The assessee is a commercial bank having its head office in France. AO noticed that the Indian branch office had paid interest to its head office/overseas branches as interest on the subordinated debt and further interest on Nostro overdrafts. The Indian branch office has claimed a deduction of such an amount citing the provisions of Article 7(3) of the India-France DTAA. The AO held that once the assessee has opted to be governed under the beneficial provisions of the India-France DTAA and it is accepted that the assessee has a PE in India under the DTAA, then the single entity approach of the Act gives way to the distinct and independent entity or separate entity approach under the DTAA. The AO therefore, held that the interest paid by the Indian branch office (i.e. PE) is chargeable in the hands of the head office in terms of the provisions of S. 9(1)(v)(c) of the Act by virtue of the Explanation to S. 9(1)(v)(c) of the Act, inserted by the Finance Act, 2015. The ITAT held that the coordinate bench of the Tribunal came to the conclusion that the interest paid by the Indian branch/PE to the head office/GE is not taxable in India independent of the decision of the Special Bench of the Tribunal in Sumitomo Mitsui Banking Corporation (supra). Thus, in view of the above, even though the submission of the Revenue that the amendment by Finance Act 2015, whereby Explanation to S. 9(1)(v) of the Act was inserted specifically to overcome the decision in Sumitomo Mitsui Banking Corporation (supra), is accepted, the same would still not lead to taxation of the interest paid to the head office/overseas branches under the provisions of the DTAA. (AY. 2017-18, 2018-19)