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2023 (4) TMI 990 - AT - Income TaxTaxability of interest earned on External Commercial Borrowings (“ECB”) loans - Permanent Establishment - Undisclosed income / TDS - Not claiming credit of TDS on the ground the income is not taxable in India and Tax Burden is born by the Deductors themselves - income earned by the head office/overseas branches has been subjected to TDS at 10% under the India Netherlands Double Taxation Avoidance Agreement (“DTAA”) - HELD THAT:- AO as well as the learned CIT(A) though held that the interest income is includable in the hands of the assessee, however, did not analyse the applicability of the provisions of the DTAA in the present case. Assessee has also not made any submission before the lower authorities as regards the provision under which this income is taxable under the DTAA - As during the assessment proceedings, the assessee merely requested that the income be taxed at the rates prescribed under the treaty. Before us the assessee has prayed for the applicability of the rate of tax of 10% as per Article 11(2), however, the assessee has also not proved the beneficial ownership of the interest for the applicability of the aforesaid rate of tax under Article 11(2) of the India-Netherlands DTAA - remand this issue to the file of the AO for de novo adjudication after examining the applicability of the India-Netherlands DTAA in the present case - assessee shall be at liberty to adduce all the evidence in support of its submission of taxability @10% under Article 11(2) of the India-Netherlands DTAA. As a result, grounds no.1-4 raised in Revenue’s appeal are allowed for statistical purposes. Addition in respect of interest received by the head office/overseas branches from the Indian branch - HELD THAT:- Special Bench in Sumitomo Mitsui Banking Corporation[2012 (4) TMI 80 - ITAT MUMBAI] held that the interest paid by the Indian branch is not taxable in the hands of the head office or overseas branches, all being the same entity. As regards the reliance placed upon the amendment to section 9(1)(v) of the Act vide Finance Act, 2015 w.e.f. 01/04/2016 by the AO, we find that the said amendment was held to be applicable prospectively from 01/04/2016 and not prior thereto by the coordinate bench of the Tribunal in JP Morgan Chase Bank N.A.[2020 (1) TMI 19 - ITAT MUMBAI]. Thus, this amendment is not applicable to the year under consideration and would only be applicable to the assessment year 2016-17 and onwards - No infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground raised in Revenue’s appeal is dismissed.
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