• Service: Tax, Global Indirect Tax, International Tax
  • Type: Regulatory update
  • Date: 1/21/2014

India - Movie royalties, PE-related tax liability, industrial incentives  

January 21: The KPMG member firm in India prepared reports on the following developments (read the January 2014 reports by clicking on the hyperlinks provided below):
  • Payment for transfer of copyright in a feature film for 99 years is “sale” and not royalty - The Madras High Court held that consideration paid for the transfer of a copyright in a feature film for a period of 99 years is not a “royalty.” Under India’s copyright law, cinematographic films have a copyright life of 60 years (whereas the taxpayer had acquired the rights for 99 years). Therefore, the transaction could only be treated as a sale.

    The case is: K. Bhagyalakshmi. Read a January 2014 report [PDF 437 KB]

  • No tax liability attributable to foreign company without establishing that income is attributable to permanent establishment (PE) in India - The Uttarakhand High Court rejected the position of the tax authorities to subject 25% of the taxpayer’s gross receipts to tax, finding that there was no evidence that the taxpayer’s project office was a PE in India through which the taxpayer conducted business in India and that 25% of the gross receipt was attributable to this business.

    The case is Samsung Heavy Industries Co. Ltd. Read a January 2014 report [PDF 431 KB]

  • Clarification of Supreme Court decision on excise tax - The Central Board of Excise and Customs issued guidance clarifying how a decision of the Supreme Court of India will be implemented. The Supreme Court held that when products are sold at considerable losses for an unduly long period of time for the purpose of market penetration, the transaction value cannot be accepted for the purpose of levying excise tax.

    The case is Fiat India (P) Ltd. Read a January 2014 report [PDF 404 KB]

  • Extended industrial incentives - A package of industrial incentives for the states of Himachal Pradesh and Uttarakhand has been extended to 31 March 2017. New industrial units and existing units with “substantial expansion” are eligible for a central capital investment subsidy at the rate of 15% of investment in plant and machinery, subject to a ceiling of INR 3 million.

    Read a January 2014 report [PDF 347 KB]

  • Reserve Bank of India guidance on non-convertible / redeemable bonus preference shares or debentures to non-resident shareholders - The Reserve Bank of India amended the regulations that apply concerning the transfer or issuance of a security by persons outside India. The new changes allow the issuance of non-convertible / redeemable bonus preference shares or debentures (bonus instrument) to non-resident shareholders under certain circumstances.

    Read a January 2014 report [PDF 349 KB]

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