Photo of Daksha Baxi

Head of International Taxation at the Mumbai office of Cyril Amarchand Mangaldas. Daksha has a vast experience of over 30 years in taxation laws and also specialises in succession and estate planning, education sector and employee equity compensation. She can be reached at daksha.baxi@cyrilshroff.com

 

Taxpayer’s Choice for Valuation of Shares at Premium Upheld

The Income Tax Appellate Tribunal (ITAT) in the case of M/s. Rameshwaram Strong Glass (P) Ltd. v The Income Tax Officer[1] has upheld the right of the company issuing shares to choose the valuation methodology under the provisions of the Income Tax Act, 1961 (IT Act) read with the rules framed thereunder (Tax Law) for the purposes of determining the ‘fair market value’ (FMV) of such shares at premium. Continue Reading Taxpayer’s Choice for Valuation of Shares at Premium Upheld

The Telangana and Andhra Pradesh High Court (High Court) in the case of Leo Edibles and Fats Limited v. TRO, Writ Petition No 8560 of 2018, has allowed the liquidation of assets of a company under the Insolvency and Bankruptcy Code, 2016 (IBC), despite the claim of the tax authorities that they have a charge over it, by virtue of having initiated attachment proceedings under the Income Tax Act, 1961 (IT Act). The High Court, while dealing with the interplay between the IT Act and the IBC, held that the income tax authorities are not at par with ‘secured creditors’ under the IBC.

The petitioner in the instant case had purchased certain property of a company undergoing liquidation under the IBC in an e-auction. The registrar refused to register the transfer in favour of the petitioner due to the attachment notice issued by the tax authorities. Accordingly, the petitioner filed a writ petition challenging the refusal of the registrar to register the sale deed – and sought issuance of direction to the income tax department to withdraw the said attachment.

Continue Reading Decoded: The Interplay Between Tax Law and the Insolvency and Bankruptcy Code

The Income Tax Appellate Tribunal, Delhi (ITAT) recently delivered a very significant decision in the case of Nokia Networks O.Y (Assessee)[1] on the issue of its permanent establishment (PE) in India and attribution of income to the PE. The majority of members of the ITAT ruled in favour of the Assessee holding that its Indian subsidiary would not constitute a PE in India, especially in absence of a Service PE clause in the erstwhile India-Finland Tax Treaty (Treaty).

Facts

The Assessee is a resident of Finland and sold GSM equipment manufactured by it to Indian telecom operators, on a principal-to-principal basis. It’s Indian subsidiary, Nokia India Private Limited (NIPL) was either assigned the installation contracts by the Assessee or entered into independent contracts with the customers for installation. NIPL also entered into technical support agreements with customers. NIPL’s income from these activities was taxed in India.

The Assessing Officer (AO) was of the view that NIPL constituted a PE of the Assessee and attributed an additional 30 percent of the profit from the equipment to NIPL. The AO also concluded that 30% of the equipment price pertained to supply of software and sought to tax it as royalty in the hands of the Assessee. On appeal, the ITAT held that NIPL being a virtual projection would form a PE, and attributed to NIPL 20 percent of the Assessee’s profits from the sale of equipment to Indian customers.

Continue Reading Subsidiary is Not a Permanent Establishment but Beware the ‘Virtual Projection’ Risk