Assessee had a branch office in India and it also had a branch in Dubai namely ‘CSDB’. During relevant year, CSDB received certain amount from Indian branch of assessee-company for referring a resident client to Indian company for bringing out issue of convertible bonds. AO held that referral fee was liable to be taxed in India under S. 9(1)(i) of the Act. Tribunal held that referral fee was not taxable in India as fee for technical services. Tribunal; also held that since CSDB did not have PE in India, amount in question could not be brought to tax even as business income under article 7 of India-Switzerland DTAA . Tribunal also held that interest paid by Indian branch of foreign bank to Head Office is neither deductible in hand of Indian Branch nor chargeable to tax in hand of Head Office and overseas branches as they constitute a single entity. (AY. 2013-14)
Credit Suisse AG v. DCIT (IT) (2019) 176 ITD 873 (Mum.)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services-Dubai based branch a foreign bank, received referral charges from its Indian Branch for referring a resident client to Indian branch for bringing out issue of convertible bonds- Not liable to tax in India as fee for technical services- Transaction with head office-Interest paid- Neither deductible nor chargeable – DTAA-India- Switzerland. [S. 9(1)(i), Art. 7, 12]