India: Costs incurred by Singapore taxpayer and cross-charged to its Indian branch deductible in computing branch’s profits under Singapore treaty (tribunal decision)
Denying deductions would be contrary to principles of the treaty
The Delhi Bench of the Income-tax Appellate Tribunal held that the Indian branch of a Singapore taxpayer was entitled to deduct expenses incurred by the taxpayer for the procurement of goods/services and cross-charged to the branch because the branch must be treated as a distinct and separate enterprise under Article 7 of the India–Singapore income tax treaty.
The tribunal rejected the position of the tax authority that because the branch and the taxpayer were effectively the same person, the branch could not purchase goods/services from itself, and thus the branch must not be allowed to deduct the cross-charged costs. The tribunal concluded that denying such costs would effectively tax the gross receipts of the branch, instead of business profits, which is contrary to the principles of the treaty. Rather, branch profits must be computed independently after allowing all expenses incurred for the branch’s business.
The case is: FCE Computer Systems S Pte Ltd v. ACIT
Read a January 2026 report prepared by the KPMG member firm in India