A foreign bank is subject to income tax rates applicable to non-domestic companies, as legislative amendments clarify tax classifications without conflicting with existing DTAAs.

JUDGMENT :

SURYA PRAKASH KESARWANI, J.

1. Heard Sri Percy Pardiwala, learned senior advocate assisted by Sri Akhilesh Gupta, learned counsel for the appellant and Smt. Smita Das De and Sri Smarajit Roychowdhury, learned senior standing counsel for the respondent.

2. Learned counsels for the parties jointly stated that similar facts and question are involved in all the above noted six appeals and accordingly requested to hear all the appeals together. Therefore, all the afore-noted six appeals have been heard at length on 16.04.2024 and 18.04.2024 and the judgment has been reserved on 18.04.2024. Although by order dated 17.05.2005 the appeal was admitted on three substantial questions of law, but the learned counsel for the appellant has pressed and argued only on substantial question of law no. (a) which is reproduced below:

“(a) Whether on a true and proper interpretation of the provisions of sections 2(22A) and 90 of the Income Tax Act, 1961 read with CBDT circular No. 333 dated April 2, 1982 and CBDT letter dated November 21, 1994 and Article 24(2) of the Double Taxation Avoidance Agreement India and Netherlands, the Tribunal was justified in law in holding that the appellant was liable to income tax at the higher rate applicable to a foreign company and not at the rate of tax applicable to a domestic company.”

Particular of Afore-Noted Appeals:

3. Afore-noted leading Income Tax Appeal No. 155 of 2005 arises from the impugned order of the Income Tax Appellate Tribunal, ‘E’ Bench, Kolkata (for short ITAT) dated ____ November, 2003 passed in (i) ITA No. 58 (Cal) of 2001 (Assessment year 1992-93), (ii) ITA No. 690 (Kol) of 2002 (Assessment year 1993-94), (iii) ITA No. 106 (Kol) of 2001 (Assessment year 1994-95) and (iv) ITA No. 496 (Kol) of 1999 (Assessment year 1995-96).

4. Above noted Income Tax Appeal No. 154 of 2005 arises from the impugned order in (i) ITA No. 694 (Kol) of 2002 (Assessment year 1997-98) and (ii) ITA No. 695 (Kol) of 2002 (Assessment year 1998-99). Income Tax Appeal No. 19 of 2017 arises from impugn order of the ITAT “C” Bench Kolkata dated 13.04.2016 passed in (i) ITA 519/Kol/2011 (Assessment year 2007-08). Income Tax Appeal No. 20 of 2017 arises from the aforesaid common order of the ITAT dated 13.04.2016 passed in (i) ITA No. 1926/Kol/2010 (Assessment year 2006-07). Income Tax Appeal No. 21 of 2017 arises from the aforesaid impugned common order of the ITAT dated 13.04.2016 passed in (i) ITA No. 1738/Kol/2009 (Assessment year 2005-06). Income Tax Appeal No. 22 of 2017 arises from the aforesaid common impugned order of the ITAT dated 13.04.2016 passed in (i) ITA No. 1805/Kol/2012 (Assessment year 2008-09).

Facts:

5. Since common substantial question of law is involved in all the above noted Income Tax Appeals, therefore, with the consent of the learned counsel for the parties, the facts of leading Income Tax Appeal No. 155 of 2005 are being noted.

6. Appellant is a branch of ABN Amro Bank NV (Now The Royal Bank of Scotland N.V.) incorporated in the Netherlands with limited liabilities having its original office at Singapore. In India, the appellant is registered as scheduled bank in terms of Schedule-II of the Reserve Bank of India (RBI) Act, 1934. The main activities of the appellant in India are accepting deposits, giving loans, discounting/collection of bills, issue of letters of credit/ guarantees, executing forward transaction of foreign currencies for importers/exporters, money market lending /borrowings, investment in societies, ect. In terms of the existing rules and regulations governing such transaction. There is an agreement between India and Netherlands for avoidance of double taxation and preventing of fiscal evasion (for short ‘DTAA’). Article 7 of the DTAA