Taxable unit is a Foreign Company and not its Branch or PE in India

Morgan Stanley Mauritius Co Ltd Vs DCIT (ITAT Mumbai)

The reasoning given by the DRP is ex facie incorrect inasmuch as the SCB-India, being a permanent establishment of a company fiscally domiciled in the United Kingdom, and is not a taxable unit in India, and the taxability is in the name of its general enterprise- i.e UK based company, though only in respect of its profits attributable to the permanent establishment. The unit of taxability is not SCB- India, i.e. PE of the UK-based foreign company, but the foreign company itself, and the place of management of the UK-based company is obviously United Kingdom. As observed by Hon’ble Supreme Court, in the case of CIT Vs Hyundai Heavy Industries Ltd [(2007) 291 ITR 482 (SC)], “it is clear that under the Act, a taxable unit is a foreign company and not its branch or PE in India”. Clearly, therefore, the observations of the DRP so far as the basis of taxability, i.e. “assessed to tax on account of place of management” is incorrect.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. By way of this appeal, the assessee appellant has challenged the correctness of the order dated 7th October 2019, passed by the Assessing Officer in the matter of assessment under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 2015-16.

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