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The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015
The Finance Minister, in his budget speech, while acknowledging the limitations under the existing law, had conveyed the considered decision of the Government to enact a comprehensive new law on black money to specifically deal with black money stashed away abroad. He also promised to introduce the new Bill in the current Session of the Parliament. In order to fulfil the commitment made by the Government to the people of India through the Parliament, the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 has been introduced in the Parliament on 20.03.2015. The Bill provides for separate taxation of any undisclosed income in relation to foreign income and assets. Such income will henceforth not be taxed under the Income-tax Act but under the stringent provisions of the proposed new legislation.
SEE ATTACHMENT
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CA Vivekanand Pote Purpose Sets out the concepts for preparation and presentation of financial statements in accordance with IND AS Assist in development of future Indian Accounting Standards and review the existing Assist in promoting harmonization of regulations, AS and procedures relating to presentation of IND AS Assist prepares of FS in applying IND AS […]
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CA Rohit Gupta Some of the important case laws published during 2015 pertaining to TDS u/s 195 and/or taxability of foreign companies/non-resident entities in respect of source of income in India. Discussion and analysis (given in italics) pertain to relevance of judgement in future proceedings, subsequent developments, other relevant case laws on the same aspect, […]
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Antwerp Diamond Bank NV vs. ADIT (ITAT Mumbai), ITA No. 1798/Mum/2009 (AY-2005-06), Date of Pronouncement : 04/09/2013 Interest was paid by assessee Indian branch of a Belgian bank to its head Office on subordinate debts and term borrowing. HELD, in view of domestic law as well as treaty same would not be chargeable to tax […]
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PFA
TDS on interest paid by assessee Indian branch of a Belgian bank to its head Office
Antwerp Diamond Bank NV vs. ADIT (ITAT Mumbai), ITA No. 1798/Mum/2009 (AY-2005-06), Date of Pronouncement : 04/09/2013
Interest was paid by assessee Indian branch of a Belgian bank to its head Office on subordinate debts and term borrowing. HELD, in view of domestic law as well as treaty same would not be chargeable to tax in India and thus, TDS provision of section 195 would not be attracted and, hence, question of disallowance under section 40(a)(i) did not arise.
Next ground of appeal is about disallowance of interest paid by the assessee to HO amounting to Rs.8.57Crores.During the assessment proceedings, AO found that interest of Rs.8,56,15, 525/- was paid by the assessee to HO on subordinate debts and term borrowing.That it had claimed the interest as an expense of the branch. However, the said interest was offered for taxation in the hands of the HO as per the Article 11 of the Indo-Belgium DTTA. Relying on the decision of special bench of Kolkata delivered in the case of ABN AMRO Bank (97 ITD 89),he disallowed the interest paid to HO.
Assessee preferred an appeal before the FAA.After considering the submission of the assessee,he held that AO had followed the decision of special bench of ITAT Kolkata,that he was inclined to agree with the stand taken by the AO ,that such disallowances were upheld by his predecessor for the earlier assessment years,that assessee himself has disallowed an amount of Rs. 43.68 lacs for failure to deduct tax at source u/s. 40(a)(i) of the Act. Finally,relying upon the order of the special bench delivered in the case of ABN AMRO Bank (Supra), he confirmed the disallowances made by the AO.
Before us,AR submitted that order of the special bench of Kolkata in the case of ABN AMRO Bank had been overruled by the Hon'ble High Court of Kolkata.He further relied upon the judgment of Sumitomo Mitsui Banking Corporation (ITA Nos. 5402 and 545 8/Mum/2006) DR supported the order of the FAA.
We have heard the rival submissions and perused the material before us.AO and the FAA had relied upon the order of the special Bench of Kolkata for disallowing the claim of the assessee ,but now the said order has been reversed.We further find that issue in question has been dealt extensively in the case of Sumitomo Mitsui Banking Corporation (supra).While deciding the appeal filed before it ,Tribunal has held as under:
"Keeping in view all the facts of the case and the legal position emanating from the interpretation of the relevant provisions of the domestic law as well as that of the treaty as discussed above, we are of the view that although interest paid to the head office of the assessee-bank by its Indian branch which constitutes its permanent establishment in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to the permanent establishment which is taxable in India as per the provisions of article 7(2) and (3) of the Indo-Japanese treaty read with paragraph 8 of the protocol which are more beneficial to the assessee. The said interest, how-ever, cannot be taxed in India in the hands of the assessee-bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law. Even otherwise, there is no express provision contained in the relevant tax treaty which is contrary to the domestic law in India on this issue. This position applicable in the case of interest paid by Indian branch of a foreign bank to its head office equally holds good for the payment of interest made by the Indian branch of a foreign bank to its branch offices abroad as the same stands on the same footing as the payment of interest made to the head office. At the time of hearing before us, the learned representatives of both sides have also not made any separate submissions on this aspect of the matter specifically. Having held that the interest paid by the Indian branch of the assessee-bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of section 195 would not be attracted and there being no failure to deduct tax at source from the said payment of interest made by the permanent establishment, the question of disallowance of the said interest by invoking the provisions of section 40(a)(i) does not arise. Accordingly we answer question No. 1 referred to this Special Bench in the negative, i.e., in favour of the assessee and ques-tion 2 in affirmative, i.e., again in favour of the assessee.
Respectfully, following the same, we reverse the order of the FAA. Ground no 2 is decided in favour of the assessee-bank.
Assessee, a US company, entered into agreements with various customers in India for rendering software services - Assessing Officer held that payments received by assessee from sale of software and provision of maintenance and other support services to customers in India, were taxable as 'royalty' and accordingly made additions. HELD, in view of decision of […]
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PFA
M/s Halliburton Export Inc. Vs. Asstt. D.I.T. (ITAT Delhi), I.T.A. No.5209/Del/2011, Date of Pronouncement- 14/01/2014
Assessee, a US company, entered into agreements with various customers in India for rendering software services – Assessing Officer held that payments received by assessee from sale of software and provision of maintenance and other support services to customers in India, were taxable as 'royalty' and accordingly made additions. HELD, in view of decision of Jurisdictional High Court in case of DIT v. Infrasoft Ltd. [2014] 220 Taxman 273/[2013] 39 taxmann.com 88 (Delhi), payment received by assessee from sale of software and provisions of maintenance and other supports services to customers in India were not taxable as 'royalty', in terms of article 12 of India US Double Taxation Avoidance Agreement.
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'C' NEW DELHI)
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER
AND
SHRI J.S. REDDY, ACCOUNTANT MEMBER
(DELHI BENCH 'C' NEW DELHI)
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER
AND
SHRI J.S. REDDY, ACCOUNTANT MEMBER
I.T.A. No.5209/Del/2011 Assessment year: 2008-09
M/s Halliburton Export Inc. Vs. Asstt. D.I.T.,
ORDER
PER U.B.S. BEDI, JM:
This appeal of the assessee emanates from the order passed by Assessing Officer u/s 144C(1) read with section 143(3) dated 23rd September, 2011 relevant to assessment year 2008-09 whereby besides challenging action of the Assessing Officer in holding that payment received by the assessee from sale of software and provisions of maintenance and other supports services to customers in India were taxable as "Royalty", in terms of section 9(1)(vi) of the Income-tax Act, 1961 as well in Article 12 of India US Double Taxation Avoidance Agreement, assessee has also challenged charging of interest u/s 234B of the Act.
Facts indicate that assessee had filed original return of income for the relevant assessment year on 29.09.2008 declaring nil income and claimed a refund of Rs.61,58,059/-. Thereafter, the return was revised on 19.02.2010 wherein the assessee declared nil income and claimed a refund of Rs. 121,24,329/-. Notice u/s 143(2) along with questionnaire issued was duly served upon the assessee. In response thereto representative of the assessee appeared before the Assessing Officer from time to time, filed requisite details and case was discussed with him by the Assessing Officer.
2.1 Assessing Officer noted in the assessment order that M/s Halliburton Export Inc., (hereinafter referred to as the assessee) is a company incorporated in the USA and is engaged in the business of supplying prepackaged software and providing maintenance and other support services associated with it. The assessee has entered into agreements with various customers in India for rendering the above services.
2.2 The Assessing Officer further noted that assessee is a tax resident of USA and it has filed a tax return relying on the provisions of DTAA between India and USA. In the return of income, assessee has claimed that it does not have a permanent establishment in India in terms of Article 5 of the India US DTAA and accordingly, the income received from the aforesaid supply/maintenance of software is not taxable in India. During the assessment proceedings a letter was written by the Assessing Officer on 9.12.2010 stating therein that assessee has received a gross amount of Rs. 6,03,64,143/- for sale and maintenance of software from its Indian customers in relation the agreements entered into by it. During the course of assessment proceedings, assessee was asked to show cause as to why receipt in sale of software should not be regarded as royalty and receipt in lieu of provision of maintenance services associated with it should not be regarded as royalty/fee for technical services in terms of the provisions of Income Tax read with article 12 of the Indian US DTAA and taxed accordingly
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