India: Income related to seconded employees | KPMG | GLOBAL

India: Income related to seconded employees; withholding tax certificates

India: Income related to seconded employees

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


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  • Payment to Hong Kong company for services of seconded employees taxable as “fees for technical services”: The Bangalore Bench of the Income-tax Appellate Tribunal held that payment made to a foreign company for the services of “deputed personnel” under the secondment agreement is taxable as fees for technical services under the Income-tax Act, 1961. The case is: Food World Supermarkets Ltd.
  • Validation of tax returns electronically: Taxpayers not required to use a digital signature certificate for uploading their India tax returns are eligible for “e-verifying” their returns. The Central Board of Direct Taxes issued an order permitting an e-verification.
  • Treaty’s LOB clause not applicable when taxpayer has bona fide business activities in UAE: The Rajkot Bench of the Income-tax Appellate Tribunal held that the India-UAE income tax treaty benefits cannot be denied a foreign shipping company that has bona fide business activities in the UAE by applying the treaty’s limitation of benefit (LOB) provisions. The tribunal found that the LOB provisions are applicable only when the main purpose (or one of the main purposes) of the creation of an entity was to obtain benefits of the tax treaty that otherwise would not be available. The case is: MUR Shipping DMC Co, UAE.
  • Taxpayer is entitled to withholding credit of sister concern: The Delhi High Court held that the taxpayer was entitled to a credit of a “sister concern” for tax withheld (deducted) at source. A vendor made an error listed the taxpayer’s account number in the withholding certificate (rather than the number of the sister concern). Also, the sister concern did not claim use of the credit. Accordingly, the tax authority could not deny the taxpayer’s claim for the credit on a mere technical ground that the corresponding income was not that of the taxpayer. The case is: Relcom.
  • Taxation of income, rupee-denominated bonds issued offshore: The Reserve Bank of India issued guidance clarifying the tax treatment of income related to rupee-denominated bonds issued by Indian companies outside India.

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