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Details

  • Service: Tax, International Corporate Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 9/25/2012

India - Foreign-currency loans, foreign direct-investment incentives 

September 25: The KPMG member firm in India has prepared reports on the following developments (read the September 2012 reports by clicking on the hyperlinks provided below):
  • Conditions for lower withholding tax (5% rate) on interest relating to foreign-currency loans: India’s Central Board of Direct Taxes issued guidance on 21 September 2012 intended to reduce the compliance burden and other procedural issues related to requests for a lower withholding tax on interest on borrowings made in a foreign currency.

    Read a September 2012 report [PDF 191 KB]


  • Supreme Court resolves that levy of interest is mandatory: The Supreme Court of India held that the levy of interest on assessments is mandatory, but that interest can be waived pursuant to a notice of the Central Board of Direct Taxes.

    The case is: Karanvir Singh Gossal. Read a September 2012 report [PDF 193 KB]


  • Incentives for foreign direct investment in retail, broadcasting and civil aviation: A package of reform proposals, introduced 14 September 2012, would allow for foreign direct investment in multi-brand retail, aviation, power exchanges, and broadcasting sectors. The Department of Industrial Policy and Promotion Ministry of Commerce issued a series of separate notices formally announcing these proposals.

    Read a September 2012 report [PDF 175 KB]


  • Service tax is not part of total receipts, for purposes of computing deemed profits on exploration of mineral oils: The Delhi Bench of the Income-tax Appellate Tribunal held that the amount of service tax paid by the taxpayer is not part of the amount used in computing deemed profits in connection with business of exploration of mineral oils under Section 44BB of the Income-tax Act, 1961.

    The case is: Mitchell Drilling International Pty. Ltd. Read a September 2012 report [PDF 195 KB]


  • Section 10A relief is determined without regard for losses of non-eligible unit from the profits of eligible unit: The Delhi High Court held that the tax relief benefits available under section 10A of the Income-tax Act, 1961, allow for an exemption—rather than a deduction—and therefore, in computing the amount of the section 10A benefit for an export processing zone (EPZ) unit, the current year’s loss and carried forward loss of a non-EPZ unit are not to be set off against the profits of the EPZ unit.

    The case is: TEI Technologies P. Ltd. Read a September 2012 report [PDF 200 KB]


  • Sale of pledged shares at loss, to group company that in turn sets-off capital gain arising from transfer of other shares, not tax-avoidance transaction: The Gujarat High Court held that the sale of pledged shares at a loss, to a group company that sets-off the gain arising from transfer of other shares during the same year, is not a “colourable transaction” created for tax avoidance.

    The case is: Biraj Investment Pvt. Ltd. Read a September 2012 report [PDF 207 KB]


  • Title to property passed outside India, and sale was outside India: The Delhi High Court held that computer software embedded in equipment is not taxable under the India- Finland income tax treaty. The title to the goods passed outside India, and therefore, the sale of equipment took place outside India.

    The case is: Nokia Networks OY. Read a September 2012 report [PDF 219 KB]


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