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  • Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 3/26/2014

India - Taxation of software under China treaty; stock dividends 

March 26:  The KPMG member firm in India has prepared reports on the following developments (read the March 2014 reports by clicking on the hyperlinks provided below):
  • Income from supply of telecommunications network equipment (including software) is taxable as business income under India-China tax treaty - The Delhi Bench of the Income-tax Appellate Tribunal held that, concerning the taxability of income from the supply of telecommunications network equipment along with embedded software: (1) the taxpayer had a permanent establishment (PE) in India pursuant to the India-China income tax treaty; (2) income from the supply of the software cannot be treated as a royalty because the software was supplied in an embedded form along with the hardware under a common contract; and (3) income from the supply of the telecommunications network equipment including the software was taxable as business income arising from the taxpayer’s PE in India.

    The case is: Huawei Technologies Co. Ltd. Read a March 2014 report [PDF 328 KB]


  • Interest is payable on refund of excess tax withholding - The Supreme Court of India held that the taxpayer (who is entitled to refund of excess taxes withheld by it under the provisions of the Income-tax Act, 1961) is also entitled to interest on the refund. The Supreme Court concluded that the taxpayer is entitled to not only the refund of withholding tax, but also to interest (measured from the date of payment of tax).

    The case is: Tata Chemicals Ltd. Read a March 2014 report [PDF 478 KB]


  • Proportionate allotment of additional shares (stock dividend) is not income - The Mumbai Bench of the Income-tax Appellate Tribunal held that because shares were allotted on pro-rata basis to the shareholders (based on their existing holdings), additional property was not received by them and this allotment did not result in taxable income. However, if the shares had been allotted to a person without regard to that person’s existing shareholding or if the shares were allotted to existing shareholders but disproportionately, there would be value or property being passed on to that person that would be subject to taxation pursuant to section 56(2)(vii)(c).

    The case is: Sudhir Menon HUF. Read a March 2014 report [PDF 454 KB]



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