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Global Business Tax Alerts

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2018

US Tax Law Reform – High Level Analysis and India Impact

January 2018: With the process to codify the US tax reforms now complete, it is important to understand the impact these changes could have on the overall business models and tax costs of US corporations holding Indian subsidiaries and Indian MNCs holding US subsidiaries or having operations in the US.

2017

Background/Facts Issues for consideration Ruling of the Karnataka High Court

December 2017: Karnataka High Court holds protocol an integral part of DTAA, no separate notification required to make applicability effective for MFN clause

CBDT instruction on efforts for maximization of revenue collection from arrears and current demand.

December 2017: A review of the position of revenue collection by the Central Board of Direct Taxes (CBDT), in November 2017, has revealed that the all India growth rate of net collection is 14.36%, as against the required growth rate of 15.3%.

Kolkata Tax Tribunal says payment received for intra-group services, reimbursement of expenses, not taxable in India. Also holds advisory services as not FTS / FIS.

December 2017: The issue of taxability of reimbursement of expenses and the obligation to withhold tax at source, on the person making the payment, has been a matter of considerable debate. Recently, the Bangalore ITAT in Tungabhadra Steel Products Ltd. [TS-485ITAT-2017(Bang)] and Delhi ITAT in SMS Iron Technology Pvt. Ltd. [TS-555-ITAT2017(DEL)] rejected the contention that withholding tax is not applicable on reimbursement of expenditure.

Bangalore Tax Tribunal holds date of reversal of provisions important to decide whether income in respect of year-end provisions has accrued to payee or not

December 2017: The ITAT has given a finding that as the provision has not been reversed in the beginning of the subsequent year (i.e. reversal has happened at a later stage), income has accrued in the hands of the payee.

CBDT clarification on indirect transfer provisions in case of redemption of share or interest outside India

November 2017: This clarification issued by the CBDT addresses the concerns of a select category of overseas investors and with conditions/limits attached thereto.

GST Council recommends revision in rates for multiple goods. Array of benefits provided to the MSME sector. Compliance burden has been eased by revising return filing due dates.

November 2017: The High Court has struck down some ICDS’ and also few paragraphs from other ICDS’ as being ultra vires the provisions of the Act and/or in being contrary to the settled law as laid down by various decisions of the Supreme Court.

The international tax provisions of the Tax Cuts and Jobs Act

November 2017: Consistent with the 2014 Camp bill, the Bill would source income from the production and sale of inventory property (section 863) solely by reference to the location of production activities - thus, not in any part based on the “place of sale,” or “title passage” rule.

Delhi High Court rules on powers of the central government to notify ICDS

November 2017: The High Court has struck down some ICDS and also few paragraphs from other ICDS as being ultra vires the provisions of the Act and/or in being contrary to the settled law as laid down by various decisions of the Supreme Court.

Supreme Court holds that mobilization fees received by non-resident for transportation of drilling units is taxable in India

November 2017: The view of the Supreme Court that mobilisation fees received by non-resident taxpayer(s) for transportation of oil rigs from outside India to designated drilling places in India will be taxable in India, is in light of the fact that the receipt is on account of provision of services and facilities in connection with the extraction, etc., of mineral oil in India and against the supply of plant and machinery on hire used for such extraction.

CBDT clarification for determination of POEM in cases where regional headquarter of the group is located in India

October 2017: This clarification issued by the CBDT provides much needed clarity on the applicability of PoEM for multinational companies having their regional headquarter in India, which are merely conducting routine activities as per the global policies of the parent entity, for the entire group.

Notification of Procedure for Filing Statement of Income from Specified Territory Outside India and Foreign Tax Credit

September 2017: Introduction of the procedure for filing statement of income online to claim FTC, is a welcome step. This is in accordance with government’s intention to promote use of electronic communication for tax compliance matters.

Powers and functions provided to additional Authority for Advance Ruling benches

September 2017: With powers and functions granted to additional benches of AAR, it is expected that these benches would start functioning soon, which would aid in ensuring faster disposal of advance ruling applications.

Draft Notification - Mechanism for voluntary self-reporting of income estimate, tax payments, advance tax liability

September 2017: The proposed mechanism will aid tax authorities to obtain basis for advance tax payments and would also put an onus on the taxpayer to justify the same. It will benefit both the taxpayer and the government (which may utilize the information for planning and prioritizing government expenditure).

CBDT issues clarifications on computation of book profit for the purpose of MAT for Ind AS compliant companies

July 2017: The CBDT has cleared the air on the treatment of various Ind AS adjustments for the purposes of computing book profit under MAT and taxpayers would certainly welcome them. However, certain issues still remain unclear such as change in accounting policy for recognition of ESOP expenditure from intrinsic value to fair value, leading to recognition of additional liability through retained earnings upon transition, adjustment for prior period items etc.

CBDT issues modified circular clarifying no TDS with respect to component of GST on services

July 2017: The CBDT clarification through the above circular is timely and welcome. In line with the introduction of a new tax regime for indirect taxes on services, the CBDT has extended its rationale for excluding taxes from the purview of tax deduction at source for payments to residents.

CBDT issues final notification amending Rule 11UA in respect of valuation of unquoted equity shares

July 2017: The final notification is broadly in line to the draft notification issued on 5 May 2017. While the CBDT has now aligned the valuation of preference shares for the purposes of section 50CA, as per existing valuation rules under Rule 11UA(1)(c)(c), difficulties may arise with respect to valuation of unquoted equity shares in certain cases. For instance, practical difficulties may arise for valuation of equity shares in cases of cross holding, valuing investment in unquoted equity shares of investee companies, which in turn hold immovable property/jewelry, etc.

Alienation of shares of Indian company by Dutch company covered under Article 13(5) of India-Netherlands DTAA, thus, not taxable in India: High Court

July 2017: The ruling of the Andhra Pradesh and Telangana High Court in upholding the legal distinction between the concept of ‘share sale’ as opposed to an ‘asset sale’ is in line with the law laid down by the Hon’ble Supreme Court in the case of Vodafone International Holdings B.V.

India signs multilateral instrument and submits provisional list of reservations and notifications

July 2017: The MLI is a big step in the BEPS implementation process. The provisional list of reservations and notifications made by India and by other countries, has provided insights on how Indian tax treaties will shape up in the BEPS world. It needs to be seen if India makes any further changes in the provisional list of reservations and notifications.

 

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