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TMI Blog2019 (8) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... is a matter of regret and shame that the reference has remained pending for such a long time. Paragraph 7 from the relevant order is quoted:- "7. From the aforesaid facts, the following questions are referred to the Hon'ble High Court which would, in our opinion, highlight preciously the legal issue: 1. Whether on the facts and in the circumstances of the case, the tribunal was right in law in holding that the rate of tax applicable to the assessee would be the rate of 65% and not the rate applicable to a domestic company? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that in computing the profits attributable to the permanent establishment in India of the applicant deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn country to be taxed by the foreign country. In other words, if there is a foreign establishment of an Indian entity in Japan, the direct and indirect income attributable to that permanent establishment of the Indian entity in Japan may be taxed in accordance with the laws of taxation in Japan. Likewise for a Japanese entity having a permanent establishment in India. Article 23 of the said agreement provides for the laws in force of the contracting State to govern the taxation of income in the respective contracting State except where there is any express provision to the contrary in the agreement. Article 24(2) of the double taxation avoidance agreement provides the key to the legal questions raised here and should be seen in its entiret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied on enterprises...carrying on the same activities.' By virtue of Clause 24(2) of the said agreement and the statutory recognition thereof in Section 90(2) of the Act, the permanent establishment of a Japanese entity in India could not have been charged tax at a rate higher than comparable Indian assessees carrying on the same activities. In the instant case, it is evident from the order of the Commissioner as affirmed by the Tribunal by the impugned order of March 31, 1997 that in respect of assessment year 1991-92, the assessee herein was assessed as not being a domestic company. There is no dispute that an Indian company which was a domestic company would have been charged tax at a lower rate than the 65% imposed on the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank in India could not be extended to this assessee. When there is no dispute that there is a double taxation avoidance agreement in place between India and the country of origin of the assessee in the present case and when such agreement contains a lucid clause as apparent from Article 24(2) thereof quoted above and when Section 90 of the Act itself recognises such an agreement and creates a special status for the relevant permanent establishments, there was no room for either the Commissioner to wait for any dictat from the high command of the CBDT or for the Tribunal to demonstrate similar servile conduct in not appropriately interpreting and giving effect to the clear words of the agreement between the two countries. The reference i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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