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2018 (6) TMI 757 - AT - Income TaxPE in India - Interest paid by Indian Branch to its foreign Head Office and other overseas Branches - withholding of tax - assessee is a non–resident Banking Company operating in India as Branch of DBS Bank Limited, Singapore - India–Singapore Tax Treaty - Held that:- The issue in dispute has been decided in favour of the assessee by the Tribunal in assessee's own case [2013 (10) TMI 1452 - ITAT MUMBAI] as held under the domestic law the interest paid by the Indian branch to the head office was not allowable as deduction as this was payment to self - interest payment was allowable as deduction while determining the profit attributable to the PE being the Indian branch under DTAA - The said interest cannot be taxed in the hands of the assessee bank in India under the domestic law as it was payment to self. There was no express provisions in the relevant tax treaty which was contrary to the domestic law. Therefore, interest payment was not taxable in the hands of the bank and thus there was no question of any tax deducted at source. - Decided in favour of assessee Allowing loss claimed on valuation of unmatured forward exchange contract - Held that:- As decided in assessee's own case [2013 (10) TMI 1452 - ITAT MUMBAI] adjustment on account of foreign exchange fluctuation can be made on each balance-sheet date in respect of any forward foreign exchange contract pending actual payment and any loss arising there from has to be allowed as an item of expenditure u/s 37(1). We, therefore, see no infirmity in the order of CIT(A) in allowing the claim of loss of the assessee. Disallowance of expenditure u/s 37 - amount was paid to CCIL on account of short position on security deal, hence, in the nature of penalty - Held that:- As rightly observed by the learned Commissioner (Appeals), the Assessing Officer has not established on record that the payment was on account of an offence or was prohibited by law. On the contrary, the payment made by the assessee appears to be compensatory in nature. As in assessee' own case [2011 (4) TMI 791 - ITAT, MUMBAI] has deleted the disallowance. In the aforesaid view of the matter, we uphold the decision of the learned Commissioner (Appeals) on this issue. Taxability of interest earned on investments made in Indian securities by DBS Bank Ltd., Singapore as Foreign Institutional Investor (FII) - Held that:- We direct the Assessing Officer to assess the interest income from Government Bonds on gross basis as per Article–11 of the India–Singapore Tax Treaty.
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