India: Subsidiary not PE of U.S. company; foreign currency-related losses

India: Subsidiary not PE of U.S. company

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

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  • Indian subsidiary of U.S. company held not a permanent establishment (PE): The Delhi High Court, in deciding whether an Indian subsidiary of a U.S. company represented a PE in India, held that Indian subsidiary did not satisfy any of the tests under PE provisions of the India-United States income tax treaty. Accordingly, while the India entity was a subsidiary of a foreign company, it was not a PE of that foreign company in India. The case is: Adobe Systems Incorporated. Read a June 2016 report [PDF 345 KB]
  • No withholding on reasonable per diem allowances paid to employees for overseas trips: The Karnataka High Court held that a reasonable per diem allowance paid by an employer to its employees for overseas trips would not be subject to tax withholding (deduction) at source by the employer. The case is: Symphony Marketing Solutions India Private Limited. Read a June 2016 report [PDF 380 KB] 
  • Home loan interest double deduction: The Bangalore Bench of the Income-tax Appellate Tribunal held that interest paid on a home loan would not be eligible for deduction as the cost of acquisition for purposes of computing capital gains. The case is: Captain B L Lingaraju. Read a June 2016 report [PDF 343 KB]
  • Foreign exchange fluctuation loss on outstanding foreign currency loans: The Pune Bench of the Income-tax Appellate Tribunal held that loss recognised with respect to foreign exchange fluctuation is an accrued and subsisting liability—and not merely a contingent or a hypothetical liability. Further this loss has no nexus or relation to the acquisition of the assets and is to be allowed as a deduction. The case is: Cooper Corporation Pvt. Ltd. Read a June 2016 report [PDF 337 KB]

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