This decision could have far reaching impact on asset management companies. Apart from the withholding tax obligations, asset management companies could also be regarded as agents of non-resident investors. This implies that asset management companies could be proceeded against by the tax authorities for assessment and recovery of non-resident investors’ taxes.
ITAT held that the consideration paid by the taxpayer to foreign affiliates for purchase of Business Information Report (BIR) was not ‘royalty’ within the meaning of explanation 2(iv) to section 9(1 )(vi) of the Income-tax Act, 1961 (the Act). Further, no withholding of tax is required when payment is made to foreign affiliates for purchase of Business Information Report.
Mumbai bench of the Income-tax Appellate Tribunal held that subscription income received by a foreign entity from Indian clients is not in the nature of Royalty in accordance with the India-Ireland tax treaty (tax treaty). Further, the Tribunal relying on various Supreme Court decisions observed that the orders of the higher appellate authorities should be followed by the subordinate authorities and non compliance of this rule will result into undue harassment to taxpayers and chaos in the administration of tax laws.
On the issue of deductibility of certain business expenditure incurred by the Taxpayer, under the provisions of the Indian Tax Laws (ITL), The ITAT allowed the deduction of the expenditure which was found to be inextricably linked to and expended for the purpose of the Taxpayer’s business.
Where the details in the charts relied upon in the show-cause notice have been culled out from the trade and order logs and, in the circumstances of the case, it was not only relevant but even necessary that the appellant be furnished with those trade and order logs so that she could possibly make out a case based on other orders punched into the system, non-furnishing of the trade and order logs to the appellant in the circumstances of this case resulted in the violation of the principles of natural justice
In order to be covered within the expression derived from it is sine qua non that the relation between the income and source must be that of the first degree Where the relation between income and source slips from first to second degree, income stands excluded from the scope of expression derived from and may fall within the purview of attributable to.
ITAT Mumbai held in above case that that since there was no sale, discarding, demolition or destruction of an asset, no adjustment can be made to the Written Down Value (WDV) of the block of assets. Accordingly, the depreciation on goodwill and non-compete fees has to be allowed since these assets already formed part of the block of assets.
Recently, the Mumbai bench of the Income-tax Appellate Tribunal (the Tribunal) in the held that mere provision of a dredger on dry lease for carrying out dredging activity in India does not result in the taxpayer having a Permanent Establishment (PE) as per the India-Netherlands tax treaty (tax treaty). Further, the Tribunal relied on OECD commentary which states that to form a PE, there should be existence of fixed place of business i.e. it must be establish a distinct place with certain degree of permanence. It usually means that persons who in one way or another are dependent on the enterprise, conduct the business of the enterprise in the state in which the place is situated.
Mumbai bench of the Income-tax Appellate Tribunal held that the income from supply of information relating to various markets should be taxed as business profits under Article 7(3) of the India-Singapore tax treaty (tax treaty) and accordingly the expenses incurred for earning the income should be allowed as a deduction. Further, the Tribunal upheld the view that when the taxpayer chooses to be covered by provisions of an applicable tax treaty, the tax department cannot thrust provisions of the Income-tax Act, 1961 (‘the Act’) on the taxpayer unless those are more beneficial to the taxpayer.
The ITAT held that the taxes paid on profits, whether on presumptive basis or on the basis of actual profits earned, represent application of income and are not allowed as deduction in computation of taxable profits. In terms of applicable provisions of the Indian Tax Laws (ITL), read with the applicable tax treaty, such taxes qualify for tax credit relief so as to avoid double taxation.
