The Taxation Ordinance, 2020; Insight - The clause “Make available”, Cross charge on deputation of “employees” - Part 3 and lots more!!
Issue No. 200 / April 1st, 2020
Dear Patrons,
Taxability of ‘Fees for technical services’ / 'Fees for included services' in matters of cross border deputation of employees is one of the most contentious issues with the Income Tax Department trying to bring such payment within the ambit of Fees for Technical Service. One of the most significant issues is the tax liability of the non-resident on the income proposed to be generated in India on provision of managerial, technical or consultancy services in India. As per the terms of agreement, either the Indian entity or the Foreign Company pays salary to the said employees on deputation. Owing to the discrepancy in the view of courts in interpretation of the legal propositions, it is difficult to establish a principle for ascertaining the taxability of expatriate employees.
In continuation of our Taxsutra Database Insight Part 2 wherein, we presented 8 landmark rulings on the issue, we bring to youPart-3 comprising of 8 more rulings on the issue covering aspects such as technical services ‘made available’ through deputed personnel, whether the salary recharge on their behalf amounts to FTS or are mere reimbursements; whether payments for ‘managerial services’ amounts to FTS under the India-France DTAA; deductibility of salary expenses of seconded employees upon constitution of service PE and more...
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106450+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
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Taxsutra Database Bulletin: IT relief measures announced by FM; Copy of Finance Bill, 2020 as passed with amendments
Issue No. 199 / March 25th, 2020
Dear Patrons,
As you are aware, all of us are facing this situation of uncertainty arising out of Covid-19 and our priority to stay focused on our families and friends. We pray that you and your family stay safe and healthy. In these challenging times, we remain fully committed to supporting you with whatever may be required.
On 23rd March, Lok Sabha passes Finance Bill, 2020 with amendments and with an aim to give relief, in the light of disruption caused by COVID-19, the Finance Minister Nirmala Sitharaman on March 24 announced several Tax reliefs on the regulatory front and extended deadlines for many compliances.
Following are the decisions with respect to statutory and regulatory compliance matters related to various sectors: -
1) Extension of last date for filing income tax returns for (FY 18-19) from 31st March, 2020 to 30th June, 2020.
2) Extension of Aadhaar-PAN linking date from 31st March, 2020 to 30th June, 2020.
3) Vivad se Vishwas scheme – no additional 10% amount, if payment made by June 30, 2020.
4) Extension of the due dates in cases where the time limit is expiring between 20th March 2020 to 29th June 2020, to 30th June 2020 - Due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act, Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law where the time limit is expiring between 20th March 2020 to 29th June 2020 shall be extended to 30th June 2020.
5) For delayed payments of advance tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between 20th March 2020 and 30th June 2020, reduced interest rate at 9% instead of 12 % / 18 % per annum ( i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged for this period. No late fee/penalty shall be charged for delay relating to this period.
6) Necessary legal circulars and legislative amendments for giving effect to the aforesaid relief shall be issued in due course.
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106400+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 3400 + GST AND includes a annual license to the Taxsutra Library.
Taxsutra Database Insight: The clause “Make available”, Cross charged on deputation of “employees”; TCS on Sale of Goods – A New Horizon
Issue No. 198 / March 18th, 2020
Dear Patrons,
Taxability of ‘Fees for technical services’/'Fees for included services' in matters of cross border deputation of employees is one of the most contentious issues with the Income Tax Department trying to bring such payment within the ambit of Fees for Technical Service. One of the most significant issues is the tax liability of the non-resident on the income proposed to be generated in India on provision of managerial, technical or consultancy services in India. As per the terms of agreement, either the Indian entity or the Foreign Company pays salary to the said employees on deputation.
Bangalore ITAT in 2019 constituted Special Bench to decide on taxability of expats' salary reimbursements, the matter has been adjourned to July, 2020 and recently Mumbai ITAT reported in Taxsutra.com, ruled that amount received by assessee by way of salary and other costs recharge in relation to deputing its Vice-President to its Indian subsidiary, constitutes Fees for Included Services (FIS) under Article 12 of the India-USA DTAA. ITAT rejected assessee's plea that no technology / expertise / knowhow was 'made available' in India by virtue of employee's deputation and remarked that “The experience of an expert lies in the mind of an expert and if an expert having knowledge and expertise is transferred from one tax jurisdiction to the another tax jurisdiction, then it cannot be said that only the employees were per se transferred and not the technology”;
Owing to the discrepancy in the view of courts in interpretation of the legal propositions, it is difficult to establish a principle for ascertaining the taxability of expatriate employees.
In continuation of our Taxsutra Database Insight Part 1, which was on Make available on design and drawing, we bring to you Part 2 of the insight on “Make Available - Cross charge on deputation of ‘employee’” wherein we have compiled 8 rulings which interpret on whether reimbursement of cost towards the services rendered by deputed employees/seconded employees tantamounts to "making available", the technical knowledge to Indian entity & hence taxable as fees for included services...and what is crucial for bringing to tax and in Part 3 of the insight, we will cover 8 more rulings on the aforesaid subject, giving more perception of the prevailing law on the issue.....lots more!
Vide Finance Bill 2020, Government proposed to collect TCS in respect of two transactions, namely, overseas remittances and TCS on sale of goods above specified limit. The Memorandum to the Finance Bill 2020 states that the intent of expanding the scope of TCS provisions is to widen and deepen the tax net.
In this regard, Deepak Manoharan & Abhishek Singhvi, Chartered Accountants discuss certain practical issues which may arise on the amended to TCS provisions. The Authors highlight various grey areas proposed in the Finance Bill, 2020 (‘the Bill’), and remark that there are no exclusions to non-resident sellers, who do not have any kind of presence in India and in case buyer is a non-resident covered, a resident seller exporting goods outside may be required to collect TCS. The authors take a constructive view that TCS should not be applicable in case of exports if the non-resident buyer is otherwise not subject to tax in India. On proposed amendment on sale of goods, the authors point out issues on applicability of TCS on B2B sales / GST / Works contract / contract manufacturing / inter-unit transfer having multiple TAN.
The authors conclude that the proposed amendment with additional errands by way of such TCS provisions leave taxpayers with increased costs to buyers, cash flow hitches, updating the software/ infrastructure to espouse the new law, etc
Read here the article titled, TCS on Sale of Goods – A New Horizon
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106310+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 3400 + GST AND includes a annual license to the Taxsutra Library.
Taxsutra Database Insight: Revised avatar of ‘Vivad se Vishwas’ – Part 3
Issue No. 197 / March 12th, 2020
Dear Patrons,
To reduce direct tax litigation after the success of 'Sabka Vishwas Scheme’, Lok Sabha on 4th March passed 'Direct Tax Vivad se Vishwas Bill, 2020'. Also, the CBDT on 5th March, 2020 released 55 FAQ clarifying technical interpretations on the Scope / illegibility, Calculation, Procedure, and on Consequences.
In the Taxsutra Database Insight series on Amnesty Scheme (Vivad se Vishwas) sent so far, we have covered rulings which explain the concepts of Appeal ‘admitted’ and ‘pending’, Effect of pendency of Assessee’s and Departmental appeals, Disputed tax, and Tax arrears, whether revision filed to be treated as pending, Power to revoke certificate granted by designated authorities, Whether condonation of delay can be considered, credit of advance-tax, self-assessment tax...etc!
In continuation of our Taxsutra Database Insight series on Amnesty Scheme (Vivad se Vishwas), we bring to you Taxsutra Database Insight: Revised avatar of ‘Vivad se Vishwas’ – Part 3, comprising of 10 rulings on certain key principles borrowed from precedents delivered under KVSS, VDIS which examine “the distinction between eligible taxpayers and non-eligible taxpayers for the benefit of ‘Amnesty Scheme’ (the Scheme)” / Benefits to partnership firm under KVSS on the amount disclosed by the partner/ Revenue’s ‘assurance’ to file rectification of mistake u/s 154 to avail of the benefit of the Scheme / Reopening of assessment to decide the question of eligibility of claim after declaration filed under the Scheme...and lots more!
Read Here - Taxsutra Database Insight: Revised avatar of ‘Vivad se Vishwas’ – Part 3
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Expert Column
Tax litigations are vexatious, both for the assessees and the Government. One of the ambitious schemes introduced by FM in the Union Budget 2020 to tackle this, is the dispute settlement scheme known as ‘Vivad se Vishwas’ (From Dispute to Trust). Also, CBDT has issued FAQs last week to clarify certain issues.
In this regard, while commenting that “the scheme is introduced for a very short period and at the fag end of the year”, R.Krishnan (Rangamani & Co, Chartered Accountant) further believes that “The FAQs released by the department seems to give rise to more questions than resolutions.” The author attempts to highlight various grey areas in Scheme and interalia, remarks that, “There is no guarantee that the additions accepted by the taxpayer under the scheme will be taken up for action under other Acts like Benami Act, Companies Act etc, on which the scheme is silent.”
Further, stating that the scheme does not cover the assessments reopened u/s 147, the author opines that “There are several instances where assessments are reopened on the basis of audit objections, for which the assessee should have been given an option treating the income escaping assessment as the basis for determining the disputed tax for the scheme, something similar to cases covered by show cause notices in the case of Sabka Viswas Scheme.” Also, the author is of the firm belief that a special reduced tax rate should be available for ‘demonetisation’ related cases which “would have ensured collection and reduction in considerable number of appeals.”. While signing off, the author concludes that “Nevertheless, this scheme appears to be a golden opportunity to settle disputes, particularly old ones,..”
Read Here the article titled, "Vivad se Vishwas – A Road Swarmed with Impediments?"
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Click here to Read - Taxsutra Database Insight: Amnesty Scheme - Interpretation of the word "Admitted and Pending" - Part 1
Click here to Read - Taxsutra Database Insight: Amnesty Scheme - Effect of pendency of Assessee and Departmental appeal - Disputed tax and Tax arrears - Part 2
Read Here and Download - Notification No. 14/2020: Govt. of India notifies TIEA with Brunei Darussalam
Read Here and Download - CBDT NOTIFICATION No. 15/2020 - Income-tax (7th Amendment) Rules, 2020 - Notifies investment in ‘digital payments settlement’ company as ‘eligible modes’ by Trusts u/s.11(5)
Read Here and Download - CBDT NOTIFICATION No. 16/2020 : CBDT Notified Securities - Transfer of capital asset - Notifies MF, AIF units & 3 "other" securities for IFSC related capital gains exemptions u/s. 47(viiab)
Read Here and Download - CBDT Circular 7/2020 - CBDT releases FAQs on Vivad se Vishwas Bill, 2020
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106200+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 3400 + GST AND includes a annual license to the Taxsutra Library.
Taxsutra Database Insight: Interpretations of the words "derived from" and ‘attributable to’ – Deduction u/s 80IA and 80IB on Interest income
Issue No. 196 / March 4th, 2020
Dear Patrons,
The expression used in Sec. 80-IA is “Profits and gains derived from any business of an Industrial Undertaking etc” and the expression “derived from”’ is narrower then ''attributable to'' the business. The source of the income must be directly connected with the business and generated therefrom. Interest income is not considered to be directly “derived from” eligible industrial undertaking and is also not to be considered for deduction.
SC in the case of Cambay Electric examined the expressions “attributable to” and “derived from”, and elucidated that the legislature intended to cover receipts from sources other than the actual conduct of the business and concluded that the expression “derived from” covers the receipts by way of all the profits and gains of the industrial undertaking. Further Bombay HC in the case of HINDUSTAN LEVER examined the word "derived" and noted that as far as income-tax law is concerned, it has been given a narrow meaning—a strict meaning by Courts and has been understood in the restricted sense of a direct derivation and not understood in the broad sense as equivalent to derived directly or indirectly. In other words, one has to only consider the proximate source and not the source to which it may ultimately be referable.
In this context, the expression, “Profits and gains derived from an Industrial Undertaking”, has generated a lot of controversies and the issue has been in debate before the Courts & Tribunal. At Taxsutra Database Insight - Issue No. 195, we mainly focus on eligibility of deduction u/s 80-IA, 80-IB of the Act on interest earned on fixed deposits, etc.
Read Here - Taxsutra Database Insight: Interpretations of the words "derived from" and ‘attributable to’ – Deduction u/s 80IA and 80IB on Interest income
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106000+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 3400 + GST AND includes a annual license to the Taxsutra Library.
In continuation of our Taxsutra Database Insight 
In this regard, Deepak Manoharan & Abhishek Singhvi, Chartered Accountants discuss certain practical issues which may arise on the amended to TCS provisions. The Authors highlight various grey areas proposed in the Finance Bill, 2020 (‘the Bill’), and remark that there are no exclusions to non-resident sellers, who do not have any kind of presence in India and in case buyer is a non-resident covered, a resident seller exporting goods outside may be required to collect TCS. The authors take a constructive view that TCS should not be applicable in case of exports if the non-resident buyer is otherwise not subject to tax in India. On proposed amendment on sale of goods, the authors point out issues on applicability of TCS on B2B sales / GST / Works contract / contract manufacturing / inter-unit transfer having multiple TAN.
In this regard, while commenting that “the scheme is introduced for a very short period and at the fag end of the year”, R.Krishnan (Rangamani & Co, Chartered Accountant) further believes that “The FAQs released by the department seems to give rise to more questions than resolutions.” The author attempts to highlight various grey areas in Scheme and interalia, remarks that, “There is no guarantee that the additions accepted by the taxpayer under the scheme will be taken up for action under other Acts like Benami Act, Companies Act etc, on which the scheme is silent.”
In this context, the expression, “Profits and gains derived from an Industrial Undertaking”, has generated a lot of controversies and the issue has been in debate before the Courts & Tribunal. At Taxsutra Database Insight - Issue No. 195, we mainly focus on eligibility of deduction u/s 80-IA, 80-IB of the Act on interest earned on fixed deposits, etc.