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HC set-aside ITAT’s order justifying levy of 65% tax rate on PE of Japanese Co. in India

August 20, 2019[2019] 108 242 (Calcutta)

INTERNATIONAL TAXATION : Where assessee, permanent establishment of Japanese company, was assessed as not being a domestic company and tax rate of 65 per cent was imposed on assessee, since clause 24(2) of DTAA agreement between Indian and Japan provides that a permanent establishment of an entity of one country in other country shall not be subjected to less favourable terms than an assessee carrying on similar activities in other country, assessee was liable to pay tax at same rate as Indian companies carrying on same activities were liable to for relevant assessment year. The effect of the legal fiction envisaged in article 24(2) of the agreement is that for purpose of applying appropriate tax rate, permanent establishment of entity had to be regarded as a domestic company

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