India: Tax treatment of compounding fee | KPMG | GLOBAL

India: Tax treatment of compounding fee, non-compete fee, foreign taxes

India: Tax treatment of compounding fee

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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  • Compounding fee allowed as business deduction: The Hyderabad Bench of the Income-tax Appellate Tribunal held that a compounding fee paid to the municipal corporation for regularising a building plan is allowable as a deduction under section 37 of the Income-tax Act, 1961, since the project was completed and the deviations were within the limits for which the municipal corporation had approved the project. The case is: Keerthi Estates (P) Ltd. Read a September 2017 report [PDF 330 KB]
  • Non-compete fee not taxable: The Delhi High Court held that a non-compete fee received by the taxpayer was not taxable because it was in the nature of capital receipt and not an attempt to avoid a payment of tax. The case is: Tara Sinha. Read a September 2017 report [PDF 374 KB]
  • Foreign taxes and Medicare not taxable salary in India: The Bangalore Bench of the Income-tax Appellate Tribunal held that foreign taxes and Medicare, while offering overseas salary to tax in India, would not constitute taxable salary in India. The case is: Shri Sunil Shinde. Read a September 2017 report [PDF 345 KB]
  • Tax withheld at source not applicable without expenditure claim: The Mumbai Bench of the Income-tax Appellate Tribunal in a case when the taxpayer created a provision for lease rent and did not withhold tax at the source held that the tax withholding provisions are not applicable when there is no claim of expenditure made by the taxpayer and the taxpayer made disallowance under section 40(a)(ia) of the Income-tax Act, 1961 on its own. The case is: Destimoney Enterprises Limited. Read a September 2017 report [PDF 331 KB]
  • Settlement of provident fund / pension claims for Japanese expatriates: A circular provides clarification on the payment of provident fund / pension accumulations to Japanese expatriate workers. Instructions have been given to field offices of the Employees’ Provident Fund Organisation to process provident fund / pension withdrawals for those Japanese expatriates who left India before 1 October 2016. Read a September 2017 report [PDF 309 KB]

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