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In this regard, Kinjesh Thakkar (Head – Corporate Tax & Transfer Pricing at Linde Engineering India) provides a lucid analysis of Interplay between PPT under MLI and GAAR. The author highlights that the approaches in application of Principal Purpose Test under MLI and GAAR are divergent and states that while GAAR adopts the narrow approach (i.e., main/principal purpose is to obtain tax benefit), MLI adopts the intermediate approach (i.e., one of the main/principal purposes is to obtain tax benefit), thus, creating confusion. The author explains that domestic law is the prime source of charge on tax as well as characterization of transaction or arrangement, “Thus, it is reasonable to conclude that PPT under MLI shall not displace GAAR”. Similarly, the author explains that based on commentary in OECD and Vienna convention, PPT is also not displaceable and therefore, both should co-exist. Highlighting that even OECD commentary on Model Tax Convention provides that in case there is conflict in result of GAAR and MLI, the provisions of tax treaties are intended to prevail, the author opines that “...broader definition under PPT rule of MLI shall achieve more desirable result which is in line with purposive interpretation when applied to GAAR provision.”
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Issue No. 210 / June 25th, 2020 Dear Professionals, “Taxsutra Database”, a true Income-tax research tool, is an archive of over 107400+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. It is a completely integrated service with the following features:
We are glad to present to you the 210th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena! *********************** Key Takeaways from Handpicked Rulings 1) ITAT: Non-deposit of tax deducted by Deductor, liability cannot be fastened on Assessee-deductee; Assessee cannot be denied tax credit - ITAT holds that once tax had been deducted then it is deductor’s liability to deposit the withheld tax into the credit of the Central Government, deductee cannot be denied credit of tax; Observes that u/s 205, the assessee/deductee ............. Click here to read and download ITAT order 2) ITAT: Oral contract is adequate to invoke the provisions of Section 194C – ITAT upholds TDS liability u/s. 194C on vehicle hire-charges, states that a contract need not be in writing, it may be inferred from the conduct of the parties; Notes that assessee is engaged in the business of vehicle hire and takes vehicles along with drivers on hire from various persons and pays vehicle hire charges, petrol and diesel expenses to such cab owners; ITAT holds that payment of hire charges made by assessee to cab owners for hiring cabs for the purpose of providing transportation services to its customers would ...........Click here to read and download ITAT order 3) HC: Allows Sec 54F exemption; Actual use, whether commercial or residential, to be considered while adjudicating upon the eligibility of deduction – HC grants Sec. 54F benefit for investing long term capital gains arising on sale of shares during the financial year 2005-06, holds two independent residential units to be treated as one residential unit; Observes that out of nine flats, seven flats have been sanctioned for commercial purposes and only two flats have been sanctioned as residential units which were put to use for commercial purposes for service apartments; Rules that the usage of the property ........... Click here to read and download HC order 4) HC: Souharda Co-operative entitled to claim Sec.80P benefit; Allows writ – HC quashes assessment order passed by AO, rules that Assessee-society registered under the Karnataka Souharda Sahakari Act, 1997 fits into the definition of “co-operative society” u/s. 2(19) and is hence entitled for deduction u/s 80P.................. Click here to read and download ITAT order 5) ITAT: Income from unlisted company’s share sales to be taxed as “capital gain”, applies CBDT Circular – ITAT grants relief to NDTV, sets aside lower authorities order treating income from sale of shares of M/s Astro Awani Networks Ltd as income from “Other Sources"; AO noted that the shares of increasingly loss making companies which had been purchased just 13 months before the date of sale (for Rs.46 per share) were sold at a high price (Rs.544) and treated gain from sale of shares as income from other sources instead of capital gain; CIT(A) placed reliance on Apex court ruling of Karanpura Development and Durga Prasad More confirmed the order passed by AO that the valuation report of shares of the company is not reliable; ITAT observes that the sale price................... Click here to read and download ITAT order 6) ITAT: Allows co-operative society’s Sec. 80P claim on interest income; Distinguishes Totgars SC ruling – ITAT allows Sec. 80P benefit to assessee (a co-operative society) with respect to interest earned on statutory deposits being income from business and not the income from other sources; Follows co-ordinate bench decision in assessee’s own case for AY 2013-14 & 2014-15 wherein it was held that as per guidelines of Orissa Co-operative Society Rules, it is mandatory for assessee to create surplus / reserve fund and it was intrinsically connected with the ............. Click here to read and download ITAT order 7) ITAT: Date of possession is the date of the actual purchase of the property for purpose of Sec.54F – ITAT allows the benefit of section 54F, treats date of possession of the flat, not date of payment of the first installment towards allotment of flats to be considered as the date of obtaining the title of the property.......... Click here to read and download ITAT order Note: SC in [TS-5072-SC-2015-O] had dismissed assessee’s SLP against HC’s order. HC had held that booking confirmation letter is irrelevant for determining Apartment "Booking Rights". “Booking rights” in flat / apartment shall be treated as acquired upon execution of buyer’s agreement with builder and not on the date of 'booking confirmation letter' for provisional allotment of flat. Kolkata ITAT in [TS-8534-ITAT-2018(Kolkata)-O] had held that by virtue of the allotment letter issued and receipt of booking amount acknowledged by the builder, assessee was vested with title, domain and control over the flats (i.e. legal right over the property) 8) ITAT: Donation to trust eligible for deduction u/s 80G though forming part of CSR obligation – ITAT sets aside lower authorities order, holds that the benefit under Chapter VI-A for computing “Total Taxable Income” cannot be denied to assessee; States that “If Assessee is denied this benefit, merely because such payment forms part of CSR, would lead to ..................Click here to read and download ITAT order 9) ITAT: Shah commission report merely an expression of its opinion lacking both finality and authoritativeness, no reason for reopening the assessment – ITAT quashes initiation of reassessment proceedings against assessee [trader / exporter of iron ore]; Observes that reasons recorded by AO for reopening the assessment and approved by the Addl. Commissioner (i.e., under-invoicing of exports) is entirely based on findings in the .................. Click here to read and download ITAT order Note: Karnataka HC in [TS-6469-HC-2016(Karnataka)-O] upheld re-assessment beyond 4 years on the grounds that ‘Under-invoicing’ based on Shah Committee report was ‘sufficient reason’ for reassessment initiation.
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Author Prabhat Agarwal (Chartered Accountant), in his article, refers to the recent HC decision of SESA GOA LIMITED as reported in |
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Advocate Dharan Gandhi in Part 3 of his article discusses nuances further to reimbursement in cases of secondment of employees and examines the possibility of constitution of various forms of PEs upon such secondment. Considering that when senior employees are seconded, they are mostly given a place in India which is at their disposal, and carry out business of the foreign company from such place for a longer period of time, the author opines that they could constitute a ‘fixed place PE’ of business in India. Similarly, the author contemplates a possibility of a ‘Service PE’ also where the payment is not in the nature of FTS/FIS considering that its common that employees are seconded for providing services to AEs and would stay for a period longer than 90 days. The author also examines the Transfer Pricing implications in cases where in a MNC, a single entity employs such employees who are seconded worldwide, leading to business of such companies being providing of employees, the TP provisions would require such company to earn something more than mere cost.
Authors Sunny Bansal and Akanksha Gupta (Chartered Accountants) in their article unveil the issues and interpretations surrounding Sec. 115BAB recently introduced vide the Taxation Laws (Amendment) Act, 2019 providing a reduced rate of 15% for manufacturing entities. The authors analyse the ‘Elemental Terms’ used in the section. Pondering whether the section allows benefit to Job worker, Contract Manufacturer or the Company engaging such Job worker/Contract Manufacturer, the authors opine that various factors such as license ownership, raw material procurement, supervision, risks, degree of control etc., matter in this regard. Further, the authors examine if R&D activities conducted towards an IP held by the parent company would be challenged as an additional activity other than manufacturing. Thereafter, the authors apprise about the possible scrutiny in cases of SDT wherein the tax authorities might argue that as per sub section (6) of section 115BAB, the taxpayer (a new company) by way of a cost plus arrangement has produced more than ordinary profits which might be expected to arise in the business.|
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