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Details

  • Service: Tax, International Corporate Tax, Global Indirect Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 10/8/2012

India - Treatment of fees for online auctions, R&D expenditures 

October 8: The KPMG member firm in India has prepared reports on the following developments (read the October 2012 reports by clicking on the hyperlinks provided below):
  • Taxation of fees paid to a foreign company for operating an India-specific website providing an online auction: The Mumbai Bench of the Income-tax Appellate Tribunal held that the user fee paid to a foreign company for operating an India-specific website providing an online auction is not to be treated as “fees for technical services” under the India-Switzerland income tax treaty. The tribunal also found: (1) that the Indian group entities rendering marketing support services were “dependent agents” because they were providing the services exclusively to the taxpayer; (2) that, however, such dependent agents could not be treated as permanent establishments under the income tax treaty because they did not perform any of the functions required of a dependent agent permanent establishment under the tax treaty; and (3) that the Indian group entities could not be treated as having a “place of management” in India because they were not making managerial decisions but were simply providing marketing services to the taxpayer and that all the business decisions and deals were settled through the taxpayer's websites.

    The case is: eBay International AG. Read an October 2012 report [PDF 211 KB]


  • Tax authorities cannot challenge R&D expenditure certified by Department of Scientific and Industrial Research: The Hyderabad Bench of Income-tax Appellate Tribunal held that once the Department of Scientific and Industrial Research (DSIR), of the Ministry of Science and Technology, has certified the quantum of an eligible R&D expenditure for purposes of the weighted deduction under section 35(2AB) of the Income-tax Act, 1961, the income tax authorities cannot also decide the same issue.

    The case is: Electronics Corporation of India Ltd. Read an October 2012 report [PDF 192 KB]


  • Decisions concerning the section 14A disallowance of expenses related to exempt income: Section 14A of the Income-tax Act, 1961, and Rule 8D of the Income-tax Rules, 1962,—concerning the disallowance of an expenditure related to a taxpayer’s exempt income—were addressed in decisions of Kolkata Bench of the Income-tax Appellate Tribunal and the Delhi High Court: (1) the Kolkata tribunal held that the allocation of expenditure will be only those that are not directly connected to exempt income or taxable income; and (2) the Delhi High Court held that mere prejudice to the tax authorities or a mere erroneous view cannot be revised under section 263, but that an element of “unsustainability” in the order of the Assessing Officer must be present to invoke the authority of the Commissioner of Income- tax.

    The cases are: Champion Commercial Co. Ltd. and DLF Ltd. Read an October 2012 report [PDF 192 KB]


  • Summary of recent tax and regulations developments: KPMG in India’s “Tax Konnect - October 2012” provides summaries of recent tax and regulatory developments.

    Read an October 2012 report [PDF 690 KB]


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