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  • Service: Tax, International Corporate Tax, Global Indirect Tax, International Executive Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 1/8/2013

India - Tax highlights (2012); satellite royalties; services outside India 

January 8: The KPMG member firm in India has prepared reports on the following developments (read the December 2012 reports by clicking on the hyperlinks provided below):
  • Payments for services of operating and maintaining a steel plant on cost-to-cost basis is “reimbursement” and not fees for technical services: The Bangalore Bench of the Income-tax Appellate Tribunal held that a payment made under a “strategic alliance agreement” for services in operating and maintaining a steel plant is a reimbursement on cost-to-cost basis and did not constitute income to the payee. Accordingly, the reimbursement cannot be categorized as fees towards professional and technical services; therefore, the taxpayer is not required to withhold tax on such reimbursements.

    The case is: Mukund Ltd. and Kalyani Steels Ltd. Read a December 2012 report [PDF 208 KB]

  • Salary received by non-resident of India, for services rendered outside India, not taxable in India, if tax treaty conditions are satisfied: The Delhi Bench of the Income-tax Appellate Tribunal held that salary received in India by a tax resident of the Philippines, for services rendered in the Philippines, is exempt from Indian income tax under the India-Philippines income tax treaty.

    The case is: Arjun Bhowmik. Read a December 2012 report [PDF 197 KB]

  • Profits from Indian project relating to services rendered both in and outside India are taxable by virtue of force of the “attraction principle” under the India-UK tax treaty: The Mumbai Bench of the Income-tax Appellate Tribunal held that the term “profits indirectly attributable to the Permanent Establishment” incorporates the “force of attraction principle” in Article 7 of the India-United Kingdom income tax treaty. Accordingly, all profit from the Indian project relating to services rendered by the taxpayer in and outside India is taxable in India by virtue of force of attraction principle in the tax treaty.

    The case is: Linklaters & Paines. Read a December 2012 report [PDF 216 KB]

  • Payment for acquiring satellite rights of films is “royalty” and subject to tax withholding: The Chennai Bench of the Income-tax Appellate Tribunal held that the payment made for acquiring satellite rights of films is a “royalty” and because the consideration was not paid for sale, distribution, or exhibition of cinematographic films, it cannot be excluded from the scope of “royalty” under Indian tax law. Therefore, the taxpayer must withhold tax, and a failure to withhold could result in an expense disallowance under section 40(a)(ia) of the Income-tax Act.

    The case is: Shri Balaji Communications. Read a December 2012 report [PDF 201 KB]

  • Tax highlights for 2012: This report provides summaries of key direct tax and indirect tax-related developments of 2012.

    Read the December 2012 report [PDF 430 KB]


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