Details

Service: Tax, International Corporate Tax, International Executive Services, Global Compliance Management Services
Type: Regulatory update
Date: 2/8/2012

India - Support services under UK treaty, industrial park tax holiday, and treatment of payments to flat owners by developer

February 8: The KPMG member firm in India has prepared February 2012 reports of the following developments (to read the reports, click on the topics below):

Payment for general business support services are “fees for technical services” under India-United Kingdom income tax treaty: India’s Authority for Advance Rulings concluded that payments made to a foreign company for “general business support services” are “fees for technical services” under provisions of the India-United Kingdome income tax treaty. The services included special knowledge and use of expertise on the part of a foreign company; thus, these services were to be treated as “consultancy services” under the tax treaty. Further, the AAR noted that in providing general business support services, a foreign company works closely with the employees of the taxpayer and supports or advises them. As such, these services made available technical knowledge, skills, etc., to the taxpayer pursuant to provisions of Article 13(4)(c) of the tax treaty.

The case is: Shell India Markets Pvt. Ltd

Eligibility of industrial parks for tax holiday under a 2002 incentive regime: The Delhi High Court held that industrial parks that were operational and that applied for registration under the industrial parks incentive regime after 31 March 2006 were not eligible for the tax holiday as available under the Industrial Park Scheme, 2002.

The case is: Regency Soraj Infrastructures

Cash payment to individual member of a housing society from the developer under a re-development arrangement is treated as a capital receipt and hence non-taxable: The Mumbai Bench of the Income Tax Appellate Tribunal held that cash compensation received by a member of a housing society under a re-development plan from the developer is to be treated as a “capital receipt” and hence is not taxable as “revenue receipt” in the hands of the individual member. The payment, however, would reduce the cost of acquisition of the individual’s new flat for purposes of computing capital gains for the flat.

The case is: Kushal K Bangia

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© 2012 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.