The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that the rate of tax applicable to domestic banking companies is not the same as foreign banking companies. Tax levied at a higher rate in the case of a foreign company is not to be regarded as a violation of the non-discrimination clause.
Assessee, BNP Paribas is a commercial bank having its head office in France. The assessee has 8 branches in India and is involved in normal banking activities including financing of foreign trade and foreign exchange transactions. The assessee filed the return of income for A.Y. 2016-17 by declaring total income of Rs.705,48,99,620/-.
During the assessment proceedings AO noted that the assessee has considered the rate of tax applicable to Indian companies carrying on similar business instead of the rate applicable to non-residents .
The Assessing Officer accordingly reopened the assessment as per Explanation 2(a) to section 147. The AO after considering all documents verification imposed a 48% tax rate on assessee companies along with making additions.
Aggrieved by the order, the assessee filed an objection before the Dispute Resolution Panel l(DRP), who dismissed the objection sl. Therefore the assessee filed another appeal before the tribunal.
Before the bench Farrokh Iran , counsel for the assessee submitted that the rate of tax applicable to domestic companies is also applicable to assessee companies. Thus the tax levied at higher rate in the case of foreign companies is discriminatory in nature
Sandeep Raj , Counsel for the revenue, supported the decision of lower authorities.
The tribunal observed that the coordinate bench of the Tribunal in assessee’s own case in BNPParibas vs DCIT, for the assessment year 2014-15, decided a similar issue against the assessee.
Referred to the Explanation in the Section 90, inserted in the IT Act with retrospective effect from 01-04- 1962 as per which the higher tax rate in case of foreign company, should not be regarded as violation of nondiscrimination clause. After considering the facts submitted by both parties, the two member bench of Padmavathy S,(Accountant Member ) and Vikas Awasthy, (Judicial Member)held that tax levied at a higher rate in the case of a foreign company is not to be regarded as a violation of the non-discrimination clause. There fore rate of tax applicable to domestic banking companies is not the same as foreign banking companies
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