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DATE: April 24, 2020 (Date of pronouncement)
DATE: April 25, 2020 (Date of publication)
AY: -
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Taxability of Liaison Offices under DTAAs: The activities carried on by the liaison office of the non-resident in India as permitted by the RBI, demonstrate that the liaison office must steer away from engaging in any primary business activity and in establishing business connection as such. It can carry on activities of preparatory or auxiliary nature only. A liaison office which is only carrying on such activity of a "preparatory or auxiliary" character is not a PE in terms of Article 5 of the DTAA. The deeming provisions in Sections 5 and 9 of the 1961 Act can have no bearing whatsoever (all imp judgements referred)

The meaning of expressions “business connection” and “business activity” has been articulated. However, even if the stated activity(ies) of the liaison office of the respondent in India is regarded as business activity, as noted earlier, the same being “of preparatory or auxiliary character”; by virtue of Article 5(3)(e) of the DTAA, the fixed place of business (liaison office) of the respondent in India otherwise a PE, is deemed to be expressly excluded from being so. And since by a legal fiction it is deemed not to be a PE of the respondent in India, it is not amenable to tax liability in terms of Article 7 of the DTAA.

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DATE: March 19, 2020 (Date of pronouncement)
DATE: March 25, 2020 (Date of publication)
AY: 2015-16
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S. 5, 9 + DTAA: The payment by an Indian company to a foreign celebrity (Nicholas Cage) for an appearance by him in Dubai, UAE, in a product launch event for promoting the business of the assessee in India, is taxable as arising from a "business connection" and also under Article 23(1) of Inda-USA tax treaty (All imp judgements referred)

business models are constantly evolving, and as the rapid communication modes such as internet and social media have completely transformed the way businesses communicate, it is time that the law is seen in tandem with the ground realities of the business world, rather than in the strict confines of what was decided in the judicial precedents, in the context of a different business world when these ground realities did not exist. Today, virtual and intangible business connections are perhaps far more critical, important and commonplace than the conventional brick and mortar business connections half a century ago, and, therefore, to disregard these business connections as a real and intimate business connection leading to earning of income by the non-residents, only because Hon’ble Courts, while delivering judgments several decades ago, could not visualize the same and hedge their observations about such possibilities, will certainly be travesty of justice.

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DATE: September 25, 2018 (Date of pronouncement)
DATE: October 6, 2018 (Date of publication)
AY: -
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S. 5, 9, 163, 166: A representative assessee represents all income of a non-resident accruing or arising in India directly or indirectly from any business connection in India. It is wrong to contend that the representative assessee is not liable for income which has directly arisen or accrued in India. It is also wrong that if the department chooses to make an assessment of the person resident outside India directly, it cannot assess the agent or representative assessee. The Dept has the choice of proceeding against either

In my opinion the Tribunal has made a complete misunderstanding of the law in entertaining the opinion that since the income made by the non- resident Cricket Boards were held to have directly arisen in India, this income could not be deemed to have arisen or accrued to the non-resident in India and the responsibility of the representative assessee was confined to accounting for income which had directly arisen or accrued in India

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DATE: April 19, 2018 (Date of pronouncement)
DATE: April 23, 2018 (Date of publication)
AY: -
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It is a fundamental rule of law of taxation that, unless otherwise expressly provided, income cannot be taxed twice. A taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted

It is not disputed that there can be double taxation if the legislature has distinctly enacted it. It is only when there are general words of taxation and they have to be interpreted, they cannot be so interpreted as to tax the subject twice over to the same tax….. If any double taxation is involved, the Legislature itself has, in express words, sanctioned it. It is not open to any one thereafter to invoke the general principles that the subject cannot be taxed twice over

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DATE: April 11, 2018 (Date of pronouncement)
DATE: April 19, 2018 (Date of publication)
AY: 2010-11, 2011-12
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S. 9(1)(i)/ 40(a)(i): Entire law on whether commission paid by an Indian entity to foreign agents can be said to accrue in India and whether the assessee is obliged to deduct TDS thereon u/s 195 explained. All relevant judgements and CBDT Circulars Nos.7 dated 22.10.2009, 23 dated 23 July 1969, 163 dated 29th May 1975 and 786 dated 7th February 2000 considered

It is not disputed that that the withdrawal of the circulars No. 23 and 786 has been made on 22.10.2009 vide CBDT Circular No. 7 of 2009 and mere withdrawal of the circular does not negate the principles of income deemed to accrue or arise in India or outside India. The CBDT has not stated that any part of the circulars is contrary to law or that the circulars were wrongly issued or that the law has undergone changes holding their withdrawal. Thus, in respect of cases, which directly follow with the situations covered by the circulars, the liability to tax should continue to be in accordance with section 9 of the Act and its intent. The relevant sections, namely section 5(2) and section 9 of the Income-tax Act, 1961 not having undergone any change in this regard, the clarification in Circular No. 23 still prevails even after the withdrawal. No tax is therefore deductible under section 195 and consequently, the expenditure on export commission payable to a non-resident for services rendered outside India is not liable for withholding tax

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DATE: October 30, 2017 (Date of pronouncement)
DATE: November 1, 2017 (Date of publication)
AY: -
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S. 44BB: Amounts received as “mobilisation fee” on account of provision of services and facilities in connection with the extraction etc. of mineral oil in India attracts s. 44BB and have to be assessed as business profits. S. 44BB has to be read in conjunction with ss. 5 and 9 of the Act. Ss. 5 and 9 cannot be read in isolation. The argument that the mobilisation fee is “reimbursement of expenses” and so not assessable as income is not acceptable because it is a fixed amount paid which may be less or more than the expenses incurred. Incurring of expenses, therefore, would be immaterial. Also, the contract was indivisible

Section 44BB starts with non-obstante clause, and the formula contained therein for computation of income is to be applied irrespective of the provisions of Sections 28 to 41 and Sections 43 and 43A of the Act. It is not in dispute that assessees were assessed under the said provision which is applicable in the instant case. For assessment under this provision, a sum equal to 10% of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head ‘profits and gains of the business or profession’. Sub-section (2) mentions two kinds of amounts which shall be deemed as profits and gains of the business chargeable to tax in India. Sub-clause (a) thereof relates to amount paid or payable to the assessee or any person on his behalf on account of provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used in the prospecting for, or extraction or production of, mineral oils in India. Thus, all amounts pertaining to the aforesaid activity which are received on account of provisions of services and facilities in connection with the said facility are treated as profits and gains of the business.

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DATE: July 13, 2017 (Date of pronouncement)
DATE: July 17, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 5(2)(a): Salary of a non-resident seafarer for services rendered outside India on-board foreign ships accrues outside India and is not assessable in India even if received by the seafarer into the NRE bank account maintained in India by the seafarer. CBDT Circular No. 13/2017 dated 11.04.2017 is clarificatory

Whether on the facts and in the circumstances of the case and in law, income by way of salary which became due and has accrued to the assessee, a non-resident, for services rendered outside India and which is not chargeable to tax in India on the “due” or “accrual” basis, can be said to be chargeable to tax on the “receipt” basis merely because the foreign employers, on the instructions of the assessee, have remitted a part of amount of salary to the assessee’s NRE bank account in India?

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DATE: December 15, 2017 (Date of pronouncement)
DATE: January 4, 2017 (Date of publication)
AY: 2011-12
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S. 5/ 9: Salary received by a non-resident for services rendered abroad accrues outside India and is not chargeable to tax in India. The source of the receipt is not relevant. The CIT has wide powers u/s 264 and has to exercise them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11.04.1955

The relevant test to be applied to decide whether the income accrued to a non-resident in India or outside is concerned, is to find the place where the services were rendered, in order to consider where the income accrued. The source of the income was not relevant for the purposes of ascertaining whether the income had accrued in India or outside India. The question whether the petitioner has rendered services in India or not is a question of fact

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DATE: April 19, 2016 (Date of pronouncement)
DATE: May 7, 2016 (Date of publication)
AY: 1989-90
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S. 5/ 147: Even if income by way of rent is enhanced with retrospective effect, it accrues only when a right to receive the income is vested in the assessee. A notice u/s 148 seeking to assessee the income prior to its accrual is without jurisdiction

A reading of the decision of this Court in E.D. Sassoon (supra) would go to show that the income to be chargeable to tax must accrue or arise at any point of time during the previous year. This Court in E.D. Sassoon (supra) has held in categorical terms that income can be said to have accrued or arisen only when a right to receive the amount in question is vested in the assessee. Viewed from the aforesaid perspective, it is clear that no such right to receive the rent accrued to the assessee at any point of time during the assessment year in question, inasmuch as such enhancement though with retrospective effect, was made only in the year 1994. The contention of the Revenue that the enhancement was with retrospective effect, in our considered view, does not alter the situation as retrospectivity is with regard to the right to receive rent with effect from an anterior date. The right, however, came to be vested only in the year 1994

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DATE: October 30, 2015 (Date of pronouncement)
DATE: April 5, 2016 (Date of publication)
AY: 2002-03
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Income does not accrue if the debtor is in a precarious financial position and recovery is doubtful

Income did not accrue in the hands of the assessee owing to the precarious financial condition of the debtor notwithstanding that: (a) Services were rendered and the income was recorded in the books of account of the assessee during the relevant year & (b) bad debts were claimed in subsequent years when the dispute was settled

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