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2022 (12) TMI 997 - AT - Income TaxIncome deemed to accrue or arise in India - referral fees earned by Singapore Branch Office - AO proceeded to bring to tax the referral fee treating it as FTS taxable at 10% as per Article 12 of DTAA between India and Switzerland - Whether not taxable in India u/s.5(2) r.w.s. 9(1)(i) - whether the said fee is taxable in India as fee for technical services u/s.9(1)(vii)? - HELD THAT:- As decided in assessee own case [2018 (2) TMI 969 - ITAT MUMBAI] referral activity was undertaken outside India and assessee's Mumbai branch (PE) had no role to play in the performance of the referral activity, the referral fee earned by CSDB could not be construed to be attributable to assessee‟s PE in India and thus, the DRP rightly applied Article 7 of Indo- Swiss Double Taxation Avoidance Agreement (DTAA) and held the same to be non-taxable in India. The aforesaid conclusion of the DRP is hereby affirmed. - Decided in favour of assessee. Addition of taxability of interest income in respect of transaction between two branches of the same legal entity - HELD THAT:- As in assessee’s own case for A.Yrs. 2013-14 and 2014-15 [2019 (5) TMI 733 - ITAT MUMBAI] decided tax is not deductible from such interest payable by the PE in India to the overseas head office of a foreign bank and there is no question of making disallowance of such interest expenditure by invoking the provisions of section 40(a)(i) - Decided against revenue. MAT computation u/s 115JB - whether the provisions of Section 115 JB of the Act per se would be made applicable to a foreign company? - HELD THAT:- We find that Article 7(1) of the treaty prescribes that profits that were attributable to the PE would be taxable in India. The manner in which the AO had applied the provisions has the effect of not only bringing to tax the profits that are not attributable to the PE but also has the effect of taxing the other items not in accordance with the provisions of other Articles of the treaty. Five items of income earned by CSSB which was sought to be covered by the ld. AO within the ambit of MAT are not included in the books of accounts drawn up by CSMB in India. Once a particular item is not at all included in the books of accounts which are drawn up in India, how can the same be subject matter of applicability of provisions of Section 115JB of the Act. Reliance in this regard is placed on the decision of Apollo Tyres Ltd. [2002 (5) TMI 5 - SUPREME COURT]. When the accounts of CSMB do not incorporate the aforesaid five items of income earned by CSSB, the department cannot impose MAT provisions by using the fiction which is contrary to the Banking Regulation Act, 1949. The provisions of Income Tax Act cannot require CSMB to re-write the accounts in a manner different than what is stipulated in the Banking Regulation Act, 1949. Hence, even on merits, the question of applying the MAT to CSSB’s income does not arise. Accordingly, the ground No.4 raised by the Revenue is dismissed.
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