India: LOB clause under Singapore treaty; determining taxable “presumptive income”

India: LOB clause under Singapore treaty

The KPMG member firm in India prepared reports about the following developments (read more at the hyperlinks provided below).

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  • Limitation of benefit clause: The Rajkot Bench of the Income-tax Appellate Tribunal held that the benefit of the India-Singapore income tax treaty is not to be denied to a taxpayer by applying provisions of the limitation of benefit (LOB) clause because the subject income was already subject to tax on an accrual basis in Singapore. The tribunal noted that the LOB provisions can only be triggered when two conditions are satisfied: (1) there is low or no taxability in the source jurisdiction; and (2) there is taxation on a “receipt basis” in the residence jurisdiction. In this case, the taxpayer had remitted its freight income to a UK account, but the tribunal allowed the taxpayer the benefit of the tax treaty provisions. The case is: Alabra Shipping Pte Ltd, Singapore / GAC Shipping India Pvt Ltd. Read an October 2015 report [PDF 444 KB]
  • Service tax collected: The Delhi High Court held that the amount of service tax collected in relation to services rendered in connection with the business of exploration of mineral oils is not included in gross receipt for purposes of computing “presumptive income” under section 44BB of the Income-tax Act, 1961. The service tax collected by the taxpayer did not have any element of income and therefore could not form part of gross receipt, the court concluded. The case is: Mitchell Drilling International Pvt Ltd. Read an October 2015 report [PDF 346 KB]

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