International Tax

Treaty Shopping Safari Ends Here: Footprints from Tiger Global

Summary:

The Supreme Court’s ruling in Tiger Global International Holdings has redrawn the contours of India’s tax landscape. By rejecting treaty shopping structures and affirming the reach of GAAR even for legacy investments, the Court has signalled a decisive shift toward substance-over-form in cross-border taxation. TRCs are no longer conclusive shields, and investors must now demonstrate genuine commercial substance to claim treaty benefits. This landmark judgment underscores India’s firm stance against tax avoidance and sets the tone for heightened scrutiny of offshore investment structures going forward.Continue Reading Treaty Shopping Safari Ends Here: Footprints from Tiger Global

From PE Confusion to Clarity: NITI Aayog’s Push to Reform Profit Attribution Rules

Summary: India’s tax framework has long posed challenges for foreign investors, particularly around PE and profit attribution rules. NITI Aayog’s working paper proposes a presumptive taxation scheme to simplify compliance and reduce litigation with respect to profit attribution. Through introducing sector-specific profit percentages to turnover, the working paper intends to offer clarity and ease administrative burdens. Its success, however, will hinge on setting realistic rates that are pragmatic and practicable and can balance revenue protection with investor appeal.Continue Reading From PE Confusion to Clarity: NITI Aayog’s Push to Reform Profit Attribution Rules

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

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

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

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

Foreign Pension Funds’ tax treatment to match Sovereign Funds for certain investments 

Background

With a view to boost infrastructure investments in India and make Indian investment more attractive, the Finance Act, 2020 (FA, 2020) introduced section 10(23FE) in the Income-tax Act, 1961 (IT Act). This section provides an exemption from tax in India in respect of income of certain specified investors who have investments in the infrastructure sector. Specified investors for this purpose include a wholly owned subsidiary of Abu Dhabi Investment Authority, ‘pension funds’ (PF) and ‘sovereign wealth funds’ (SWF). The exempt income would include interest, dividend or long-term capital gains arising to the specified investors, from their investments made in (a) company or entity engaged in developing, maintaining or operating an ‘infrastructure facility’ (Infra Companies); (b) Category-I and Category-II Alternate Investment Funds which have in turn made all their investments in Infra Companies; and (c) business trusts (i.e. Real Estate Investment Trusts and Infrastructure Investment Trusts). These exemptions are available if the Specified Investors meet certain conditions, including the requirement that they should be notified by the Indian Central Government in this regard. In pursuance to this, the Central Board of Direct Taxes (CBDT) has specified the procedure for the inclusion of PFs in the tax exemption notification.
Continue Reading Foreign Pension Funds’ tax treatment to match Sovereign Funds for certain investments

Clarity on eligibility criteria for funds set up by Category I FPIs for exemption from taxable presence in India

Background

A special  taxation regime, provided under Section 9A of the Income-tax Act, 1961 (“IT Act”), exempts eligible offshore funds, with their fund managers located in India, from treating them as having taxable business presence in India. On satisfaction of the requirements set out in Section 9A of the IT Act, management of the funds through such Indian fund managers would not constitute the offshore fund’s ‘business connection’ in India. It is important to note that when an offshore fund, satisfying these conditions is not taxable in India on its business income under the domestic law, then the question of it not having permanent establishment under the applicable double taxation avoidance agreement (“DTAA”) becomes moot. Additionally, Section 9A also excludes an eligible investment fund from being treated as resident in India for tax purposes under the provision of ‘Place of Effective Management’ when the eligible fund manager undertakes fund management activities while situated in India.
Continue Reading Clarity on eligibility criteria for funds set up by Category I FPIs for exemption from taxable presence in India

Mauritian entities have found it difficult to benefit from the capital gains tax exemption under the India- Mauritius double taxation avoidance agreement (DTAA) upon exit from Indian investments with the tax department questioning the said benefits. Recently, the Authority for Advance Ruling (AAR), declined to give a ruling on taxability of a Mauritian resident in India, on the grounds that the transaction was prima facie designed for avoidance of tax.[1]Continue Reading AAR declines ruling to a Mauritius resident, alleging that transaction was designed to avoid tax

MLI Impact on Treaty Benefit Tax Blog

The Base Erosion and Profit Shift (“BEPS”) programme, initiated by OECD, had recommended a host of action plans, which could be implemented by making changes to the international tax treaties. . However, there are more than 3000 bilateral tax treaties entered into by contracting countries and it would have taken years to amend them. To solve this problem, over 100  jurisdictions negotiated and concluded a multi-lateral instrument (“MLI”) in November 2016. Countries that agreed to change their tax treaties were required to sign and notify the OECD Secretariat.  India was amongst the first few signatories to the MLI in 2017 and ratified   it on June 25, 2019. Thus, its network of bilateral tax treaties would be impacted by the provisions of the MLI where its treaty partner is also a signatory. It is, therefore, necessary now to read the applicable tax treaty with MLI, based on the treaty partner’s position and reservations on the provisions of the MLI.
Continue Reading Have You Checked the Applicability of Multi-Lateral Instrument Impacting Your Treaty Benefit Claim?