ITAT Affirms Tax Neutrality of Head Office Branch Inter

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, by its order dated 25 June 2026, partly allowed the appeals of The Bank of Nova Scotia for Assessment Years 1999-2000 to 2001-02, holding that interest received by the Indian branch from its overseas head office and branches is not taxable, while interest paid to them is correspondingly not deductible under the Income-tax Act. 

Relying on the principle that no person can make profit from itself, the Tribunal followed the decisions of the Special Bench in Sumitomo Mitsui Banking Corporation, the Delhi High Court in Bank of Tokyo-Mitsubishi UFJ Ltd., and the Bombay High Court in Credit Agricole Indosuez, thereby reaffirming the doctrine of tax neutrality in transactions between a foreign bank's permanent establishment and its head office.