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2023 (3) TMI 1236 - AT - Income TaxIncome taxable in India - Taxability of interest paid by the Indian branch office to the other overseas branches of the assessee - profit attributable to the PE - CIT(A) by referring to the provisions of Explanation to section 9(1)(v) of the Act held that the Explanation has been added in the case of a person engaged in the business of banking and is therefore applicable in this case - HELD THAT:- Since the assessee has a PE in India, therefore, the interest has been claimed as a deduction while computing the business profits of the Indian branch office. Further, as per Article 7(2) of the Indo-Swiss DTAA, the profit attributed to the PE shall be determined which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is the PE. Thus, in view of the aforesaid decision in BNP Paribas [2023 (3) TMI 193 - ITAT MUMBAI] the fiction of hypothetical independence of the PE and head office/overseas branch cannot be extended to the computation of the profit of the head office/overseas branch, and the same is restricted only for computation of profit attributable to the PE. Special Bench in Sumitomo Mitsui Banking Corporation [2012 (4) TMI 80 - ITAT MUMBAI] accepted that the independent fiction and separate entity approach under Article 7 of the tax treaty is only for the purpose of determining the profit attributable to the PE and not for the purpose of determining the total profits of the enterprise as a whole. Therefore, we direct the AO to delete the addition on account of interest income received by the overseas branches of the assessee from the Mumbai branch office. As a result, grounds no.1 and 2 raised in assessee’s appeal are allowed.
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