Interest paid by a branch of a Foreign Bank to its Head Office is deductible in the hands of the branch

The appellant before us is a foreign company incorporated in Netherlands and having its principal branch office in India at ITC Center, 4^th Floor, Russel Street, Kolkata 71.

We are here concerned with only a limited transaction made by this bank and the effects thereof, for the purpose of computing its income.

In course of its banking activities the appellant’s said branch in India remits substantial funds to its head office as payment of interest. While the appeal was being argued, it was submitted by Mr. R.N. Bajoria, learned senior Advocate for the appellant, that there is a continuous process of the said branch receiving interest from its head office and other branches and remitting of interest by the branch to the head office and other branches. This interest accrues according to him on funds of the head office or the branch as the case may be, treated to be held by the other unit.