Search Results For: International Tax


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DATE: November 15, 2019 (Date of pronouncement)
DATE: November 30, 2019 (Date of publication)
AY: 2018-19
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Static vs. Ambulatory interpretation of DTAAs: Entire law on whether the retrospective amendments to the definition of "royalty" in s. 9(1)(vi) of the Act can have bearing on the interpretation of the same term in the DTAAs explained with reference to the doctrine of "treaty override" and the Vienna Convention (Siemens AG 310 ITR 320 (Bom) explained)

That is a classic case of a subtle unilateral treaty override. While, in India, the expression ‘treaty override’ is often loosely used for the situations where the provisions of tax treaty prevails over any inconsistent provisions of domestic law, this approach seems to be at variance with the international practices wherein connotations of ‘treaty override’ refer to a situation in which domestic legislation of a treaty partner jurisdiction overrules the provisions of a single treaty or all treaties hitherto having had effect in that jurisdiction. That will be the end result of a domestic law amendment of an undefined treaty term, in departure from the current position, and import such amended meaning of that term, under article 3(2), in the treaty situations as well. Such an approach, on the first principles, is unsound inasmuch as it is well settled in law that the treaty partners ought to observe their treaties, including their tax treaties, in good faith. Article 26 of Vienna Convention on Law of Treaties provides that, “Pacta sunt servanda: Every treaty in force is binding on the parties to it and must be performed by them in good faith”. What it implies is that whatever be the provisions of the treaties, these provisions are to be given effect in good faith. Therefore, no matter how desirable or expedient it may be from the perspective of the tax administration, when a tax jurisdiction is allowed to amend the settled position with respect to a treaty provision, by an amendment in the domestic law and admittedly to nullify the judicial rulings, it cannot be treated as performance of treaties in good faith. That is, in effect, a unilateral treaty over-ride which is contrary to the scheme of Article 26 of Vienna Convention on Law of Treaties

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DATE: November 27, 2019 (Date of pronouncement)
DATE: November 30, 2019 (Date of publication)
AY: 2007-08
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Law on taxation under DTAAs of "transparent entities" & "representative assesseess" explained: When an assessee is a representative assessee of a tax transparent entity, it is the status of beneficiaries or constituents of tax transparent entities which is relevant for the purpose of determining treaty protection (Linklaters LLP 9 ITR (Trib) 217 (Mum) followed)

The principle emerging out of this analysis of legal position is that when an assessee is a representative assessee of a tax transparent entity, it is the status of beneficiaries or constituents of tax transparent entities which is relevant for the purpose of determining treaty protection. Viewed thus, this is beyond doubt that the income in question has actually accrued to the taxable entities on the Netherlands, which, according to the approach adopted by the Assessing Officer, is sine qua non for tax treaty protection. It would thus appear that the treaty protection has indeed been wrongly declined to the assessee

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DATE: February 5, 2019 (Date of pronouncement)
DATE: June 8, 2019 (Date of publication)
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S. 9(1)(vi) 'Royalty': The insertions of Explanations 5 & 6 to s. 9(1)(vi) by the Finance Act 2015 w.r.e.f. 01.04.1976, even if declaratory and clarificatory of the law, will not apply to the DTAAs. The DTAAs are a bilateral agreement between two Countries and cannot be overridden by a unilateral legislative amendment by one Country (New Skies Satellite BV 382 ITR 114 (Del) & Siemens AG 310 ITR 320 (Bom) followed)

India’s change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty.

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DATE: May 10, 2019 (Date of pronouncement)
DATE: June 8, 2019 (Date of publication)
AY: 2016-17
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S. 9(1)(vi) Royalty: Payment for 'bandwith services' is not assessable as 'royalty' if the assessee only has access to services and not to any equipment. The assessee also did not have any access to any process which helped in providing of such bandwith services. All infrastructure & process required for provision of bandwith services was always used and under the control of the service provider and was never given either to the assessee or to any other person availing the said services

The assessee pursuant to the terms of the “agreement‟ had only received standard facilities i.e bandwith services from RJIPL. In fact, as observed by the CIT(A), the assessee only had an access to services and did not have any access to any equipment deployed by RJIPL for providing the bandwith services. Apart there from, the assessee also did not have any access to any process which helped in providing of such bandwith services by RJIPL. As a matter of fact, all infrastructure and process required for provision of bandwith services was always used and under the control of RJIPL, and the same was never given either to the assessee or to any other person availing the said services

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DATE: April 12, 2019 (Date of pronouncement)
DATE: April 23, 2019 (Date of publication)
AY: 2004-05
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S. 44BB: Amount reimbursed to the assessee (service provider) by ONGC (service recipient), representing service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in clauses (a) and (b) of sub-section(2) of Section 44BB of the Act (Mitchell Drilling International 380 ITR 130 (Del), CBDT Circular No. 4/2008 dt 28.04.2008 & Circular No. 1/2014 dt 13.01.2014 followed)

Except to state that the said judgment needs re-consideration, no justifiable cause has been shown as to why this Court should take a view different from that of the Delhi High Court, in Mitchell Drilling International Pvt. Ltd.48, more so when the Division Bench of the Delhi High Court has taken a view similar to that of a Division Bench of this Court in M/s Schlumberger Asia Services Ltd.2. As the revenue has not been able to show just cause for this Court to take a different view, we see no reason to differ with the Division Bench judgment of the Delhi High Court that reimbursement of service tax is not an amount paid to the assessee on account of providing services and facilities in connection with the prospecting for, or extraction or production of, mineral oils in India.

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DATE: April 5, 2019 (Date of pronouncement)
DATE: April 10, 2019 (Date of publication)
AY: 2008-09, 2009-10, 2010-11
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S. 201(1) TDS: The time limit specified in s. 201(3) & (4) for passing orders does not apply to cases where payments are made to non-residents. In cases of payments made to non-residents, an order passed after one year from the end of the FY in which the proceedings were initiated is void ab initio and liable to be quashed

In our considered opinion, where the payments are made to the entities/persons other than the persons specified in sub-section (3), the limitation period of one year from the end of financial year in which the proceedings u/s. 201 were initiated, as laid down by the Special Bench of Tribunal and affirmed by the Hon’ble Jurisdictional High Court would apply. In the instant case, since, the order u/s. 201 has been passed much after the elapse of one year period from the end of financial year in which proceedings u/s. 201 were initiated, the order u/s. 201 in the impugned assessment years is void-ab-initio and hence, is liable to be quashed

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DATE: March 29, 2019 (Date of pronouncement)
DATE: April 3, 2019 (Date of publication)
AY: 2012-13
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S. 249(4): The power conferred upon the CIT(A) to condone the delay in filing of appeal is to alleviate genuine suffering of taxpayers. He has the power and corresponding duty to exercise the power when circumstances so warrant. U/s 14 of the Limitation Act, delay caused due to proceeding in a wrong forum has to be condoned. Article 2(1) of the India-UAE DTAA provides that the taxes covered shall include tax and surcharge thereon. Education cess is nothing but an additional surcharge & is also covered by the definition of taxes

The powers conferred upon the CIT(A) under section 249(3), for condoning the delay in filing of appeal if he is satisfied that the appellant had sufficient cause for not presenting it within that period, are statutory power to alleviate genuine suffering of taxpayers, so far as their grievance redressal by way of appeals are concerned, within framework of law. When a public authority has the powers to do something, he has a corresponding duty to exercise these powers when circumstances so warrant or justify–a legal position which has the approval of Hon’ble Supreme Court

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DATE: December 21, 2018 (Date of pronouncement)
DATE: January 17, 2019 (Date of publication)
AY: -
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Law on what constitutes a "fixed place permanent establishment" under Articles 5(1) to 5(3) of India-USA DTAA explained after referring to all judgements and pronouncements from the OCED Commentary and eminent authors

GE’s overseas enterprises have a place of business in India, per Article 5(1) of the DTAA. The term “place of business” has been understood to mean any premises, facilities or installations used for carrying on the business of the enterprise – does not have to be exclusively used for that purpose [OECD Model Tax Convention on Income and on Capital, Commentary on Article 5 Concerning the Definition of Permanent Establishment, para. 4 (“OECD MTC”)], with even a certain amount of space at its disposal is sufficient to cause fixed place of business.1 Moreover, having space at disposal does not require a legal right to use that place – mere continuous usage is sufficient if it indicates being at disposal. (Ref Para 4.1 of OECD MTC)

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DATE: October 24, 2018 (Date of pronouncement)
DATE: November 6, 2018 (Date of publication)
AY: 2011-12
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S. 9(1)(vi) Royalty/ 40(a)(i): Law explained on whether payment of web hosting charges to Amazon Web Services LLC (USA) (AWS) constitutes "royalty" under Explanation 2 to s. 9(1)(vi) read with the India USA DTAA and whether there is any obligation to deduct TDS thereon u/s 195

The aspect which needs to be seen is whether the assessee is paying consideration for getting any right in respect of any property. The assessee claims that it does not pay for such right but it only pays for the services. The claim of assessee before us was that it was only using services provided by Amazon and was not concerned with the rights in technology. The fees paid by assessee was for use of technology and cannot be said to be for use of royalty, which stands proved by the factum of charges being not fixed but variable i.e. it varies with the use of technology driven services and also use of such services does not give rise to any right in property of Amazon and consequently, Explanation under section 9(1)(vi) of the Act is not attracted

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DATE: October 12, 2018 (Date of pronouncement)
DATE: October 31, 2018 (Date of publication)
AY: 2012-13
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S. 90(2): If a non-resident assessee derives income from multiple sources in India, it is entitled to adopt the provisions of the Act for one source and the DTAA for the other source, whichever is more beneficial to it, even though the payer is common for both sources

As per Section 90(2), the assessee is entitled to claim benefits of the Double Tax Avoidance Agreement to the extent the same are more “beneficial” as compared to the provisions of the Act. While doing so, in cases of multiple sources of income, an assessee is entitled to adopt the provisions of the Act for one source while applying the provisions of the DTA for the other. This view of ours is supported by the order of this ITAT Bangalore Bench in the case of IBM world Trade Corporation v ADIT (IT) (2015) 58 taxmann.com 132 (Bang) and IMB World Trade Corpn v DDIT (IT) (2012) 20 taxmann.com 728 (Bang)