Income Tax Appellate Tribunal

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Are the Assets or monies distributed to retiring partners taxable

Disputes involving whether capital gains taxes are leviable on sums/assets paid to retiring partners has been a subject matter of litigation for several decades now. In order to bring clarity, the legislature introduced a new provision (i.e. section 45(4)) into the Income tax Act, 1961 (IT Act), which provided that capital gains tax should be levied in the hands of the partnership firm at the time of distribution of assets. This seems, however, to have further complicated the situation.

Bangalore Income Tax Appellate Tribunal (ITAT) in the case of Savitri Kudur[1] and the Madras High Court (HC) in the case of National Company[2] have delivered noteworthy decisions recently. The Bangalore ITAT held that the cash consideration paid to the retiring partner on the basis of the amount lying in his/her capital account would not be subject to capital gains tax under the IT Act by relying on the decision of the Supreme Court (SC) in the case of Mohanbhai Pamabhai[3]. The Madras HC, on the other hand, held that even the allotment of immovable properties to the retiring partners would not be subject to capital gains tax by relying on the same SC decision in the case of the Mohanbhai Pamabhai (supra).
Continue Reading Never-Ending Saga: Are the Assets/Monies Distributed to Retiring Partners Taxable?

AT&T Communications Services (India) Pvt. Ltd. v. Deputy Commissioner of Income Tax

With increasing globalisation of the world economy, the continuous movement of people from one jurisdiction to another has become imminent. However, such decisions have also created a significant amount of uncertainty, not only because of the social impact of such movement, but also because it creates tax complexities.

In a recent case, the Income Tax Appellate Tribunal (ITAT) had the occasion to examine the tax implications of reimbursement of salaries and other expenses in the case of AT&T Communications Services (India) Pvt. Ltd. v. Deputy Commissioner of Income Tax[1]. The ITAT held that reimbursement made by AT&T Communication Services (India) Pvt. Ltd. (AT&T India) for salary and other costs to AT&T World Personnel Services Inc., USA (AWPS) for the seconded employees working in India did not constitute fees for technical services (FTS) or fees for included services (FIS) under section 9(1)(vii) of Income Tax Act, 1961 (IT Act) or Article 12 of India-US Double Tax Avoidance Agreement (DTAA). Hence, AT&T India was not required to withhold taxes under section 195 of the IT Act.
Continue Reading Control and Supervision is the Important Factor to Determine the Nature of Reimbursements in Secondment Agreements