A large number of Indian companies have set up offices outside India. The profits or losses of such offices are liable to be taxed in the foreign country. But how such profits or losses should be treated in India is a vexed question. A recent judgment of Pune Tribunal clarifies the legal position in favour of the assessee.
An Indian company engaged in computer software business set up a trading office in Japan. The company’s Japan branch suffered loss, which it claimed as deduction from profits earned in India.
The assessing officer, however, held that “since the profits of the trading office are taxable in Japan only, any loss incurred by the firm in respect of its trading office is not allowable as deduction from the income which is taxable in India.”
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