Deepak Cables (India) Limited Vs. DIT (International Taxation), Bangalore (Advance Ruling Authority)- It is the case of the applicant that transfer of the goods by LS Cables, Korea to the applicant being outside India, there is no territorial nexus for taxation regarding those off-shore supplies. It is pointed out that the applicant after obtaining the goods from LS Cables, Korea sells them to KPTCL for consideration. For its on-shore activity, including the sale it is taxed in India. Learned Counsel specifically requested as to note that sale by the applicant to KPTCL is taxed in India since it is taxable in India and that part of the contract is not involved in this application.
Recently, the Authority for Advanced Ruling held that pendency of a similar matter of the applicant in respect to transaction with a different party, before a statutory forum, is no bar to seek advance ruling in respect of another transaction.
Deere and Co., In re (Authority for Advance Rulings)- American company is not liable to pay any capital gain under s 45 read with s 47(iii) on transfer of shares of Indian subsidiary to Singapore subsidiary without consideration on account of reorganisation as same amounts to gift.
Verizon Data Services India Private Limited (A.A.R. Nos. 865 of 2010) – The AAR held that the seconded personnel are employees of a foreign company and render managerial services to the Applicant. Hence, the payments made would be in the nature of income and would be regarded as fees for included services under the provisions of the India – US Double Taxation Avoidance Agreement (US DTAA) as well as fees for technical services under the provisions of the Indian Tax laws. Furthermore, the ‘make available’ criteria, as stipulated in the US DTAA, are not required to be satisfied in the case of managerial services. Hence, taxes were required to be withheld on the Applicant’s payments to its US affiliate.
A.A.R. No. 840 of 2010 in the case of ABC International Inc. USA- Foreign corporates with subsidiaries in the country are not subject to payment of withholding tax for financial services like discounting of bills provided to their Indian arms. In a ruling, the Authority of Advanced Rulings (AAR) also held such companies are also not liable to pay income tax in case the firm is based in a country which has a Double Taxation Avoidance Agreement (DTAA) agreement with India.
Recently in the case of Lanka Hydraulic Institute Limited In AAR No. 874 of 2010 , the Authority for Advance Rulings (AAR) held that where the scope of work under a contract is primarily related to technology transfer by way of software along with ancillary services in the nature of field data collection/mathematical model studies, the consideration would constitute “Royalty” under Article 12 of the Double Taxation Avoidance Agreement with Sri Lanka (the tax treaty). The applicant had argued that since there was no specific Article in the tax treaty for taxation of Fees for Technical Services (“FTS”), the consideration would constitute business profits under Article 7 of the tax treaty, which would not be taxable in the absence of a Permanent Establishment (“PE”) in India. The AAR rejected this contention and ruled that the income would be taxed under Article 12 of the tax treaty as Royalty.
A tax tribunal has ruled that service tax will apply on the proposed GMR-led joint venture in Special Economic Zone to provide maintenance, repair and overhauling (MRO) facilities to domestic and foreign airlines. The ruling was given by the Authority of Advance Rulings (AAR) on an application filed by the MAS-GMR Aerospace Engineering Company, a joint venture of GMR, Hyderabad International Airport Limited, Hyderabad and Malaysian Aerospace Engineering, SDN-BHD, Malaysia.
Indian firms outsourcing routine work to their overseas subsidiaries would not have to deduct withholding tax on the payments made to them. In a landmark ruling, the Authority of Advance Ruling (AAR) ( A.A.R. No.883 of 2010 dated 16.05.2010 – Applicant R.R. Donnelley India Outsource Private Limited) held that firms are exempted from deducting the withholding tax on the payments made for services like transcription and data processing.
OHM Limited v. DIT (AAR No. 935 of 2010) – Foreign firms operating in the country will have to pay tax at the existing rate of 4.223 per cent on revenue earned under seismic data acquisition and processing contracts, says a tribunal. In a ruling, the Authority of Advanced Rulings (AAR) held that foreign firms would not enjoy any leeway even if their income falls under the label of royalties or is considered as fees for technical services.
AAR in the case Goodyear Tire and Rubber Company held that capital gains provisions are not attracted in case of transfer of shares without consideration. Further, the AAR held that the transfer pricing provisions in an international transaction can be applied only when income is chargeable to tax in India and since in the present case no income was chargeable to tax in India the question of applicability of Transfer Pricing provisions and withholding tax under Section 195 of the Income-tax Act, 1961 (the Act) does not arise.
