Case Law Details
ABC International Inc USA (2011) 199 Taxman 211 / 241 CTR 289 / 55 DTR 393 (AAR)
Foreign corporates with subsidiaries in the country not subject to payment of withholding tax for financial services like discounting of bills provided to their Indian arms – AAR
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.
“The applicant will not be subject to withholding of tax…,” the AAR said.
The ruling came in response to an application filed by US-based ABC International. The firm has an Indian subsidiary — ABC India Pvt Ltd — which is engaged in the business of trading food products and other activities. ABC International provides various financial services to its subsidiary, including discounting of bills of exchange or promissory notes and buying and underwriting negotiable instruments and commercial papers.
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