TMI Blog2019 (8) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the same activities. By virtue of Clause 24(2) of the said agreement and the statutory recognition thereof in Section 90(2), the permanent establishment of a Japanese entity in India could not have been charged tax at a rate higher than comparable Indian assessees carrying on the same activities. The stand taken in the Tribunal s order cannot be appreciated or accepted since a similar clause in the double taxation avoidance agreement between India and the Netherlands was interpreted by the Central Board for Direct Taxes and a circular issued thereupon. The Tribunal held, in the present case, that since there was no similar circular, the benefit as available to a permanent establishment of ABN Amro Bank in India could not be extende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d here is as to the rate of tax which would be applicable to a permanent establishment of a foreign State which has contracted with the Government of India to avoid double taxation. At the time that this reference was entertained, three questions were framed at paragraph 7 of the order dated November 24, 1997. It is a matter of regret and shame that the reference has remained pending for such a long time. Paragraph 7 from the relevant order is quoted:- 7. From the aforesaid facts, the following questions are referred to the Hon ble High Court which would, in our opinion, highlight preciously the legal issue: 1. Whether on the facts and in the circumstances of the case, the tribunal was right in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation, then in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. There is no dispute that there is a double taxation avoidance agreement between India and Japan. Article 7 of such agreement permits the income directly or indirectly attributable to a permanent establishment in the foreign country to be taxed by the foreign country. In other words, if there is a foreign establishment of an Indian entity in Japan, the direct and indirect income attributable to that permanent establishment of the Indian entity in Japan may be taxed in accordance with the laws of taxation in Japan. Likewise for a Japanese entity having a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r from the relevant clause. By virtue of Section 90(2) of the Act, since there is a double taxation avoidance agreement between India and Japan, the provisions of the Act shall apply to a permanent establishment of a Japanese entity in India to the extent they are more beneficial to that assessee. Also, in terms of the mandate of clause 24(2) of the agreement, the taxation on a permanent establishment in the other Contracting State shall not be less favourably levied than the taxation levied on enterprises carrying on the same activities. By virtue of Clause 24(2) of the said agreement and the statutory recognition thereof in Section 90(2) of the Act, the permanent establishment of a Japanese entity in India could not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on the same activities, in Article 24(2) of the bilateral agreement between India and Japan. The stand taken in the Tribunal s order cannot be appreciated or accepted since a similar clause in the double taxation avoidance agreement between India and the Netherlands was interpreted by the Central Board for Direct Taxes and a circular issued thereupon. The Tribunal held, in the present case, that since there was no similar circular, the benefit as available to a permanent establishment of ABN Amro Bank in India could not be extended to this assessee. When there is no dispute that there is a double taxation avoidance agreement in place between India and the country of origin of the assessee in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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