Taxation

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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 

Delhi ITAT delivers one of the first decisions dealing with Principal Purpose Test

The principal purpose test (“PPT”) has been introduced into the Indian double taxation avoidance agreement (“DTAA”) lexicon through the base erosion and profit shifting (“BEPS”) project of the Organisation for Economic Cooperation and Development (“OECD”) to dissuade sophisticated taxpayers from entering into transactions aimed at tax avoidance. The requisite amendments to the DTAAs have been made via multilateral instruments (“MLIs”).Continue Reading Delhi ITAT delivers one of the first decisions dealing with Principal Purpose Test

From courtrooms to clicks: Rethinking why simple GST rectifications require Court intervention

The Goods and Services Tax (“GST”) regime was introduced with the promise of a seamless, technology-driven tax system aimed at reducing cascading effects and ensuring smooth compliance. However, after seven years of its introduction, businesses and taxpayers have found themselves burdened with the rigidity of a tax regime, which makes the subsequent correction of even the smallest of clerical errors in returns quite difficult and requires litigation to have them rectified. Continue Reading From courtrooms to clicks: Rethinking why simple GST rectifications require Court intervention

GST liability on the benefits arising out of land: The conundrum continues

The applicability of Goods and Services Tax (“GST”) on various land-related rights has been a subject of ongoing debate, leading to uncertainty for businesses, developers, and policymakers. While the GST framework seeks to tax the supply of goods and services, transactions involving land and immovable property present unique challenges due to their distinct legal nature.Continue Reading GST liability on the benefits arising out of land: The conundrum continues

Legal debate at tipping point over Notification extending GST deadline

The legal validity of the contentious CGST Notification No. 56/2023 (“Notification“), is facing challenges across multiple High Courts in India. The Notification, issued by the Central Board of Indirect Taxes and Customs (CBIC), extended the timeline for passing orders under Section 73(10) of the Central Goods and Services Tax Act, 2017 (“CGST Act“) for financial years 2018-19 and 2019-20.Continue Reading Legal debate at tipping point over Notification extending GST deadline

Tax reassessment proceedings: Supreme Court puts TOLA controversy to rest

The Supreme Court (“SC”) recently addressed the validity of reassessment notices in Rajeev Bansal[1], issued under Section 148 of the Income Tax Act, 1961 (“IT Act”), from April 1, 2021, to June 30, 2021, even though the reassessment regime had been overhauled with effect from April 1, 2021. The Revenue argued that these notices fell under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (“TOLA”), which relaxed the time limits for reassessment due to the COVID-19 pandemic (“Pandemic”). However, several High Courts, including the Allahabad and Gujarat High Courts,[2] had ruled that such notices were subject to the new reassessment provisions introduced by the Finance Act, 2021, and hence, without the applicability of TOLA, were time-barred. The SC, in this landmark decision, ruled in favour of the Revenue, by upholding the validity of TOLA and laid down several jurisprudential observations in its judgement.Continue Reading Tax reassessment proceedings: Supreme Court puts TOLA controversy to rest

Delhi High Court rules on taxability of a PE’s profits despite global loss

In a landmark ruling, the Hon’ble Delhi High Court (“Delhi HC”) has held that profits generated by a Permanent Establishment (PE) in India shall be liable to tax in India, even if the parent enterprise has incurred losses on a consolidated basis. This decision overturns the previous judicial position set forth in the Nokia Solutions judgment and carries significant implications for global corporations operating in multiple jurisdictions.Continue Reading Delhi High Court rules on taxability of a PE’s profits despite global loss

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?

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

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