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2018 (8) TMI 850 - AT - Income TaxTaxability of Interest paid by the branch (PE) in India to its parent foreign bank in Japan - Deduction of interest so paid as expenditure - India-Japan Double Taxation Avoidance Agreement (DTAA) - A.O held a conviction that as the source of the interest income earned by the head office was the latters branch office in India, thus the same as per Sec. 9(1)(v)(c) of the Act having deemed to have accrued or arisen in India, was therefore taxable in India as per the domestic law i.e. the Income Tax Act, 1961. - It was further held by the A.O that as the interest was paid by the branch office, hence the latter automatically became the representative assessee/agent as per Sec. 163(1)(c) of the Act. - CIT(A) deleted the additions. Held that:- the interest income received by the head office of the assessee bank would not be chargeable to tax in India. The Article 7(3) of India-Japan DTAA expressly provides for deduction of interest on money advanced by the Head office to its Indian PE when such foreign enterprise is a banking institution - the interest paid by the branch office of the assessee bank in India to the head office of the bank on the amounts advanced by the latter in the normal course of its banking business is allowable as a deduction while computing the income of the Indian PE i.e. the branch of the assessee bank in India. - Order of CIT(A) sustained - Decided against the Revenue.
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