Tax rate applicable to foreign companies - Non-Discrimination Article under DTAA.

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..... occasion to examine this question of the rate of tax applicable to foreign companies doing business through a permanent establishment in India. The article on "Non-Discrimination" in the Double Taxation Avoidance Agreements between India and various countries normally contains the following sentence:- "The taxation on a permanent establishment which an enterprise of a Contracting State has in t .....

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..... ed arrangements for declaration and payment of dividends within India. A foreign company by definition (under section 2(23A) of Income-tax Act, 1961), is the one which is not a domestic company i.e. which has not made prescribed arrangements for declaration and payment of dividends in India. As against this, under section 6(3) of the Income-tax Act, 1961, a company is said to be resident in India .....

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..... nent Establishments(PE) in the Non-Discrimination Article specifically permitting taxation of Pes at a rate higher than domestic companies. This cannot be taken to mean that the same rule of construction will not apply to the DTAAs where such a sentence is absent. In fact, what was implicit in the DTAAs where such a sentence is not present has been made explicit in these DTAAs (like the one with U .....

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