1. M/s Sumitomo Mitsui Banking Corporation Vs. Dy. Director of Income Tax, ITA No. 5402 /MUM/2006, Assessment Year: 2003-04, Date: 30.03.2012, ‘L’ Bench Mumbai
While interest paid by PE of foreign bank to H.O. is deductible in hands of PE, same interest is not taxable in hands of H.O.
(i) On the question whether the interest paid by the PE to the H.O. is deductible, while such interest is not deductible under the Act because the payer & payee are the same person, Article 7(2) and 7(3) of the DTAA & its Protocol makes it clear that for the purpose of computing the profits attributable to the PE in India, the PE is to be treated as a distinct and separate entity which is dealing wholly independently with the general enterprise of which it is a part and deduction has to be allowed for, inter alia, interest on moneys lent by the PE of a bank to its H.O.
(ii) On the question of taxability of the interest received by the H.O. from the PE, such interest is not taxable under the Act as both are, under the Act, the same person and not separate entities & one cannot make profit out of himself. The fiction created in Article 7(2) of the DTAA treating the PE as separate and independent entity does not extend to Article 11. Also, the interest paid by the PE is not interest paid in respect of debt claims forming part of the assets of the PE so as to attract Article 11(6). The DTAA, even assuming that it does create a liability, cannot be applied u/s 90(2) as it is contrary to the Act and less favorable to the assessee.
(Please click here for judgment)
2. CIT Vs. M/s Gopal Clothing Co. Pvt. Ltd., ITA No. 333/2006, Date: 22.03.2012, High Court of Delhi
Even after the amendment with effect from 1988 and introduction of the words “a person who is the beneficial owner of shares” cannot be construed to in a way alter the position that the shareholder has to be the registered shareholder.
The amendment imposes an additional condition that the registered shareholder must also be the beneficial shareholder of the company that has furnished loan/advance. the fact that the shareholders of the assessee company were also shareholders of the company which had given “loan/advances” is not sufficient and does not meet the requirement of Section 2(22)(e). The voting rights of the shareholder, i.e., the assessee can and should be taken into consideration.
(Please click here for judgment)
II. Today's Topline News:
-
Mukherjee hails substantial increase in direct tax base (Click for detail)
-
EPFO is introducing Electronic Challan cum Return (ECR) from April, 2012 (Click for detail)
-
Automatic Cancellation of Registration for Excise, Service Tax on Cards (Click for detail)
-
Govt panel proposes additional taxes on personalised vehicles (Click for detail)
III. Tenders Info.:
-
Punjab State Skill Development Society
Invited CAs Empanelled with Accountant General Punjab
Chandigarh
(Click here for detail)
New User? 
Subscribe Now