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S.R. Patnaik

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Head and Partner in the Tax Practice at the Delhi NCR office of Cyril Amarchand Mangaldas. Mr. Patnaik specialises in various aspects of direct tax, such as international tax, transfer pricing, corporate tax etc. He can be reached at sr.patnaik@cyrilshroff.com

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.Continue Reading Google Adwords program is not taxable as either “royalty” or “Fee for technical services” in India

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

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. Continue Reading Are TDS provisions tedious? Opportune time for simplification

Unfolding tax tools to invigorate resolution of companies under IBC

The Insolvency and Bankruptcy Code (IBC), introduced in 2016, was conceived as a game-changer, a potent tool to expedite debt recovery from insolvent companies within a stipulated timeframe. Eight years into its existence, the IBC has witnessed a mixed track record. While it has successfully revitalised some companies grappling with financial turmoil, it has also faced criticism. The aim of the IBC was not only to aid the revival of struggling companies, but also to enhance the quality of lenders’ balance sheets and empower distressed asset buyers.Continue Reading Unfolding tax tools to invigorate resolution of companies under IBC

Cognizant’s High Court approved scheme of arrangement was held to be a colorable device by Chennai ITAT

The ITAT recently dismissed an appeal and slammed Cognizant India Private Limited (“Cognizant India”) for what it perceived as  using a colorable device to evade taxes during its INR 190 billion share buyback exercise.Continue Reading Cognizant’s High Court approved scheme of arrangement was held to be a colorable device by Chennai ITAT

CBDT exempts GIFT City aircraft leasing cos from withholding on dividend distributed inter se , but is it enough?

Despite India being the third[1] largest domestic aviation market in the world, a majority of the aircrafts in the country (more than 70% approximately) are procured through lease arrangements, with most of them being provided by overseas lessors. Airline companies do not have the financial wherewithal to purchase aircrafts and hence, are forced to take them on lease. However, since the aircraft financing industry is at a nascent stage in India and considering the risks involved, new players are unwilling to enter the business. While leasing aircrafts helps to manage the liquidity position of aircraft operating companies, it comes at a heavy cost and significant financial risks for aircraft operating companies and creates huge trade imbalance for the country.Continue Reading CBDT exempts GIFT City aircraft leasing cos from withholding on dividend distributed inter se, but is it enough?

The Goods and Services Tax (“GST”) legislation has recently completed its sixth anniversary. The 50th GST Council meeting conducted on July 11, 2023 was marked by tax rate changes, availability of exemptions, procedural amendments, etc. It is noteworthy that the GST Council is proactively considering representations and feedback from all quarters of the industry. While the Government has been persistent in its efforts to iron out all creases, bottlenecks continue to exist. It was also expected that several sectors, including online gaming, would get relaxation – that the GST authorities would simplify the law, avoid unnecessary ambiguities, but in reality, it appears that on certain fronts, it has merely focussed on increasing sources of tax collection.Continue Reading GST Council’s half century meeting & the inning ahead!

Share subscription above fair market value would be subject to angel tax

The Bombay High Court has recently allowed a writ, challenging a reassessment notice served on the Assessee (by the income tax department) for FY11-12 on share premium issued by it. The assessing officer, however, failed to come up with any reasonable grounds that led him to believe that income had escaped assessment during the relevant FY. 

Section 56(2)(viib) was introduced into the (Indian) Income Tax Act, 1961 (“IT Act”) as an anti-abuse provision with effect from FY12-13, according to which, if a company issues shares at a value higher than its fair market value, then it will have to pay tax (angel tax) on such incremental value. Rule 11UA of the (Indian) Income Tax Rules, 1962 (“IT Rules”) provides mechanism for computing fair market value.Continue Reading Share subscription above fair market value would be subject to angel tax

Salary reimbursement of seconded employees not taxable in the hands of foreign company

The Hon’ble Income Tax Appellate Tribunal (“ITAT”), Delhi has recently held that salary reimbursement of seconded employees paid to the original employer without any profit element is not taxable as fee for technical services.

This case[1] pertains to Ernst and Young LLP, USA (“EY USA”), which is set up in the US. It had sent its employees on secondment (“Seconded Personnel”) to work with various EY member firms in India (“EY India”). During the assessment proceedings, the tax officer held that the cost-to-cost reimbursement of salary of Seconded Personnel is taxable as fee for technical services (“FTS”) as per Article 12 of the India-US Double Taxation Avoidance Agreement (“DTAA”) in the hands of EY USA.Continue Reading Salary reimbursement of seconded employees not taxable in the hands of foreign company: Delhi ITAT

Income Tax Act

In the case of Manas Vs. Income Tax Officer[1], the Hon’ble Madras High Court (“HC”) took serious objection to the taxpayer’s attempt at misleading the Court. The taxpayer had filed a writ petition seeking quashing of the reassessment proceedings and satisfaction order passed under Section 148A of Income Tax Act, 1961 (“IT Act”).Continue Reading Madras High Court takes taxpayer to task for mischief with costs