Income Tax : The guide explains how residents can avoid double taxation through DTAA benefits, Foreign Tax Credit, and Section 91 relief, outli...
Income Tax : The article explains how India has broadened Permanent Establishment and Business Connection concepts after BEPS reforms. It highl...
Income Tax : xplains how the functions performed by an Indian subsidiary are tested under Article 5 to determine whether a foreign company form...
Income Tax : The analysis explains how activities of a liaison office can trigger PE exposure despite regulatory approval. Taxability depends o...
Income Tax : Highlights how the Court ruled that consistent operational control and strategic oversight in India can establish a Fixed Place PE...
Income Tax : The OECD Committee on Fiscal Affairs has proposed important and far-reaching changes to the Commentary on Article 5 (Permanent Est...
Income Tax : A host of companies from Mumbai, said to be 367 in number and mostly multinational in nature, have moved the recently set up dispu...
Income Tax : A Double Taxation Avoidance Agreement was signed between India and Tajikistan today, i.e. 20th November, 2008. The Agreement was s...
Income Tax : The Bombay High Court held that only the royalty retained after an APA adjustment is taxable, applying the doctrine of real income...
Income Tax : The Bombay High Court held that royalty refunded by a foreign company to its Indian subsidiary under an Advance Pricing Agreement ...
Income Tax : The Delhi ITAT ruled that no installation or supervisory PE existed in India as the activities did not exceed the 120-day threshol...
Income Tax : The Tribunal held that offshore supply receipts could not be taxed under Section 44BB where the Revenue failed to prove the existe...
Income Tax : Bangalore ITAT ruled that only solar days and not cumulative man-days should be considered while determining the existence of a Pe...
Income Tax : CBDT notifies Section 206C (1G) of Income Tax Act shall not apply to a person (being a buyer) who is a non-resident & who does not...
Income Tax : Public Consultation on the proposal for amendment of Rules for Profit attribution to Permanent (PE) Establishment invited by CBDT....
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 Tribunal while upholding the order of the CIT(A) and after relying on the decision of the AAR in the case of Brown and Root Inc. held that since an installation project was not carried on for more than six months, as per Article 5(2)(k) of the tax treaty the taxpayer did not create PE in India.
Mumbai Income-tax Appellate Tribunal in the case of M/s. Goldcrest Exports v. ITO held that compensation payable for breach of contract to a foreign company would not be taxable in the hands of the foreign company in the absence of a permanent establishment of the foreign company in India. The Tribunal further held that interest included in compensation merges with and partakes the character of compensation itself, and hence, would not be taxable under the tax treaty between India and UK . Therefore, deduction claimed by the assessee for compensation including interest cannot be disallowed on account of non-withholding of taxes therefrom.
The Tribunal held that mere existence of subsidiary does not by itself constitute the subsidiary company a PE of the parent company. The main condition for constitution of PE is carrying on of business in India. However, no operations in respect of the manufacture and sale of parts and Completely Knocked Down (CKD) kits to subsidiary was carried out by the taxpayer in India.
Compensation including interest on cancellation of contract not taxable in the absence of Permanent Establishment of the non-resident in India under India-UK tax treaty
Prudential Assurance Company Limited (‘the Petitioner’ or ‘the Company’), a sub-account duly registered with the Securities and Exchange Board of India (‘SEBI’) filed a writ petition (Writ petition no.866 of 2010 ) with the Bombay High Court against the show-cause notice issued under section 263 of the Income Tax Act, 1961 issued by the Commissioner of Income-tax (Commissioner). The Commissioner was seeking to revise an assessment order determined on the basis of a ruling of the Authority for Advance Ruling (‘the AAR’) in the case of Fidelity Northstar Fund (AAR No. 678/2006). The Bombay High Court has quashed a show-cause notice issued by the Commissioner and held that the assessment order passed by the Assessing Officer (AO) after applying the AAR ruling in petitioner’s own case, cannot be regarded erroneous or prejudicial to the interests of the tax department. Further, the High Court also observed that as per section 245S of the Income-tax Act, 1961 (the Act), the ruling in the case of Fidelity Northstar Fund cannot displace the binding character of the advance ruling rendered between the Petitioner and the tax department.
ITAT Mumbai in the case of Satellite Television Asia Region v. ADIT held that the Assessing Officer cannot consider the assessee a Permanent Establishment blocker or conduit company when there are commercial reasons for its existence. This means that they cannot tax the entire advertisement revenues in the hands of parent company.
In a recent case of SET Satellite Singapore Pte Ltd.1 the Income Tax Appellate Tribunal, Mumbai (“ITAT”) has held that royalty payments made by a resident of Singapore to another Singaporean entity, as consideration of rights to transmit and broadcast matches etc. in India, are not subject to Indian withholding tax requirements. The ITAT in this case relied on Article 12(7) of the India-Singapore Tax Treaty (“Treaty”), which provides that royalty payments will be considered to arise in India, only if the royalty is paid by a resident of India or incurred in connection with its permanent establishment (“PE”) in India and such royalty is borne by such PE.
No income would arise to the American company in India in the course of deputing personnel to an Indian company who work under the control and supervision of the Indian company and carry out the work allotted to them by the Indian Company and the American company is reimbursed by the Indian company.
Depending on the facts, the activity of storage and supply of goods in India by a foreign enterprise may need examination to determine impact of the above ruling. For the purpose of the computation of the profit, a PE should be regarded as separate and distinct enterprise wholly independent of the non-resident foreign company.
