Treaty between India and Japan – Indian decision on whether losses incurred by PE of Indian company in Japan could be reduced from taxable income in India

The Indian Income Tax Appellate Tribunal (ITAT) delivered a ruling dated 29 June 2007 in the cases of Deputy Commissioner of Income Tax v. Patni Computer Systems Ltd (109 TTJ 742) on whether losses incurred by a foreign branch of an Indian company are eligible to be set off against the company's taxable income in India.

(a) Facts. The Taxpayer (i.e. Patni Computer Systems Ltd) was an Indian company, engaged in the business of development of computer so…