Global Business Tax Alert Sharp Insights

Similar documents
Global Business Tax Alert Sharp Insights

Global Business Tax Alert Sharp Insights

Tax and Transfer Pricing Alert Insight with information

Global Business Tax Alert Sharp Insights

Global Business Tax Alert Sharp Insights

Global Business Tax Alert Sharp Insights

Tax and Transfer Pricing Alert Insight with information. Marketing Intangibles A Different Approach?

Global Business Tax Alert Sharp Insights. Background/ Facts AAR s findings Conclusion Register for the India Budget 2018 webcasts Contacts

Global Employer Services Alert Harmonizing global & local perspectives

Mergers and Acquisition Alert Stay Ahead. Issue no: M&A/02/2018. In this issue:

Global Business Tax Alert Sharp Insights

Global Business Tax Alert Sharp Insights. Issue no: GBTA/10/2018. In this issue:

India Tax & Regulatory For private circulation only 31 August Global Business Tax Alert Sharp Insights

In Flipkart India (P) Ltd* case, Bangalore ITAT ruled that Flipkart s discounts are tax deductible. Global Business Tax Alert Sharp Insights

Global Business Tax Alert Sharp Insights. Issue no: GBTA/09/2018. In this issue:

Regulatory Alert Stay Ahead

Regulatory Alert Tracking change

India Tax & Regulatory For internal circulation only 25 July Global Business Tax Alert Sharp Insights

Mid-term Review of Indian Foreign Trade Policy (FTP)

Global Business Tax Alert Sharp Insights

SEBI tightens KYC norms for FPIs. Regulatory Alert Stay Ahead. In this issue: Background Key changes Our comments Do you know about Dbriefs?

Indirect Tax Alert Be in the know

ITAT Bengaluru reaffirms payment for Adwords program as royalty in case of Google India* Global Business Tax Alert Sharp Insights

Regulatory Alert Stay Ahead

Goods & Services Tax Make GST Work for you

Global Business Tax Alert Sharp Insights

Transfer Pricing in India Searching for stability in uncertain times

Regulatory Alert Stay Ahead

Tracking IFRS Hedging made simple: Part 5 Hedging using options

Pre-Budget Expectations Survey Report. February 2016

Sharing insights. News Alert 2 January, Amount paid to a non-resident net of taxes to be grossed up at the rates in force. In brief.

Mere presence of a subsidiary and virtual projection of the enterprise in India, absent other relevant factors No PE in India

EY Tax Alert Bangalore Tribunal rules on constitution of service PE for services rendered virtually as well as physically

Sharing insights. News Alert 23 May, Payment made for airborne geophysical survey services is not FTS. In brief. Facts.

Sharing insights. News Alert 22 April Use of hotel rooms for the purpose of business could result in a permanent establishment. In brief.

Sharing insights. News Alert 14 September, 2011

Sharing insights. News Alert 23 February, 2011

2 O R D E R PER SAKTIJIT DEY, J.M. Aforesaid appeal of the assessee is against assessment order dated 31 st January 2017, passed under section 143(3)

Sharing insights. News Alert 20 May, 2011

Sharing insights. News Alert 2 May, Itemised sale of assets, in substance, held to be a slump sale taxable under section 50-B. In brief.

Sharing insights. News Alert 17 May, Provisions of section 50C applicable even in respect of depreciable assets being land and/or building

Tax Insights. from India Tax & Regulatory Services. In brief. In detail. October 31, 2017

Mumbai Tribunal rules reimbursement of expenses on secondment of employees not FTS

Sharing insights. News Alert 31 May, No PE created by liaison office in absence of any violation noted by RBI. In brief. Facts.

Sharing insights. News Alert 23 August, 2012

Sharing insights. News Alert 25 April, 2011

Sharing insights. News Alert 19 April, 2011

Sharing insights. News Alert 1 February, 2012

Sharing insights Tribunal upholds important transfer pricing principles on characterisation and rewards for selling activity In brief Facts

AAR ruling on taxability of reimbursement of salary costs of seconded employees to group company not based on proper reasoning Madras High Court

The Bombay High Court s decision on Section 14A of the Income-tax Act and the binding precedent

40 per cent of the global profit to Indian PE is attributed based on the functions performed, assets deployed and risk assumed

Sharing insights. News Alert 17 February, 2011

EY Tax Alert. Executive summary. Delhi Tribunal rules on advertisement and promotion expenses involving use of trademarks as not royalty.

Use of Berry ratio as PLI upheld

Delhi Tribunal rules income of non-resident that is not attributable to PE in India shall still be taxable in India as FTS

PwC ReportingInBrief. Amendments to Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance

Background. Facts of the case. 11 April 2016

Background. Facts of the case. 16 February 2017

EY Tax Alert. Executive summary

EY Tax Alert. Executive summary

Sharing insights. News Alert 17 October, Taxability of non-compete fee as business income or capital gains. In brief. Facts.

Tribunal decides on taxability of conversion of company into an LLP

Bombay HC upholds non-taxability of deferred consideration on transfer of shares in the absence of accrual

Special Bench rules ESOP discount is deductible on vesting of options

Sharing insights. News Alert 27 July, 2012

Sharing insights. News Alert 4 March, Non-availability of indexation benefit to a non-resident does not amount to non-discrimination.

HC denies refund of SAD paid on import of coil sheets sold after corrugation as proflex roof

EY Tax Alert. Executive summary. Bangalore Tribunal rules on deductibility of employee share reward discount cross-charged by foreign parent company

Pune Tribunal upholds tax deductibility of MTM exchange fluctuation loss on forex loan borrowed to reduce interest cost and hedge export receivables

EY Tax Alert. Executive summary. Chennai Tribunal upholds salary taxation of SARs benefits received from foreign parent of employer.

Facts of the case. Background. 18 March 2016

KPMG FLASH NEWS. Background. Facts of the case. 2 March 2015 KPMG IN INDIA

EY Tax Alert. Executive summary

EY Tax Alert. Executive summary

EY Tax Alert. Executive summary. Kolkata Tribunal rules on taxability of online advertisement revenues. 18 April mber 2012

Tribunal Special Bench rules on principle of base erosion

EY Tax Alert. Executive summary

PwC ReportingInBrief. Payment of Gratuity (Amendment) Act, 2018

Sharing insights. News Alert 8 February, Trading by way of re-export of imported goods from Special Economic Zone eligible for tax holiday

Income-tax return forms for the financial year notified

Glimpses of Interim Budget February 2019

EY Tax Alert. Executive summary

Indian subsidiary of group holding company of Netherlands entity does not constitute permanent establishment in India

Taxability of Crossborder. under Service tax. September 2014

Surcharge and education cess cannot be levied on the tax deducted at source based on Section 206AA of the Act

EY Tax Alert. Executive summary

EY Tax Alert. Executive summary

EY Tax Alert. Executive summary. Delhi HC rules payment towards live telecast is not royalty. 1 December 2014

EY Tax Alert. Executive summary

The CBDT issues draft guiding principles for determination of the Place of Effective Management of a company

EY Tax Alert. Executive summary

Supreme Court rules that VAT is not leviable on transactions constituting inter-state trade and sale or purchase in course of import

Sharing insights. News Alert 13 February Revisionary powers available to CIT invalid where AO adopts either perfectly correct or a possible view

EY Tax Alert. Executive summary

Delhi ITAT upholds Indian subsidiary as PE and attributes profit for functions/risks not considered for TP analysis

Business support/marketing support activities undertaken by Indian subsidiary do not create a PE in India for the foreign company

EY Tax Alert. Delhi Tribunal rules guarantee fee income received by foreign parent from Indian subsidiary is taxable in India.

Central Government issues notification for implementation of POEM based taxation for foreign companies

Taxpayers TPO's computation Post Tribunal's rulings. No. of comparab les % 2.05% % (Excellence Data) 3

Transcription:

x India Tax & Regulatory For private circulation only 3 April 2017 p Global Business Tax Alert Sharp Insights The Bangalore Tribunal in the case of Flughafen Zurich AG vs. Deputy Director of Income-tax (International Taxation) (IT(IT)A Nos. 1525/Bang/2010, 1437,1438/Bang/2013, 244/Bang/2015), held that the payments made to foreign company towards reimbursement of salary for services provided by the seconded employees to India should be taxable as Fees for Technical Services ( FTS ) under India-Swiss Tax Treaty ( Tax Treaty ). Issue no: GBTA/27/2017 In this issue: Background Ruling of the Tribunal Conclusion Do you know about Dbriefs? Contacts

Background Flughafen Zurich AG. ( the taxpayer ), a non-resident incorporated and tax resident of Switzerland, is engaged in providing operations and management services to airports, including Bangalore International Airport Limited ( BIAL ). The taxpayer entered into an Expatriate Remuneration Reimbursement Agreement ( agreement ) for secondment of skilled personnel to BIAL. The secondees / assignees were holding high managerial positions such as CEO and CCO. In addition to the remuneration paid in local currency by BIAL, the assignees were entitled to remuneration in foreign currency from the taxpayer, which was reimbursed by BIAL. The taxpayer claimed that the seconded personnel work under the direct control and supervision of BIAL as BIAL has the right to issue directions to them, and thereby, establishing an employer-employee relationship between the secondees and BIAL. The Assessing Officer ( AO ) in three years considered the payments made to taxpayer as FTS. An appeal was filed by the taxpayer before Commissioner of Income Tax (Appeals) [ CIT(A) ] against the order of the AO. The CIT(A) confirmed the order of the AO. In one of the years, AO had considered part payment as FTS. The Dispute Resolution Panel ( DRP ) did not accept the contentions of the taxpayer and directed the AO to consider the entire payment received from BIAL under the head Reimbursement of Expenses as FTS. Aggrieved by the directions of the DRP and the order of CIT(A), the taxpayer preferred to file an appeal with the Tribunal. In the appeal to the Tribunal, the taxpayer challenged the treatment of expenses as FTS and also challenged the jurisdiction of the DRP in enhancing the total income. Ruling of the Tribunal Fees for Technical Services The Tribunal observed that there is no dispute on the fact that at the time of entering into the agreement, the secondees were under the employment of the taxpayer and accordingly, it was not an employment or recruitment by BIAL. The Tribunal also observed that there was no dispute that the secondees were holding high managerial positions and were not ordinary employees but had the expertise in the field of management. Therefore, the purpose of the assignment was to avail expertise services of the personnel. The Tribunal observed that an identical issue was considered by the co-ordinate bench of the same Tribunal in the case of Intel Corporation 1 wherein after considering the decision of the co-ordinate bench of the same Tribunal in the case of Food World Supermarkets Limited 2 it was held that the seconded employees were rendering the managerial and expertise services for which the assessee received the payment and accordingly, should be taxable as FTS. In the case of Food World Supermarkets Limited, the Tribunal relied on the decision of the Delhi High Court in the case of Centrica India Offshore Private Limited 3 and concluded that the payments made to the foreign company partook the character of FTS under explanation 2 to section 9(1)(vii) of the Income-tax Act, 1961 ( the Act ).

The Tribunal observed that it did not find material variations in the terms and conditions of the secondment agreement in the above cases as well as that of the taxpayer. The Tribunal further observed that if there is a restriction of the right to continue employment with the taxpayer, it would not determine the relationship as the employee with BIAL. The Tribunal observed that there is no significant difference between the definition of FTS under the Act and Tax Treaty. Therefore, when the payment is considered for rendering of a managerial service, it becomes irrelevant to go to the second aspect of definition i.e. provision of services by technical or other personnel. Accordingly, the Tribunal held that the reimbursement of expenses qualify as being in the nature of FTS and taxable accordingly in the hands of taxpayer. Jurisdiction of the DRP The Tribunal observed that while filing objections before the DRP against the draft assessment order, in addition to challenging the treatment of part of the expenses as FTS, the taxpayer raised a specific objection in respect of the treatment of expenses reimbursed as FTS. While adjudicating these objections, the DRP found that the entire payment received from BIAL under the head Reimbursement of Expenses should be treated as FTS instead of only the part amount identified by the AO. The Tribunal, relying on the decisions of the Apex Court 4 and Bombay High Court 5, held that even if no express power of enhancement is provided to an authority under the Act, it has inherent power to decide the issue, which was a subject matter before it, which may result in enhancement. Accordingly, the Tribunal dismissed the appeal filed by the taxpayer. 1 IT(TP)A No.1486/Bang/2013 2 174 TTJ 859 3 364 ITR 336 4 Hukumchand Mills Limited vs. CIT (63 ITR 232) 5 Ahmedabad Electricity Co. Limited vs. CIT (199 ITR 351 Conclusion The Tribunal held that the payments made by BIAL to the taxpayer for operations and management services provided, including salary costs, should be taxable as FTS. In respect of arrangement of secondment, it may be pertinent to analyse whether the payments received could be construed as being in the nature of FTS and even when the payment is on cost basis, it could be taxable in the hands of the parent entity on gross basis. Further, it also held that since the issue was a subject matter of adjudication before the DRP, the authorities have the inherent power to decide the issue even if it leads to enhancement.

Do you know about Dbriefs? Dbriefs are live webcasts that give valuable insights on important developments affecting your business. To register, visit the Dbriefs page

Contacts Ahmedabad 19 th Floor, Shapath - V SG Highway, Ahmedabad 380 015. Tel: + 91 (079) 6682 7300 Fax: + 91 (079) 6682 7400 Coimbatore Shanmugha Manram 41, Race Course, Coimbatore Tamil Nadu - 641018 Tel: + 91 (0422) 439 2801 Fax: +91 (0422) 222 3615 Kolkata Bengal Intelligent Park Building Alpha, 1st floor, Block EP and GP Sector V, Salt Lake Electronics Complex, Kolkata - 700 091. Tel : + 91 (033) 6612 1000 Fax : + 91 (033) 6612 1001 Bangalore Deloitte Centre, Anchorage II, 100/2, Richmond Road, Bangalore 560 025. Tel: +91 (080) 6627 6000 Fax: +91 (080) 6627 6010 Delhi/Gurgaon Building 10, Tower B, 7th Floor, DLF Cyber City, Gurgaon 122 002 Tel : +91 (0124) 679 2000 Fax : + 91 (0124) 679 2012 Mumbai Indiabulls Finance Centre, Tower 3, 28th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai 400013 Tel: + 91 (022) 6185 4000 Fax: + 91 (022) 6185 4101 Chennai No.52, Venkatanarayana Road, 7th Floor, ASV N Ramana Tower, T-Nagar, Chennai 600 017. Tel: +91 (044) 6688 5000 Fax: +91 (044) 6688 5050 Hyderabad 1-8-384 and 385, 3rd Floor, Gowra Grand S.P.Road, Begumpet, Secunderabad 500 003. Tel: +91 (040) 6603 2600 Fax:+91 (040) 6603 2714 Pune 106, B-Wing, 7 th Floor, ICC Trade Tower, Senapati Bapat Road, Pune 411 016. Tel: + 91 (020) 6624 4600 Fax: +91 (020) 6624 4605 Deloitte makes an impact that matters Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global ) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. This material and the information contained herein prepared by Deloitte Touche Tohmatsu India LLP (DTTI LLP) is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). This material contains information sourced from third party sites (external sites). DTTI LLP is not responsible for any loss whatsoever caused due to reliance placed on information sourced from such external sites. None of DTTI LLP, Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the Deloitte Network ) is, by means of this material, rendering professional advice or services. This information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this material. 2017 Deloitte Touche Tohmatsu India LLP. Member of Deloitte Touche Tohmatsu Limited