India: Software-related royalty; indirect transfers reporting; foreign tax credit guidance

India: Software-related royalty; indirect transfers

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

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  • Income from sale of software not royalty under India-Netherlands income tax treaty: The Mumbai Bench of the Income-tax Appellate Tribunal held that income from the sale of software is not a royalty within the meaning of Article 12(4) of India-Netherlands income tax treaty because the taxpayer did not allow the end-user to use a process under the software. The case is: Baan Global B V. Read a July 2016 report [PDF 280 KB] 
  • CBDT’s central action plan for FY 2016-17: India’s Central Board of Direct Taxes issued the “central action plan” and targets for the tax department for the financial year 2016-17. Read a June 2016 report [PDF 382 KB] 
  • Fair market value and reporting requirements in relation to indirect transfers: The Central Board of Direct Taxes issued draft rules to prescribe the manner of computation of the fair market value of assets of a foreign company and the reporting requirements by the Indian concern. Draft forms for reporting requirements have also been provided. Read a June 2016 report [PDF 282 KB] 
  • Foreign tax credit rules: The Central Board of Direct Taxes issued new rules with respect to the allowance of a foreign tax credit. The new rules have an effective date of 1 April 2017. Read a June 2016 report [PDF 189 KB] 
  • Stamp duty payment allowed as revenue expenditure: The Gujarat High Court held that the amount of stamp duty is allowed as revenue expenditure because the stamp duty paid by the taxpayer during the year was a compulsory statutory levy; would not restrict the profits of the future years; and was an ordinarily revenue expenditure incurred wholly and exclusively for the purpose of the taxpayer’s business. Accordingly, the stamp duty must be allowed in its entirety in the year in which it is incurred and was not to be spread over a number of years. The case is: Prithvi Associates. Read a June 2016 report [PDF 328 KB] 

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