Subvention received by Indian subsidiary from its parent company towards recoupment of losses is a non–taxable capital receipt

Global Tax Update:January 2017/India

Taxpayer was incurring losses and had received subvention from its German parent company towards recoupment of losses. (Global Tax Update:January 2017/India)

Tax authorities treated the aforesaid receipts as taxable revenue receipts. Such treatment was also upheld by the jurisdictional High Court.

On further appeal, Supreme Court held that voluntary payments made by the parent company to its loss making Indian company should be treated as payments made to protect capital investment in the Indian company. Such a sum cannot be treated as a revenue receipt and should not be taxed.

>> Click for Japanese [最高裁判決:インド子会社が欠損金補填のために親会社から受領した資金は非課税]

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