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2019 (5) TMI 733 - AT - Income TaxIncome accrued in India - Referral fees received by the assessee from Credit Suisse Securities (India) Pvt. Limited - constitute “Fees for Technical services” - Indo- Swiss DTAA HELD THAT:- As decided in assessee's own case [2018 (2) TMI 969 - ITAT MUMBAI] ‘referral fee’, being in the nature of ‘commission’ was to be treated as being in the nature of ‘business income’; both, under the Act as well as under the Indo-Singapore Double Taxation Avoidance Agreement (DTAA), and not as ‘fees for technical services’. - Decided in favour of assessee Taxability of interest paid by assessee to its head office - income attributable to head office and liable to tax in India - Article- 7(2) of India - Switzerland Tax Treaty - function carried out, assets deployed and the risk assumed by the head office - Whether interest attributed to India Branch shall be part of business income of Indian Branch whereas the interest attributable to head office would be taxable under domestic source of rule of taxation u/s 9(1)(v) and is liable to tax in India? - HELD THAT:- As in Sumitomo Mitsui Banking Corporation [2012 (4) TMI 80 - ITAT MUMBAI] held that wherein Indian Branch of foreign bank paid interest to head office and other overseas branches of the Foreign Bank, on advances received by it, said interest is neither deductable in the hand of Indian Branch or chargeable to tax in the hand of head office and overseas branches being all single entity. Similar contention as raised by AO in the present case that provision of section 9(1)(v) prescribed that interest payable by PE in India being income deemed to accrue or arise in India is chargeable to tax. The Special Bench further held that such interest payable by PE to head office being payment made to self does not give rise to income i.e. chargeable to tax in India as held by Hon’ble Supreme Court in Kikabhai Premchand [1953 (10) TMI 5 - SUPREME COURT] and the question of bringing the said income to tax by relying on the provision of section 9(1)(v), therefore, does not arise. The interest paid to head office of the assessee bank by its branch which constitute its PE in India is not deductible as expenditure under the domestic law being payment to self, the same is taxable by determine the profit attributable to the PE which is taxable in India as per the provision of Article 7(2) & 7(3) of Indo-Japanese Tax Treaty r.w. paragraph-8 of Protocol which are more beneficial to the assessee. It was also held that the said interest, however, cannot be taxed in India in the hands of assessee bank, a foreign enterprises being payment made to self which cannot give rise to the income i.e. taxable in India as per the domestic law. The observation made by AO that interest payment made to head office is attribution to the interest income of head office as provided under Article-7(2) of India - Switzerland Tax Treaty on the basis of function carried out, assets deployed and the risk assumed by the head office is misconceived.
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