India: Indirect transfers of assets; royalties under UK treaty

Guidance, tribunal decision in India

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

Related content

  • Draft rules on computing fair market value and reporting requirement for indirect transfers: India's Central Board of Direct Taxes (CBDT) issued draft rules prescribing how to compute the fair market value of assets of a foreign company or entity and the reporting requirements by the Indian concern. Forms for complying with these reporting requirements have also been proposed. The CBDT requested comments on the draft rules and forms by 29 May 2016. Read a May 2016 report [PDF 298 KB]
  • Payment received by UK company, under the management and administration services agreement, taxable as royalty: The Bangalore Bench of the Income-tax Appellate Tribunal held that a payment received by a UK resident from its Indian affiliate under a management and administrative services agreement was taxable as a royalty under the Income-tax Act, 1961 as well as under the India-United Kingdom income tax treaty. The tribunal noted that to qualify as a "royalty," there must be an imparting of experience and information by the taxpayer to the Indian company. In this case, the tribunal found a composite agreement for providing various services, some of which were purely business/commercial services and others that were in the nature of imparting knowledge and experience, which concern commercial or business experience. In such a situation, because the taxpayer failed to produce the relevant information that would be required to segregate part of the payment that might not fall under the definition of a royalty, the entire consideration received by the taxpayer was to be treated as royalty. The case is: TNT Express Worldwide (U.K.) Ltd. Read a May 2016 report [PDF 356 KB]

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