• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 12/20/2013

India - Interest on PE’s refund; tax on partner’s retirement 

December 20:  The KPMG member firm in India prepared reports on the following developments (read the December 2013 reports by clicking on the hyperlinks provided below):
  • Interest on tax refund, effectively connected with a permanent establishment (PE) in India, does not invoke provisions of India-France income tax treaty - The Uttarakhand High Court held that interest paid with respect to a tax refund is income that would be subject to tax under the Article 12 of India-France income tax treaty, if the recipient of such interest income did not have a PE in India (i.e., the country where the interest was received). The High Court concluded that because there was no dispute about the taxpayer having a permanent place of business in India, the interest earned in India on the refund of income tax was not covered under this provision of the income tax treaty.

    The case is: Pride Foramer SAS. Read a December 2013 report [PDF 420 KB]

  • Money paid to retiring partners not taxable as capital gains to the firm - The Karnataka High Court held that a firm is not liable to capital gains tax because of its payment made to a retiring partner, when the payment does not involve a distribution of any asset. To be subject to capital gains tax, there must be an absolute cessation of right in property of the firm, as a result of which the retiring partners then holds absolute title to the property that was relinquished by the firm. Otherwise, there is no imposition of capital gains tax.

    The case is: Dynamic Enterprises. Read a December 2013 report [PDF 472 KB]

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