• Service: Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 12/17/2013

India - Tax treatment of export commissions, derivative transaction losses 

December 17: The KPMG member firm in India prepared reports on the following developments (read the December 2013 reports by clicking on the hyperlinks provided below):
  • Export commission paid to non-resident director is taxable under both income tax law and India-Switzerland income tax treaty - The Cochin Bench of the Income-tax Appellate Tribunal held that an export commission paid to a non-resident director (i.e., a commission agent) for securing export orders, providing for the supply of software, etc., constitutes “technical services” under provisions of the Income-tax Act, 1961 because these services require the commission agent’s vast technical knowledge and experience. The payments are also taxable as independent personal services under the India-Switzerland income tax treaty.

    The case is: Device Driven (India) Pvt. Ltd. Read a December 2013 report [PDF 332 KB]

  • Loss on derivative transactions incurred by FII is capital loss, not business loss - The Mumbai Bench of the Income-tax Appellate Tribunal held that the loss from derivative transactions incurred by a foreign institutional investor (FII) is not a business loss, but is a capital loss.

    The case is: Platinum Asia Fund and Platinum International Brand Fund. Read a December 2013 report [PDF 498 KB]

  • Non-compete fee is payment to strengthen acquired intangibles and, therefore, eligible for depreciation - The Madras High Court held that non-compete fees, paid on acquisition of a division along with intellectual property rights (IPRs) through a composite agreement, are to be treated as payments to strengthen the taxpayer's rights with respect to the IPRs, and could be eligible for depreciation under the Income-tax Act, 1961.

    The case is: Pentasoft Technologies Ltd. Read a December 2013 report [PDF 437 KB]

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