Home › › Page 8

Search Results For: International Tax

This section is now closed. Click here for new judgements


Posted on by editor
COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: February 29, 2016 (Date of pronouncement)
DATE: March 7, 2016 (Date of publication)
AY: 2007-08
FILE: Click here to view full post with file download link
CITATION:
Entire law on whether consideration for user of software is assessable as "royalty" in the light of the different definitions in s. 9(1)(vi) and Article 12 of the DTAA and the conflicting judgements of various High Courts explained

A comparison of the definition of ‘royalty’ as provided under the DTAA (as reproduced above) with the definition of ‘royalty’ as provided under Income Tax Act shows that the same are not at para materia with each other.The definition provided under the DTAA is the very short and restrictive definition, whereas, the definition of the royalty as provided under the Income Tax Act is a very wide and inclusive but vague. A careful reading of the relevant provision under the DTAA and under the Income Tax Act reveals that the DTAA covers only a part of the items mentioned under sub clause (i) to (v)to Explanation 2 to section 9(1)(vi). We may mention here that the section9(1)(vi) having sub clauses (a), (b), & (c) is very vast to cover consideration paid for any right, property or information used or services utilized for the purpose of business or profession. Further, we find that in the said sub clauses(a), (b) & (c) of section 9(1) (vi), the wording is somewhat vague and negatively written.

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE: ,
CATCH WORDS:
COUNSEL:
DATE: February 12, 2016 (Date of pronouncement)
DATE: February 28, 2016 (Date of publication)
AY: 2011-12
FILE: Click here to view full post with file download link
CITATION:
S. 206AA: S. 90(2) overrides s. 206AA and so the assessee is required to deduct TDS as per the DTAA and not as per s. 206AA. The issue is debatable and so cannot be rectified by the AO u/s 200A

Where the tax has been deducted on the strength of the beneficial provisions of section DTAAs, the provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist on the tax deduction @ 20%, having regard to the overriding nature of the provisions of section 90(2) of the Act. Section 206AA of the Act does not override the provisions of section 90(2) of the Act and in the payments made to non-residents, the assessee correctly applied the rate of tax prescribed under the DTAAs and not as per section 206AA of the Act because the provisions of the DTAAs was more beneficial

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: February 11, 2016 (Date of pronouncement)
DATE: February 17, 2016 (Date of publication)
AY: 2011-12
FILE: Click here to view full post with file download link
CITATION:
A Power of Attorney executed by the Head Office in favour of the Liaison Office in India does not create a Permanent Establishment if the powers are specific to the liaison office and are not unfettered powers to enable to Liaison Office to act on behalf of the enterprise

The sole basis on which the AO as well as the DRP came to a conclusion that the assessee had a P.E. in India is the clauses in power of attorney executed by the head office in favour of its employee in the L.O. in India. Reliance was also placed on the permission granted by the RBI to the assessee for setting up the L.O. A plain reading of the clauses in the power of attorney takes us to a conclusion that the powers given therein are L.O. specific. The AO’s conclusion that the power of attorney granted unfettered powers to its L.O. employee, to do all or any acts for and on behalf of the assessee, is incorrect. In our view the finding of the AO that the power of attorney is an open ended document, which is clearly outside the scope of initial permission granted by the RBI is also perverse. No doubt the AO can investigate, call for evidences and come to a conclusion where any income earning activity has been carried out by the L.O. so as to construe it as fixed P.E. but, in our view it is beyond the jurisdiction of the AO to adjudicate and conclude that the assessee has filed false declarations before the RBI. At best, he can bring his findings to the notice of the RBI which may consider the same in accordance with law. The RBI has not found any violation of conditions laid down by it while permitting the assessee to have an L.O. In such circumstances, no adverse inference can be drawn

Read more ›

Posted on by editor
COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS: , , , ,
COUNSEL:
DATE: January 11, 2016 (Date of pronouncement)
DATE: January 26, 2016 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
Transfer of shares of an Indian Co by a Mauritius entity to a Singapore entity due to group reorganization is not a scheme for avoidance of tax. The capital gains are exempt under India-Mauritius DTAA. Treaty shopping is permissible. A ROI u/s 139(1) need not be filed if income is exempt from tax

Dow IMEA Group was dismantled in 2010 and that is how the need for realignment of the group arose whereby DAS entity was to be shifted from an entity which falls under Europe region to an entity which would fall in the Asia-Pacific region. This was to be done with a view to achieve better control. Singapore is one of the upcoming countries in Asia-Pacific region in the opinion of the applicant and therefore, the Dow group contemplated to shift the share holding of DAS India from Mauritius to Singapore. All this exercise is also more than 5 years old from the date of the last acquisition of the shares. Thus, it cannot be said that the proposed transfer of shares was amounting to a scheme to avoid payment of taxes in India. It was clearly for the business considerations. We, therefore, reject the contention of the Revenue that this amounting to a scheme to avoid payment of taxes in India. We accept the contention raised by the applicant about its not having a PE in India

Read more ›

Posted on by editor
COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: January 12, 2016 (Date of pronouncement)
DATE: January 26, 2016 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
Managerial services rendered by a UK Co to an Indian Co, even if technical in nature, is not assessable as “fees for technical services” under Article 13 of India-UK DTAA if it does not “make available” any skill, technical know-how etc

To fit into the terminology ‘make available’, the technical knowledge, skills etc must remain with the person receiving the services even after the particular contract comes to an end. The services offered may be the product of intense technological effort and lot of technical knowledge and experience of the service provider would have gone into it. But, that is not enough to fall within the description of services which make available the technical knowledge, etc. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in future without depending on the provider

Read more ›

Posted on by editor
COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: January 19, 2016 (Date of pronouncement)
DATE: January 26, 2016 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
Amount received by a FII under a settlement for giving up right to sue is not assessable as either capital gains or as business profits. In principle, a FII is an "investor" and not a "trader" in stocks. On facts, applying Circular No. 4 of 2007, Aberdeen is an investor in shares

The Circular No.4 of 2007 issued by the CBDT quotes three principles laid down by this Authority in the case of Fidelity Group 288 ITR 641 in order to determine whether shares held are investment or stock-in-trade. First principle is how the shares were valued in the books of accounts, i.e., whether they were valued as stock-in-trade or held as investment. In this case the books of accounts show that the shares were held as investment. The second principle is to verify whether there are substantial transactions, their magnitude etc, maintenance of books of accounts and finding the ratio between purchases and sales. In this case the shares of Satyam were purchased, held as investment and sold only after the fraud became public. The third principle suggests that ordinarily purchases and sales of shares with the motive of realizing profit would lead to inference of trade/adventure in the nature of trade; where the object of the investment in shares of companies is to derive income by way of dividends etc, the transactions of purchases and sales of share would yield capital gains and not business profits. This principle also suggests that in this case the object of the investment is not to have business profit because the shares of Satyam were not being purchased and sold at regular interval. In the light of this even CBDT Circular No.4 of 2007 does not support the stand of Revenue that Aberdeen investors were engaged in trading business

Read more ›

Posted on by editor
COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: November 30, 2015 (Date of pronouncement)
DATE: January 26, 2016 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
An installation project which does not last more than 183 days in a fiscal year is not a "Permanent Establishment" and the business profits are taxable only in Singapore under Article 7(1) of the India-Singapore DTAA

Since the project executed by the applicant in India for Brahmaputra continued only for 178 days in a fiscal year and as the duration of the project is less than 183 days in a fiscal year, Permanent Establishment of the applicant cannot be constituted in India for the FY 2012-13 as per the provisions of Article 5.3 of the India-Singapore DTAA. Hence, the business profits accruing or arising to the applicant by way of the execution of the project under reference is taxable only in the country where the applicant is a resident, as per Article 7.1 of India-Singapore DTAA

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S):
GENRE: ,
CATCH WORDS: ,
COUNSEL:
DATE: January 19, 2016 (Date of pronouncement)
DATE: January 25, 2016 (Date of publication)
AY: 2008-09
FILE: Click here to view full post with file download link
CITATION:
S. 9(1)(vi): While consideration paid to acquire the right to use software is assessable as "royalty", payments made for purchase of software as a product is not for use or the right to use the software and is not assessable as "royalty"

In the cases where an Assessee acquires the right to use a software the payment so made would amount to royalty. However in cases where the payments are made for purchase of software as a product, the consideration paid cannot be considered to be for use or the right to use the software. It is well settled that where software is sold as a product it would amount to sale of goods. In the case of Tata Consultancy Services v. State of Andhra Pradesh (2004) 271 ITR 401 (SC), the Supreme Court examined the transactions relating to the purchase and sale of software recorded on a CD in the context of the Andhra Pradesh General Sales Tax Act. The court held the same to be goods within the meaning of Section 2(b) of the said Act and consequently exigible to sales tax under the said Act. Clearly, the consideration paid for purchase of goods cannot be considered as ‘royalty’. Thus, it is necessary to make a distinction between the cases where consideration is paid to acquire the right to use a patent or a copyright and cases where payment is made to acquire patented or a copyrighted product/ material. In cases where payments are made to acquire products which are patented or copyrighted, the consideration paid would have to be treated as a payment for purchase of the product rather than consideration for use of the patent or copyright

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): , ,
GENRE: ,
CATCH WORDS: , , ,
COUNSEL:
DATE: December 8, 2015 (Date of pronouncement)
DATE: December 21, 2015 (Date of publication)
AY: 2007-08, 2008-09
FILE: Click here to view full post with file download link
CITATION:
Commission earned by a non-resident agent who carried on business of selling Indian goods outside India cannot be said have deemed to be income which has accrued and/or arisen in India. Circular No. 23 of 1969 & Circular No.786 of 2000 were withdrawn on 22.10.2009. The withdrawal of a Circular cannot have retrospective operation

in CIT v/s. Toshoku Ltd. 125 ITR 525 the Apex Court held that the commission earned by the non-resident agent who carried on the business of selling Indian goods outside India, cannot be said have deemed to be income which has accrued and/or arisen in India. Circular No. 23 of 1969 and its reiteration in Circular No.786 of 2000 were in force during the Assessment Years. It was only subsequently i.e. on 22nd October, 2009 that the earlier Circular of 1969 were withdrawn. However, such subsequent withdrawal of an earlier Circular cannot have retrospective operation as held in UTI v. P. K. Unny 249 ITR 612

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE: ,
CATCH WORDS: , , ,
COUNSEL:
DATE: August 20, 2015 (Date of pronouncement)
DATE: December 21, 2015 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
S. 195/ 40(a)(ia): In view of retrospective amendment to s. 195 to provide that s. 195 applies whether or not the non-resident person has a residence or place of business or business connection in India, commission to non-resident agents for services rendered outside India is liable for TDS u/s 195 and has to suffer disallowance u/s 40(a)(ia)

In respect of the issue as to whether the Assessee was liable to deduct TDS u/s 195 and whether the disallowance was liable to be made u/s 40(a)(ia) of the Act, it is noticed that the provisions of s. 195 has been amended by the introduction of the Explanation-II to the said section by the Finance Act, 2012, with retrospective effect from 1.4.1962, whereby it is clarified that ‘the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has (i) a residence or place of business or business connection in India…’ In view of the introduction of Explanation II to s. 195… the disallowance… would have to be restored

Read more ›