India: Tax treatment of subsidiary’s losses; foreign exchange gains

India: Tax treatment of subsidiary’s losses

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

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  • “Subvention” receipt from parent company not taxable as revenue receipt: The Supreme Court of India held that a “subvention” received from the parent company to recoup losses of a subsidiary is not taxable as a revenue receipt because it is a voluntary payments made by the parent company to its loss-making Indian company, and the payment is made to protect the capital investment. The case is: Siemens Public Communication Networks Ltd. Read a December 2016 report [PDF 448 KB] 
  • Scope of “fees for technical services” under treaty with Switzerland: The Ahmedabad Bench of the Income-tax Appellate Tribunal considered the scope of “fees for technical services” under a Protocol to the India-Switzerland income tax treaty. In this proceeding, the tribunal held that payments made to a Swiss-based company for technical and consultancy service constituted “fees for technical services” under the income tax treaty. The case is: Torrent Pharmaceuticals Ltd. Read a December 2016 report [PDF 446 KB]
  • Company Act rules relating to compromises, arrangements, amalgamations and capital reduction: The Ministry of Corporate Affairs issued guidance relating to the procedure for compromises, arrangements, and amalgamations under provisions of the Companies Act 2013. Read a December 2016 report [PDF 358 KB]
  • Foreign exchange gains realised as capital receipt: The Calcutta High Court held that the amount of foreign exchange gains realised had the characteristics of a capital receipt being return, when arising out of blocked funds. The case is: SDB Infrastructure Private Limited. Read a December 2016 report [PDF 324]
  • Capital gains, on partnership conversion to company: The Bombay High Court held that capital gains were not “chargeable” at the time of a partnership’s conversion into a private limited company. The case is: Umicore Finance. Read a December 2016 report [PDF 335 KB]
  • Formula one championship circuit constitutes PE: The Delhi High Court looked to the taxpayer’s physical presence in geographical area, to find that the taxpayer carried on business in India for the duration of a formula one race (in this case, two weeks before the race and one week after the race). The case is: Formula One World Championship Ltd. Read a December 2016 report [PDF 332 KB]
  • Procedure for furnishing and verification of Form 26A/27BA: The Central Board of Direct Taxes issued guidance on the procedure for electronic filing of Form 26A/27BA for short deduction/collection and non-deduction/collection of tax withheld at source. Read a December 2016 report [PDF 282 KB]

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