On July 13, 2018, India’s Central Board of Direct Taxes (CBDT) issued for stakeholders’ comments a consultation document on framing of tax rules in respect of the concept of “significant economic presence” – a recent addition to the Indian Income Tax jurisprudence. Readers will recollect that India’s 2018 Budget proposed to amend the definition of…

The importance of the permanent establishment (PE) principle in tax treaties cannot be undermined. Whether or not a source country has the right to tax business profits of a foreign company would depend wholly on the existence or non-existence of a PE of that company in the source country. Work undertaken by the OECD in…

On February 1, 2018, Indian Finance Minister presented the country’s latest Budget, which contains an international tax proposal that may not send a positive message to foreign companies doing business with India. The Budget proposes to amend the definition of “business connection” stipulated in Explanation 2 to section 9(1)(i) of the Income Tax (IT) Act…

Much has been said and written globally about Google’s tax affairs. The way the company carries on its business operations and how much tax it pays on income generated from such operations has been a subject of recent, heated debate in both France and the UK. In India too, international tax experts are discussing an…

India’s Income Tax Appellate Tribunal, Bangalore on September 28, 2017, handed down a decision in which it noted that the profits of a foreign company based in Saudi Arabia cannot be taxed in India under the India-Saudi Arabia tax treaty because the company did not have a service permanent establishment (PE) in India. Under Article…

“The judge who always likes the results he reaches is a bad judge,” Justice Antonin Scalia had famously said. A recent ruling delivered by the Bengaluru Bench of the Indian Income Tax Tribunal in ABB FZ-LLC vs. Deputy Commissioner of Income Tax (pronounced on June 21, 2017) is a case in point. In what was a…

On June 7, 2017, India joined more than 65 countries in signing the OECD’s Multilateral Instrument to implement tax treaty-related base erosion and profit shifting (BEPS) recommendations. The Instrument – developed under Action 15 of the BEPS project – seeks to transpose BEPS recommendations into over a thousand tax treaties in a “synchronized and efficient…

Consider this. Formula One World Championship Limited UK (Formula One) entered into a Race Promotion Contract (RPC) with Jaypee Sports International Limited (Jaypee), an Indian entity, under which Jaypee was granted the right to host, stage, and promote a motor racing event in India. Buddh International Racing Circuit located in the Indian state of Uttar…

Foreign enterprises for the purpose of Indian Income Tax (IT) Act are enterprises that are incorporated outside India or that do not have their place of effective management in India (as per new section 6 of IT Act, effective from April 2017). Section 5(2) read with section 4 of the IT Act provides that the…

On February 1, 2017, India’s Finance Minister, Arun Jaitley, presented the country’s 2017-18 Budget, which contains several tax proposals in the area of international tax law, including the introduction of a new provision to provide for transfer pricing secondary adjustments and new thin capitalization rules. The Budget also contains much-needed clarity on the tax treatment…

India has entered into more than 100 double tax avoidance agreements with foreign nations. Almost all these tax treaties contain an article on Mutual Agreement Procedure (MAP) setting out how India and its treaty partners would resolve, at the instance of the taxpayer, disputes that lead to “taxation not in accordance with the treaty.” International…

In a decision that offers the much-needed certainty in the tax treatment of income arising from the cross-border transfer of rights in intangibles used by Indian subsidiaries of multinational corporations, India’s Delhi High Court recently ruled that income arising from the transfer of foreign-owned intangible assets between two non-resident companies cannot be subject to Indian…

On May 10, 2016, the Indian Finance Ministry announced that a new protocol has been finalized to amend certain provisions of the Indo-Mauritius double taxation avoidance agreement. According to a press release issued by the Finance Ministry, the protocol is aimed at tackling the dual problem of treaty shopping and round tripping of funds, besides…

On April 12, 2016, India’s High Court at Madras delivered a landmark ruling in favor of an anti-avoidance provision (section 94A) introduced in the Indian Income Act, in 2011, to enable the Government to notify for tax purposes foreign tax jurisdictions that do not share tax and other financial information with the tax authority. From…