Limitations did not apply because not specifically referenced in treaty
The Mumbai Special Bench of the Tribunal held that the limitations provided under the Income-tax Act, 1961 on the deductibility of head office expenses, which were allocated to an Indian branch of a UAE company that constituted a permanent establishment (PE), were inapplicable for purposes of computing the taxable profits of the PE under the India-UAE income tax treaty.
The case is: Mashreq Bank PSC v. DCIT
The court agreed with the taxpayer’s position that the limitations on deductibility did not apply because the business profits article of the treaty did not make specific reference to such limitations.
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