interest income could only be taxed under article 11, and not additionally under article 7

 

DZ Bank AG, a company incorporated under the laws of Germany and having its principal place of business in Germany, was engaged in the banking business, and it had, with the permission of the Reserve Bank, a representative office in India. The assessee filed an income tax return in the name of “DZ Bank AG- India Representative Office”, apparently treating the India Representative Office as a taxable entity, disclosing NIL taxable income. This return was subjected to scrutiny assessment proceedings, and, in the ensuing assessment proceedings, the Assessing Officer noticed that during the relevant previous year “DZ Bank AG provided foreign currency loans to Indian companies’ and “these loans were in the nature of external commercial borrowings (ECB) as permitted under the Indian Exchange Control Regulations”. He further noted that “On perusal of ITS details generated in the case of the assessee it was seen that huge sums of TDS has been made on the interest paid/payable by Indian customers to the assessees”. Thus, when the Assessing Officer probed the matter further, it was explained by the assessee that TDS on interest payable by the Indian borrowers was borne by them, and that, as per section 115A(5), a foreign company was exempt from furnishing a return of income in India when it only earns interest income from foreign currency loans provided to Indian companies, and the appropriate taxes have been deducted at source from the same.