Assessee, a banking company based on Korea, was carrying on business in India through its PE. Assessee had claimed deduction in respect of salaries paid to its employees working for its permanent establishment in India. Assessing Officer held that deduction could not be allowed in computation of profits of PE in India, for reason that for purpose of computation of profits, PE was required to be treated as hypothetically independent of its head office and when PE did not incur expenditure, it could not be allowed a deduction. Tribunal held that since there could not be a benefit accruing to Korean company when Indian PE of assessee company did not reimburse its Korean company, non-reimbursement of expenses incurred by Korean Head Office for salary of employees of Indian PE did not result in taxable income in hands of PE/HO under section 28(iv) of the Act. (AY. 2012-13 to 2015-16 )
Shinhan Bank. v. DCIT (IT) (2023) 198 ITD 453 (Mum) (Trib.)
S. 28(iv) : Business income-Value of any benefit or perquisites-Converted in to money or not-Income deemed to accrue or arise in India-Non-reimbursement of expenses incurred by Korean Head office for salary of employees personnel deputed in India but paid in Korean by Head office of Indian PE did not result in taxable income in hands of PE-DTAA-India-Korea [S.9(1)(i), 28(iv), Art.7]