which upheld the jurisdiction of NaFAC in issuing notices under Section 143(2). Consequently, the Tribunal dismissed the assessee's ground on the validity of the assessment. 2. Rate of Tax Applicable to Domestic Companies: The second issue concerned the rate of tax applicable to domestic companies under the non-discrimination clause of the India-France Tax Treaty. The Tribunal noted that this issue had a recurring history from A.Y. 2001-2002 to A.Y. 2020-2021, and in all these years, it had been decided against the assessee. The Tribunal referred to its previous decisions, including ITA No. 1076/Mum/2021 for A.Y. 2017-2018 and ITA No. 7458/Mum/2018 for A.Y. 2014-15, where it was held that the higher tax rate for foreign companies does not violate the non-discrimination clause. The Tribunal dismissed the assessee's ground on this issue, following the consistent decisions in earlier years. 3. Taxability of Data Processing Fees: The third issue related to the taxability of data processing fees paid by the assessee to its Singapore branch. The Tribunal observed that this issue had been recurring from A.Y. 2005-2006 to A.Y. 2020-2021 and had been consistently decided in favor of the assessee. The Tribunal referred to its previous decisions, including ITA No. 1076/Mum/2021 for A.Y. 2017-2018 and ITA No. 3541/Mum/2014 for A.Y. 2009-10, where it was held that data processing fees paid to the Singapore branch were not taxable in India as they constituted payments to self. The Tribunal also cited the decision of the jurisdictional High Court in CIT vs. BNP Paribas SA, which upheld the non-taxability of such payments. Consequently, the Tribunal allowed the assessee's ground on the taxability of data processing fees. 4. Taxability of Interest Paid by Branch Office to Head Office/Overseas Branches: The fourth issue concerned the taxability of interest paid by the branch office to the Head Office or overseas branches. The Tribunal noted that this issue had been recurring from A.Y. 2001-2002 to A.Y. 2020-2021 and had been consistently decided in favor of the assessee. The Tribunal referred to Article 7 and Article 12 of the India-France DTAA, which provided that interest payments made by the permanent establishment (PE) to the Head Office are not taxable in the hands of the Head Office. The Tribunal also cited its previous decisions, including the case of Sumitomo Mitsui Banking Corporation, which held that interest paid by the Indian branch to its Head Office is not taxable in India. Following these precedents, the Tribunal decided this ground in favor of the assessee. Conclusion: The Tribunal dismissed the assessee's grounds on the validity of the assessment and the rate of tax applicable to domestic companies. However, it allowed the grounds relating to the taxability of data processing fees and interest paid by the branch office to the Head Office or overseas branches. Consequently, the appeal of the assessee was partly allowed.
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