The Tax Publishers2020 TaxPub(DT) 5570 (Mum-Trib)


Section 28(i) read with Section 90(3)

Profit/income earned by Foreign Branches of applicant bank was to be included in taxable income of the applicant bank's income and Notification dated, 28-8-2008, could not be said to have its application to non-business income only.

Business income - Taxability - Profit/income earned by foreign branches of applicant bank -

Assessee bank had branches abroad, in Belgium, China, France, Japan, Kenya, Singapore, South Africa, United Kingdom, and United States of America. During the relevant financial period, the assessee earned income aggregating to Rs. 14,08,32,77,584 (i.e., Rs. 1408.32 crores) from these foreign branches. While filing its income tax return, however, the assessee did not include this income of Rs. 1,408.32 crores in its taxable income. The plea of the assessee was that since India had Double Taxation Avoidance Agreements with all these countries, the right to tax the profits of these foreign branches exclusively vests with the respective tax jurisdictions and these profits cannot be taxed in India. This plea was negated by the AO on the ground that under the scheme of the law as it prevails particularly in the light of the provisions of section 90(3) read with Notification No. SO 2123(E), dated 28-8-2008, entire global income of an Indian resident assessee is to be taxed in India and that where a DTAA provides that 'any income of a resident of India may be taxed' in the other country, such income shall be included in his total income chargeable to tax in India, in accordance with the provisions of the IT Act, 1961, and relief shall be granted in accordance with the method of elimination or avoidance of double taxation provided in such agreement'. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Held: Assessee, however, does not give up; he has an even more innovative plea now. He submits that above decision is per incuriam for some other reason, which has not been discussed in any judicial precedent so far, inasmuch as it overlooks the fact that the Notification, dated 28-8-2008 was not issued in the context of the business income, and, should accordingly not be applicable so far as business income earned abroad, as in this case, is concerned. There was no substance in this plea either. The notification deals with connotations of the expression 'may be taxed', appearing in the tax treaties entered into by India, and there was absolutely no basis 'whatsoever' to support the proposition that the effect of the notification has to be restricted in its application to non-business income only. No such differentiation in treatment of business and non-business income is envisaged in the said notification, nor to do one sees any justification for inferring the same. Assessee does not have any material, whatsoever, in support of the proposition canvassed by him, nor does this proposition make any sense on the first principles inasmuch as once the notification is issued without any such specific restriction for application to business income, one cannot infer a restriction in its application. Therefore, the plea of the assessee was rejected, and thus interfererence in the matter was declined. The action of the AO in including the profits of the assessee's overseas branches, amounting to Rs. 1,408.32 crores, in its taxable income in India was upheld.

Followed:Technimont (P) Ltd. c. Asstt. CIT (2020) 116 996 (Mum-Trib) : 2020 Taxub(DT) 1480 (Mum-Trib).


FAVOUR : Against the assessee.

A.Y. : 2015-16


Section 90