Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2010 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (11) TMI 589 - AT - Income TaxDisallowance - Interest on borrowing to shareholders - DTAA - Held that:- profit of the assessee company that are liable to be taxed in India are such profits of the assessee company as are attributable to its operations in India, and since the only business carried on by the assessee is operations in India, its entire profits are taxable in India. - the present deduction in respect of interest on borrowings is covered by the specific provisions of section 36(1)(iii) which permits deduction in respect of "the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession". - The amount paid by the assessee, towards interest on borrowings for the purpose of business of the assessee, is thus deductible in computation of profits of the assessee which are exigible to tax in India. Overriding effect of DTAA provisions of provisions of Income Tax - Proposed provisions of DTC - Held that:- as introduced in section 129(9) of the Direct Taxes Code Bill, 2010, which provides that notwithstanding the treaty override provisions in section 129(8) [which are in pari materia with section 90(2) of the Indian Income-tax Act, 1961] the provisions of the Direct Taxes Code "relating (a) General Anti-Avoidance Rule under section 123; (b) levy of Branch Profit Tax under section 111; or (c) Control Foreign Company Rules referred to in the Twentieth Schedule, shall apply to the assessee referred to in sub-section (8), whether or not such provisions are beneficial to him". - In the scheme of things, as it exists in the Indian Income-tax Act, 1961, the treaty override over domestic law is much wider in scope. We cannot interpret the treaty provisions in such a manner so as to curtail, dilute or otherwise tinker with this comprehensive treaty override over the domestic tax law.
|