Dy. CIT (IT) v. Co-Operative Rabobank U. A. (2023) 152 taxmann.com 295 / 103 ITR 89 (SN)(Mum) (Trib)

S. 9(1)(v) : Income deemed to accrue or arise in India – Interest-Bank is a subsidiary of Netherlands company — Interest paid by Indian branch not taxable in hands of head office or overseas branches — Change of law with effect from 1-4-2016 not be applicable prior to ay 2016-17-DTAA-India-Netherlands [Art. 11(2)]

During the assessment proceedings, the assessee merely requested that the income be taxed at the rates prescribed under the DTAA of 10% in terms of Article 11(2) of the DTAA, but had not proved the beneficial ownership of the interest. Therefore, this issue was remanded to the file of the AO for adjudication de novo after examining the applicability of the DTAA. It was further held that the interest paid by the Indian branch was not taxable in the hands of the head office or overseas branches, all being the same entity. Further, the amendment to S. 9(1)(v) of the Act by the Finance Act, 2015 with effect from 01.04.2016, would not be applicable to the years under consideration and would only be applicable to the AY 2016-17 and onwards. Therefore, it was held that the CIT(A) was right in deleting the addition made by the AO in respect of interest received by head office and overseas branch from the assessee. (AY.2013-14 to 2015-16)