Foreign Branch Profits Can’t Be Included in MAT Book Profits Due to DTAA Override: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that foreign branch profits cannot be included in Minimum Alternate Tax (MAT) book profits due to Double Taxation Avoidance Agreements (DTAAs) override. The bench comprising Judicial Member Suchitra Raghunath Kamble and Accountant Member Girish Agrawal has observed that assessee is eligible to claim FTC in respect of both, treaty and non-treaty partner jurisdictions towards taxes paid in AY 2012-13 for which corresponding foreign sourced income got subjected to tax in India in the present AY 203-14 when set off of reduced brought forward loss was made which had resulted in higher tax burden in the hands of the assessee. Since FTC cannot exceed the domestic tax liability as deliberated above in detail, Assessing Officer is directed to verify and ascertain the correct quantum of domestic tax incidence on the foreign sourced income against which FTC is claimed and accordingly, give credit for the same. One of the key issues raised by the bank was the inclusion of profits earned by its overseas branches while computing book profits under Section 115JB of the Income Tax Act. The bank argued that such income should not form part of the book profits for MAT purposes because the taxation of foreign branch income is governed by Double Taxation Avoidance Agreements (DTAAs) and the provisions of Section 90 of the Income Tax Act. The bank contended that the provisions of Section 90, which give effect to tax treaties entered into by India, override the domestic provisions of Section 115JB. Therefore, the profits earned by its foreign branches, which were already subject to taxation in the respective foreign jurisdictions, should be excluded from the computation of book profits in India. The Revenue authorities, however, had invoked Section 115JB while determining the bank’s tax liability and included the foreign branch profits in the book profit calculation, leading to the dispute. While examining the matter, the Tribunal noted that similar issues had arisen in earlier assessment years in the case of the same assessee. In those matters, the coordinate benches had already dealt with the interpretation of the relevant provisions and provided directions to the Assessing Officer regarding the computation of income. The Tribunal also took note of judicial precedents, including decisions involving other public sector banks and rulings that examined the interaction between MAT provisions and treaty obligations under Section 90. The bench observed that the appellate authority had relied on earlier Tribunal rulings in the bank’s own case while granting relief. Finding that the Commissioner (Appeals) had followed established precedents and applied the relevant judicial principles correctly, the Tribunal held that there was no infirmity in the directions issued by the appellate authority. Another aspect of the dispute concerned directions issued by the Commissioner (Appeals) to the Assessing Officer regarding the granting of refund to the assessee after considering the relevant legal principles laid down in earlier cases. The Tribunal observed that the appellate authority had relied on decisions of coordinate benches, including similar rulings involving other banks. After reviewing the facts and the applicable case law, the Tribunal concluded that the directions given by the Commissioner (Appeals) were consistent with the judicial precedents and did not require any interference. Consequently, the Tribunal dismissed the appeal filed by the Revenue, holding that the findings of the Commissioner (Appeals) were legally sustainable. At the same time, certain issues raised by Bank of India were restored or partly allowed following the directions given in earlier assessment years, leading to the partial success of the bank’s appeal. “In the result, the appeal by the assessee is partly allowed and the appeal of the Revenue is dismissed,” the Tribunal concluded in its order pronounced on December 23, 2025. Case Details Case Title: Bank Of India Versus ACIT Citation: JURISHOUR-292-ITA-2026(MUM) Case No.: ITA No. 1397/MUM/2023 Date: 23.12.2025 Counsel For Appellant: P. J. Pardiwala, Sr. Advocate Counsel For Respondent: Satya Pal Kumar, CIT DR Click Here To Read Order Read More: Customs Duty Can’t Be Recovered from Subsequent Buyer Who Did Not Import Goods: CESTAT

Foreign Branch Profits Can’t Be Included in MAT Book Profits Due to DTAA Override: ITAT

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