May 7 2014
Seconded employees typically work under the direction, control and supervision of the Indian affiliate during their secondment. The foreign company pays the salary of the seconded employees abroad (i) to continue the social security contribution and (ii) for convenience purposes. The said salary paid is then recovered from the Indian affiliate on a cost-to-cost basis.
Indian revenue authorities are closely monitoring these kinds of arrangements for possible Permanent Establishment (PE) exposure and for taxing the recharge of salary as Fees for Technical Services/Fees for Included Services (FTS/FIS).
Recently, the Delhi High Court (Delhi HC), in respect of the writ petition filed in the case of Centrica India Offshore Private Limited (Indian Entity), had to decide i)whether the reimbursement of salary cost paid by Indian Entity to the overseas entities is taxable in India; if yes, ii)whether withholding of tax thereon was required u/s 195 of the Income-tax Act (the Act). A further issue raised was whether employees deputed to India created Service PE of a foreign company in India or not.
High court not impressed by AAR’s “look at” approach – sets aside AAR’s order on Taxability of an Engineering Procurement & Construction
April 26 2014
Delhi High court relying extensively on the facts of the case held that the Consortium can not be taxed as an AOP. Delhi High court has carved out some important facts/principles/observations for not treating such consortium as an AOP:Read More
Article on Corporate Guarantee – an International Transaction? – Published by Corporate Law Reporter
April 16 2014
There are a lot of developments taking place in India as well as globally on Transfer Pricing front. In that respect, recently Delhi Income Tax Tribunal in the case of Bharti Airtel Limited has held that Corporate Guarantees issued by parent to its foreign subsidiary is not covered by Indian transfer pricing provisions. This is despite the fact that, by virtue of Finance Act, 2012 the definition of the term International Transaction was clarified to have a wider scope to cover capital financing transactions and consequentially subject to Indian transfer pricing law. In the global context also corporate guarantees are subjected to transfer pricing analysis.
An attempt is made to analyse certain Indian rulings ( before & after amendment of Finance Act) as well as Foreign Court rulings on the subject matter. Important principles of OCED guidelines on Transfer Pricing have also been dealt with in the attached article.Read More
Foreign Direct Investment (FDI) in a Limited Liability Partnership (LLP) – Regulations & Forms notified
April 9 2014Limited Liability Partnership (LLP) is an ever evolving concept in India and is a form which is luring many foreign investors these days.Reserve Bank of India (RBI) has notified regulations for FDI in a LLP with retrospective effect from 20th May, 2011.The regulations attempt to provide clarity on following areas:
The already existing LLPs with FDI will have to comply with reporting requirements within the time limit from the date of issue of this notification.Read More
- Who will be the eligible investors
- Eligibility criteria for LLP accepting foreign investment
- What will be the eligible investment
- Entry route i.e. for FDI in LLP prior FIPB approval is must.
- Pricing of investment
- Mode of payment
- Reporting to RBI in new forms FOREIGN DIRECT INVESTMENT-LLP(I) & FOREIGN DIRECT INVESTMENT-LLP(II) within the time limits. (same as FC -GPR & FC -TRS applicable to a Pvt Ltd Co)
Corporate Guarantee extended to a Foreign Associated Enterprise (AE) – Whether a International Transaction and subject to Indian Transfer Pricing Law?
March 20 2014
By virtue of Finance Act, 2012 the definition of the term International Transaction was clarified to have a wider scope to cover capital financing transactions. In view of the same it is debated as to whether a corporate guarantee by an Indian parent to its foreign subsidiary falls within the ambit of the definition of International Transaction and consequently is subjected to Indian Transfer Pricing Law???Read More
Refund of Unutilized Cenvat Credit for service provider under partial reverse charge under rule 5B of Cenvat Credit Rules, 2004
March 8 2014
At the time of introducing the system of partial reverse charge mechanism i.e. 1st July 2012, the cenvat credit rules were also amended and new rule 5B was inserted to provide for the refund of unutilized cenvat credit for the service provider under the partial reverse charge mechanism. Rule 5B provided that the refund of unutilized cenvat credit can be claimed subject to certain procedures. However those procedures were not prescribed. Now CBEC has issued notification 12/2014 dated 3rd March 2014 prescribing the procedure for claiming such refund.Read More