• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 10/22/2013

India - Management services under U.S. treaty; withholding tax credit  

October 22: The KPMG member firm in India prepared reports on the following developments (read the October 2013 reports by clicking on the hyperlinks provided below):
  • Management services are taxable as “fees for included services” under India-United States income tax treaty - The Cochin Bench of the Income-tax Appellate Tribunal held that: (1) financial, sales, and risk management services provided by a U.S. company are technical in nature; (2) the services “make available” technical knowledge, experience, skills, etc., to the taxpayer; and (3) the services are taxable as “fees for included services” under the India-United States income tax treaty.

    The case is: US Technology Resources Pvt. Ltd. Read an October 2013 report [PDF 459 KB]

  • Indian trading intermediary conducts trading activities, and not providing services - The Delhi Bench of the Income-tax Appellate Tribunal held that a taxpayer’s activities as trading intermediary (referred to in Japanese as “Sogo Shosha”) are akin to activities of a trader and not a service provider. Because the taxpayer recorded purchase-and-sales transactions in its books of accounts, held title to the goods, and acted on a principal-to-principal basis, its activities are not those of a commission agent or a broker, but are activities that are akin to trading activities.

    The case is: Mitsubishi Corporation India Pvt. Ltd. Read an October 2013 report [PDF 440 KB]

  • Compliance of “contract employees” with Employees’ Provident Fund rules - “Contract employees” (i.e., employees engaged through contractors) must comply with the Employees’ Provident Funds & Miscellaneous Provision Act, 1952. The Employees’ Provident Fund Organisation has directed that details of personnel engaged through the various agencies and contractors by government departments and other private sector establishments are to be collected so as to verify compliance.

    Read an October 2013 report [PDF 431 KB]

  • Withholding tax credit allowed, even if no “tax deducted at source” certificate is available - The Mumbai Bench of the Income-tax Appellate Tribunal held that a taxpayer’s claim for a tax credit cannot be denied, even if the “tax deducted at source” (i.e., withholding tax) certificate or computer generated Form 26AS is not available. The tax authority must allow the withholding tax credit once a valid “tax deducted at source” certificate is produced, or, if the withholding agent did not issue a certificate, on the basis of evidence produced by the taxpayer of the tax withholding as well as an indemnity bond.
    The case is: Citicorp Finance (India) Ltd. Read an October 2013 report [PDF 439 KB]

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