Nordica International Bank AG is a banking company incorporated in, and a tax resident of Switzerland. It has been carrying on banking business in…

Nordica International Bank AG is a banking company incorporated in, and a tax resident of Switzerland. It has been carrying on banking business in India through a single branch at Mumbai since 2018, and that branch constitutes its permanent establishment in India. The bank is included in the Second Schedule to the Reserve Bank of India Act, 1934.For the previous year 2025-26, the Mumbai branch reported a net profit of ₹21.75 crores after debiting to its profit and loss account, inter alia, the following items:(i) Provision made towards advances classified as sub-standard, doubtful and loss assets in accordance with the prudential norms of the Reserve Bank of India – 38.75 crores.(ii) Amount allocated to the Mumbai branch by the Zurich Head Office through a head office debit note of ₹ 6.60 crores comprise of the following:(a) ₹2.50 crores, being rent, rates and insurance of the Zurich head office premises used for the purposes of the bank's business, and salary and allowances of personnel employed in that office. This expenditure relates to the bank's operations across all jurisdictions and has been allocated to the Mumbai branch on the basis of turnover.(b) ₹1.70 crores, being salary and allowances of personnel employed in the Zurich head office who deal exclusively with the Indian operations, together with the travelling expenditure of such personnel for the internal audit of the Mumbai branch. This expenditure relates wholly and exclusively to the Mumbai branch.(c) ₹2.40 crores, being professional and regulatory compliance charges for services rendered in India by Indian firms engaged for the Mumbai branch. The Indian firms raised their invoices on the Mumbai branch, which deducted and paid tax thereon under Chapter XVII-B within the prescribed time; the Head Office settled those invoices on behalf of the branch.The expenditure referred to in (a) and (b) above was incurred and borne outside India by the bank and was met out of the funds of the Zurich head office.(iii) Interest of ₹ 7.25 crores payable to the Zurich Head Office on funds provided by the Head Office for use in the banking business of the Mumbai branch. The amount was credited to the account of the Head Office during the previous year 2025-26 but remained unpaid as on 31st March 2026. No tax was deducted at source thereon by the Mumbai branch considering that HO and branch are not separate entities.(iv) Interest of ₹ 6.00 crores credited on 1st January 2026 to the accounts of resident depositors. Tax is deductible under Chapter XVII-B on this interest of 0.60 crores, however, such tax was actually deducted on 28th February 2026 and was deposited into the credit of the Central Government on 18th June 2026.The following further information is available:(1) Advances aggregating ₹ 6.40 crores became irrecoverable during the previous year 2025-26 and were written off by debit to the provision for bad and doubtful debts account made under section 36(1)(viia); the write-off has accordingly not been charged to the profit and loss account for the year. The opening credit balance as on 1st April, 2025 in that account for the purposes of the proviso to section 36(1)(vii) was 4.85 crores.(2) Interest of 18.90 crores accrued during the previous year 2025-26 on certain advances classified in accordance with the prudential norms of the Reserve Bank of India, being categories of bad and doubtful debts of the description prescribed under the Income-tax Rules, 1962. No part of this interest was credited to the profit and loss account. Of this amount, ₹5.30 crores was actually received during the previous year 2025-26 and was credited to an interest suspense account; the balance of 13.60 crores was neither credited to any income account nor received during that year.(3) The adjusted total income of the Mumbai branch for the previous year 2025-26, computed in accordance with the requirements of section 44C is 150 crores.(4) The total income of the Mumbai branch for the previous year 2025-26, computed before making any deduction under section 36(1)(viia) and before deduction under Chapter VI-A is 110 crores.(5) The branch has furnished its return of income for the Assessment Year 2026-27 within the due date specified under section 139(1).Note - The provisions of the agreement entered into between India and Switzerland under section 90 are not to be considered; the questions are to be answered with reference to the provisions of the Income-tax Act, 1961 only.