1. Generally Indian branch of the foreign bank borrow funds from its head office on which it pays interest. 2. Certain amendments have also been proposed underthe withholding tax provisions such as the banks that have adopted core banking solutions are now requiredto withhold tax on interest at the entity level as againstthe branch level 3. Whether interest paid by a branch in India to its head office abroad should be included while calculating the profits of the branch for tax purposes has long been a subject matter of controversy. 4. Likewise - it is also debatable as to whether interest paid by an Indian branch to its head office is taxable inIndia or not. 5. The Special Bench of the Income-tax Appellate Tribunal in case of Sumotomo Mitsui Banking Corporation had held that interest payable by branch to head office is payment to self and the same therefore does not give rise to income in India.