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The India–Mauritius Double Tax Avoidance Agreement (“DTAA”), entered into in 1983, has since been the subject matter of contentious litigations. The well-drafted and reasoned ruling of the Delhi High Court (“Delhi HC”), which explains the availability of benefits to a Mauritius-based investor, the significance of the tax residency certificate (“TRC”), the limitation of benefits (“LoB”) clause, and the grandfathering provision in the treaty, has provided much-anticipated relief and certainty to the taxpayers.

Continue Reading Delhi High Court grants tax-treaty benefits to Tiger Global’s Flipkart exit
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Union Budget boost to GIFT IFSC: Looking at a golden future

With numerous legislative reforms, the government has demonstrated a sincere commitment towards achieving Viksit Bharat, or ‘Developed India’ by 2047. While presenting the Union Budget for financial year 2024-25, on July 23, 2024, Finance Minister Nirmala Sitharaman introduced significant changes to enhance ease of doing business in the International Financial Services Centre (“IFSC”), Gujarat International Finance Tec-City (“GIFT City”). This Budget promises a supportive environment for growth and development, thus giving a fillip to aspiring entities, desiring to have a presence in GIFT IFSC.

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Budget 2024: Expectations and way ahead

BUDGET 2024: A CATALYST FOR FINANCIAL INNOVATION AND FINTECHS

The Indian government has been introducing pivotal reforms in the Budget to bolster the economy and increase the attractiveness and competitiveness of the International Financial Services Centre (IFSC) globally. These reforms will help foster a robust financial ecosystem, capable of supporting the nation’s ambitious economic goals of becoming a developed country. The 2024 Budget is a curious wait for foreign organisations looking to enter India as well as the IFSC. The aim is to enhance the organisational reach of such foreign companies not only in India, but across the world.

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First judgment on GAAR holds bonus-stripping to be an impermissible tax-avoidance arrangement

The provisions of General Anti-Avoidance Rules (“GAAR”) were implemented into Income Tax Act, 1961 (“IT Act”), for the first time with effect from the financial year 2017–18. The GAAR provisions provide the Indian Revenue Authorities (“IRA”) with wide powers, including even recharacterising a transaction, ignoring a part or the whole of a series of transactions, disallowing expenses incurred, etc., if the main purpose of the transaction was to obtain tax benefits. Considering the aggressive nature in which the IRA generally scrutinises the GAAR cases, the industry is always apprehensive that these GAAR provisions could be invoked in a wide-spread manner. However, much to the relief of the taxpayers, the IRA have rarely invoked these provisions.

Continue Reading First judgment on GAAR holds bonus-stripping to be an impermissible tax-avoidance arrangement
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Delhi HC delivers an important pronouncement on permanent establishment

In a significant decision delivered recently, the Hon’ble High Court of Delhi (“Hon’ble HC”) has shot down the case of the Income Tax Department (“ITD”) wherein the ITD had alleged three kinds of permanent establishments (“PE”). In Progress Rail Locomotive Inc.[1] (“Assessee”), the ITD intended to target the Assessee by putting it in all three conceivable PE silos i.e., Fixed Place PE, Service PE and dependent agent PE (“DAPE”) and used it as reasons to reopen the case. The Hon’ble HC rejected the contentions of the ITD by holding them to be prima facie unsustainable.

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Premium Received on Redemption of Debentures: Taxed as Interest or Capital Gains?

Background

While debentures have been a common mode of raising debt for companies, there still remains ambiguity regarding the taxation of certain income earned from debentures. Taxation of premium received on redemption of debentures is one such issue.

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Taxation landscape of Global Capability Centres (GCCs) in India

In part IV of our series on key legal consideration for establishing global capability centres (“GCCs”) in India,[1] we discuss the key taxation issues that foreign companies must be aware of ahead of setting up its operations in India.

Continue Reading Taxation landscape of Global Capability Centres (GCCs) in India
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Google Adwords program is not taxable as either “royalty” or “Fee for technical services” in India

The Income Tax Appellate Tribunal, Bangalore (“Tribunal”), recently in Google Ireland Ltd. v. DCIT[1] allowed an appeal by Google Ireland Ltd (“Google Ireland”) and held that the payments received from Google India Pvt Ltd (“Google India”) for granting marketing & distribution rights of Google AdWords program were not in the nature of “royalty” or fee for technical services (“FTS”) and consequently it could not be brought to tax in India.

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GST on canteen facilities and it’s applicability on non-permanent employees

In the bustling landscape of Indian factories and corporate setup, providing canteen facilities and other perquisites to employees, deputed persons from sister concerns and third-party contractors have become a common phenomena. The Factories Act, 1948, statutorily mandates employers to provide certain amenities, including canteen services, for factories with more than 250 workers, but for others, it is voluntary and provided as a goodwill gesture. To maintain a conducive work environment, such facilities have become important. However, the advent of the Goods and Services Tax (GST) has introduced complexities, especially concerning taxation on canteen facilities provided to employees, deputed persons and third-party contractors.

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Are TDS provisions tedious? Opportune time for simplification

The Tax Deducted at Source (“TDS”) provisions under the Indian Income Tax Act of 1961 (“IT Act”) have been the cornerstone of the country’s tax architecture. A payer (or a deductor) is expected to be vigilant at the time of entering into any transaction, so that the required taxes are duly deducted and deposited with the Government where required, to avoid any adverse implications including penal consequences later. TDS mechanism, under Indian tax laws, has been a useful tool to collect taxes, targeting income at source itself.

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