India: Services under tax treaties with Finland, United States

India: Services under tax treaties with Finland, US

The KPMG member firm in India has prepared reports concerning the following developments (read more at the hyperlinks provided below):


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  • Certified R&D expenditure cannot be examined: The Karnataka High Court held that when the Department of Scientific and Industrial Research (DSIR) has certified research and development (R&D) expenditures, the Assessing Officer (AO) cannot examine whether to disallow the R&D expenditure. The case is: Tejas Networks Ltd.
  • Concessional rate of central excise duty available only to manufacturers, not importers: Guidance provides the concessional rate of central excise duty is available only if no credit of central excise duty, additional duty of customs on inputs, or service tax on input services has been taken by the manufacturer of the goods (not the buyer of the goods).
  • No penalty for delayed income tax return because of withholding agent’s failure to remit the withheld tax to the government: The Bombay High Court held that the taxpayer is not liable for any penalty or interest related to a delay in uploading of their returns of income because of the failure of the withholding agent who had not deposited with the government the amount of tax withheld (or as known in India, “deducted”) at source. The case is: Zulfikar Jeewanjee Moriswala & Anr.
  • Design and drawing services not taxable as “fees for technical services” under tax treaty with Finland: The Delhi Bench of the Income-tax Appellate Tribunal held that the mere provision of technical/consultancy services comprising of review of design, construction plans, etc., is not within the scope of “fees for technical services” under the India-Finland income tax treaty, given that the service provider had not “made available” any technical knowledge, skill or experience to the taxpayer. The case is: Nokia India Private Ltd.
  • Business development and marketing-related services not “fees for included services” under tax treaty with United States: The Bangalore Bench of the Income-tax Appellate Tribunal held that business development, market services, and other support services do not make available technical knowledge, skills, and therefore, are not taxable as “fees for included service” under Article 12(4)(b) of the India-United States income tax treaty. The tribunal also found that the taxpayer’s permanent establishment (PE) in India was in respect of trading transactions only. Thus, no part of the earning from the services rendered to the associated enterprises was related to the nature of the PE activities and not taxable in India. The case is: ABB Inc.
  • Rules for valuation of undisclosed foreign assets: India’s Central Board of Direct Taxes (CBDT) issued guidance and a list of “frequently asked questions” (FAQs) concerning the valuation of undisclosed foreign assets pursuant to provisions of Black Money Act. The CBDT also offered a one-time compliance opportunity for a limited period to persons who have foreign assets that have not been disclosed for income tax purposes.

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