Sintheta Limited, a company incorporated in Mauritius, has a branch office in Chennai opened in April, 2025. The Indian branch has filed return of…
CA Final · Direct Tax Laws and International Taxation · MTP · May 2026
Sintheta Limited, a company incorporated in Mauritius, has a branch office in Chennai opened in April, 2025. The Indian branch has filed return of income for assessment year 2026-27 disclosing income of 65 lakhs. It paid tax at the rate applicable to domestic company i.e. 30% plus higher education cess@4% on the basis of paragraph 2 of Article 24 (Non-Discrimination) of the Double Taxation Avoidance Agreement between India and Mauritius, which reads as follows: "The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities in the same circumstances." However, the Assessing Officer computed tax on the Indian branch at the rate applicable to a foreign company i.e. 35% plus higher education cess@4%. Is the action of the Assessing Officer in accordance with law?
Suggested Answer and Working Notes:
Under section 90 (2) , where the Central Government has entered into an agreement for avoidance of double taxation with the Government of any country outside India or specified territory outside India, as the case may be, then, in relation to the assessee to whom such agreement applies, the provisions of the Income-tax Act, 1961 shall apply to the extent they are more beneficial to the assessee. Thus, in view of paragraph 2 of Article 24 (Non-discrimination of the DTAA, it appears that the Indian branch of Sintheta Limited, incorporated in Mauritius, is liable to tax in India at the rate applicable to domestic company (30%), which is lower than the rate of tax applicable to a foreign company (35%). However, Explanation 1 to section 90 clarifies that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company. Therefore, in view of this Explanation, the action of the Assessing Officer in levying tax@35% on the Indian branch of Sintheta Ltd. is in accordance with law.
Topics: Deduction, Collection and Recovery of Tax
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