Monthly Archives: April 2013

  • Redefining of FII & FDI!!

    April 25 2013

    After a mere consolidated FDI policy, RBI plans to come out with a discussion paper to redefine FII & FDI.


    Read More
  • Revised Tolerance band for International as well as Domestic Transfer Pricing for AY 2013-14

    April 25 2013

    Govt of India has come out with out a notification to revise the tolerance band for international as well as specified domestic transaction under transfer pricing regulations. The revised tolerance band stands to 1% for wholesale traders & 3% for all other categories/cases. The revised tolerance band is applicable for AY 2013-14.

    Read More
  • India-Mauritius DTAA will it be renegotiated ever??

    April 23 2013

    Finance Minister P Chidambaram has made a statement that the tax treaty with Mauritius is back to the drawing board.

    Read More
  • Find difficult to remember TDS rates???

    April 15 2013

    Deduction of TDS & TCS at appropriate rate & subsequent compliance thereof?? Well now a days it is easy to remember TDS rates for payments made to residents... Difficulty lies while making payment to non-residents/outside India...!!! A comprehensive TDS & TCS  chart for FY 2013-14 providing details of TDS rates applicable to both domestic as well foreign payments...

    Read More
  • What’s the Tax deduction rate that you will apply while making foreign remittances?? Should it be inclusive of Surcharge & E.Cess?

    April 13 2013

    TDS rate on payments to foreign resident to be exclusive of SC & E.Cess if DTAA silent on their inclusion in TDS rate


    • The DTAA between the Government of India and France does not say anything about inclusion of surcharge and education cess for the purpose of deduction of tax at source. Therefore, there is an apparent conflict between Income-tax Act and DTAA between the two sovereign countries with regard to deduction of tax at source on surcharge and education cess

    • In respect of a taxpayer to whom the double taxation avoidance agreement applies, the provisions of the Indian Income-tax Act shall apply to the extent they are more beneficial to that taxpayer.

    • In other words, if the provisions of DTAA are more beneficial to the taxpayer, then the provisions of DTAA would prevail over the Indian Income-tax Act.

    • Since the DTAA between Government of India and Fracne is silent about the surcharge and education cess for the purpose of deduction of tax at source, the taxpayer may take advantage of that provision in the DTAA for deduction of tax.

    • Taxpayer justified in deducting TDS at rate excluding surcharge and education cess.


    ITO (International Tax) vs. M Far Hotels Ltd. (ITAT-Cochin)

    Read More
  • Advertisement charges paid to “Google” & “Yahoo” is it taxable in India?????

    April 12 2013

    The assessee, a florist, paid a sum of Rs. 30.44 lakhs to Google Ireland Ltd and Yahoo USA for online advertising. The AO held that the assessee ought to have deducted TDS and that as there was a failure, the expenditure was not allowable u/s 40(a)(i). This was deleted by the CIT(A) on the ground that Google and Yahoo did not have a PE in India. On appeal by the department to the Tribunal, HELD dismissing the appeal:

    U/s 5(2)(b) income accruing or arising in India is chargeable to tax in India. A website does not constitute a ‘permanent establishment’ unless the servers on which websites are hosted are also located in the same jurisdiction. As the servers of Google and Yahoo are not located in India, there is no PE in India. As regards the second limb of s. 5(2)(b) of “income deemed to accrue or arise in India”, one has to consider s. 9. S. 9(1)(i) does not apply as there is no “business connection” in India nor are the online advertising revenues generated in India serviced by any entity based in India. As regards s. 9(1)(vi), it is held in Yahoo 140 TTJ 195 (Mum) and Pinstorm 54 SOT 78 (Mum) that the advertising revenues are not assessable as “royalty”. As regards s. 9(1)(vii), the services are not “managerial” or “consultancy” in nature as both these words involve a human element. Applying the rule of noscitur a sociis, even the word “technical” in Explanation 2 to s. 9 (1) (vii) would have to be construed as involving a human element. If there is no human intervention in a technical service, it cannot be treated as a technical service u/s 9(1)(vii). On facts, the service rendered by Google & Yahoo is generation of certain text on the search engine result page. This is a wholly automated process. In the services rendered by the search engines, which provide these advertising opportunities, there is no human touch at all. The results are completely automated. Consequently, the whole process of actual advertising service provided by Google & Yahoo, even if it be a technical service, is not covered by the limited scope of s. 9(1)(vii). Consequently, the receipts in respect of online advertising on Google and Yahoo cannot be brought to tax in India under the provisions of the Act or the India US and India Ireland tax treaty.

    Read More