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Kunal Savani

Partner in the Tax & Private Client Practice at the Mumbai office of Cyril Amarchand Mangaldas. Kunal specialises in various aspects of direct tax, such as corporate tax, M & A transactions, international tax and also specialises in succession and estate planning. He can be reached at kunal.savani@cyrilshroff.com

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Substance over Form: Supreme Court Clarification on Creation of Permanent Establishment in Cross-Border Services

The question of whether cross-border services rendered by foreign entities would establish a taxable presence in India has been subject to nuanced scrutiny. In a recent ruling,[1] the Hon’ble Supreme Court of India (“SC”) has reaffirmed that economic substance (not legal form) is the crucial factor for determining whether a foreign entity exercises substantive control over Indian operations to constitute a permanent establishment (“PE”) in India.Continue Reading Substance over Form: Supreme Court Clarification on Creation of Permanent Establishment in Cross-Border Services

Debunking taxation of cloud services as royalty 

Businesses are increasingly integrating cloud computing models into their operations, necessitating unambiguity regarding the position of tax leviable on such transactions under the Income-Tax Act, 1961 (“IT Act”), and tax treaties. Uniformity in the tax treatment of cross-border cloud computing models has become crucial for these businesses to plan their operations and tax costs effectively. A long-standing subject of scrutiny has been whether to consider the taxation of payment for cross-border cloud services as “royalties” or “fee for technical services” (“FTS”)/ “fee for included services” (“FIS”). However, in recent rulings, Indian courts have affirmed that such standardised services would not be liable to income tax in India.Continue Reading Debunking taxation of cloud services as royalty 

Revolutionising Import Clearance: The 2025 Customs (On-Arrival Movement for Storage and Clearance at Authorised Importer Premises) Regulations, 2025

Background

The government has implemented various measures to promote the growth of India’s manufacturing sector, such as the Production Linked Incentive schemes that were announced for the electronic industry under the Make in India initiative. It has also taken several steps to smoothen and fast track the import process, through digitalisation and faceless assessments. However, some issues remain.Continue Reading Revolutionising Import Clearance: The 2025 Customs (On-Arrival Movement for Storage and Clearance at Authorised Importer Premises) Regulations, 2025

Crypto Sales Prior to AY 2022–23: Taxable as Capital Gains?

The Raunaq Prakash Jain v. Income Tax Officer case addresses a significant cryptocurrency transaction-related taxation issue in India, i.e., whether gains arising from cryptocurrency sales should be taxed as “capital gains” or “income from other sources”. This decision is particularly important because it clarifies the tax treatment of cryptocurrency gains before the introduction of the specific tax regime for virtual digital assets (“VDA”) with effect from April 1, 2022.Continue Reading Crypto Sales Prior to AY 2022–23: Taxable as Capital Gains?

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.Continue Reading Union Budget boost to GIFT IFSC: Looking at a golden future

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

Introduction

The intricacies of tax law often unfold through nuanced interpretations and amendments aimed at addressing loopholes. One such facet is the taxation of capital contributions by partners in partnership firms (including limited liability partnerships), as delineated under section 45(3) of the Income-tax Act, 1961 (“IT Act”). This provision deals with taxing transactions…

Supreme Court lays to rest the Most Favoured Nation Controversy

The Most Favored Nation Clause

A Double Taxation Avoidance Agreement (“DTAA”) with one country might have a different treatment for the same income as compared to DTAA with another country. To ensure that such differential treatment is avoided, and similar benefits are available across different DTAAs, DTAAs may include the Most Favored Nation (“MFN”) clause. The MFN clause is not a part of the Organization for Economic Co-operation and Development’s (“OECD”) or the United Nation’s model tax conventions and is also not a standard clause of all DTAAs. Such a clause can be negotiated and included at the discretion of the contracting states for certain income (typically investment income).Continue Reading Supreme Court lays to rest the Most Favoured Nation Controversy

Background

The Income-tax Act, 1961 (“IT Act”) contains various machinery provisions which enable tax authorities to recover tax dues from taxpayers. When payments are made to non-residents that are chargeable to tax under the IT Act, payers (both resident and non-resident) are obligated to withhold tax at applicable rates prior to remittance of funds. Typically, no such obligation arises if the payments are not subject to tax in India. Thus, there are times when taxpayers don’t withhold tax on payments, believing they should not be subject to tax under the IT Act. However, if the Indian tax authorities take a different view, they may initiate proceedings under section 201 of the IT Act against such taxpayers, i.e., the person responsible for withholding taxes.Continue Reading Orders for default in withholding tax on payments made to non-residents must be passed in a reasonable time

Forex Benefit

Introduction

Section 48 of the Income-tax Act, 1961 (“IT Act”) provides the computation mechanism for capital gains arising to a taxpayer pursuant to the transfer of a capital asset.[1] The said provision, inter alia, permits non-resident taxpayers to account for foreign currency fluctuation while computing capital gains arising from the transfer of shares or debentures of an Indian company. However, where capital gains arise to a non-resident taxpayer pursuant to the transfer of unlisted securities or shares of a private company, section 112(1)(c)(iii) of the IT Act provides that such capital gains should be computed without giving effect to any foreign currency fluctuations. A concessional tax rate of 10% (plus applicable surcharge and cess) is available on such gains. Section 112(1)(c)(ii) of the IT Act, on the other hand, provides a higher tax rate of 20% (plus applicable surcharge and cess) on any other long-term capital gains arising to a non-resident (i.e., other than gains arising from transfer of unlisted securities or shares) while, inter alia, allowing foreign currency fluctuation benefits to such non-residents.Continue Reading Forex Benefit Denied to Non-Resident Investor on Sale of Unlisted Shares