India recently notified a Protocol that amends the India-China tax treaty and incorporates some of the OECD recommendations put forth as part of its BEPS project. The changes would apply from the 2020 financial year. The Protocol brings about serious changes to the tax treaty in several areas, including limiting treaty abuse, tackling artificial avoidance…

Earlier this month, the author of this blog was at the IFA UK branch meeting where experts assembled to discuss certain interpretational aspects concerning the BEPS Multilateral Instrument (BEPS MLI) from a UK perspective. Most of these issues would have relevance in other jurisdictions too (including India) as more and more countries ratify the BEPS…

I wrote in my last blog that despite its impact, corporate tax avoidance is one of the lesser debated issues in India. This is what I wrote: “Multinational tax avoidance has almost never made it to the front pages of popular Indian newspapers and has never been discussed on primetime TV news debates. That corporate…

According to an oft-cited research by the UN University World Institute for Development Economics Research, India loses over 40 billion US dollars in revenue, annually, to corporate tax avoidance. Obviously, for a country like India, the money could have been used to reduce poverty-related deaths and to provide basic social care to the poor and…

Transfer pricing cases in India are estimated to account for more than half of the world’s transfer pricing disputes. Prolonged transfer pricing litigation due to overburdened courts and tribunals is a sad reality for many companies doing business in India. The consequence is that a cloud of uncertainty constantly hangs over cross-border, intra-group transactions routinely…

Almost every foreign client I have advised has at some stage told me how complex the Indian Income Tax Act is. And those who follow Indian tax jurisprudence closely know that judicial decisions, in many cases, are doubly complex. Recently, India’s Income Tax Appellate Tribunal (ITAT), New Delhi was asked to decide if the tax…

Can an Indian subsidiary be said to be the permanent establishment of its overseas parent on the ground that it is a virtual projection of the latter even if the tests explicitly stipulated in the permanent establishment Article of a tax treaty are not met? This was one of the main questions that recently came…

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…