Apurva Goswami Vs DDIT (International Taxation) (ITAT Delhi) dated 24/05/2022
Facts in brief :
From 15CA/CB certificates filed by the assessee, the Ld. AO noted that the assessee has remitted amounts to various parties outside India without deducting tax at source. It was pointed out that the Global Business Affiliates (GBA), as per the terms and conditions of the agreement were entitled to fixed compensation and further additional commission on orders procured for the assessee. It was further stated that the nature of services as rendered by non resident agent who is carrying out business activities in other contracting state falls squarely within the scope of Article 7 of DTAA. As per Article 7 the profits of an enterprise of other State would be taxable in India if there was a PE of such enterprise in India. The explanation of the assessee was not acceptable to the ld. AO. According to him the impugned payments were made to the consultant which are covered under section 9(1)(vii) and not to the agent as claimed. The assesee was liable to deduct tax at source from fee paid for consultancy services.
Conclusion of the case :
Held that the payments made to the GBAs/ BDAs are not FTS but business profits not taxable in the hands of GBAs/BDAs in India in the absence of PE by virtue of the Article 7 of the DTAA, no tax is required to be deducted at source on such payments. In the case of GE India Technology Centre Pvt. Ltd. vs. CIT (2010-TMI-77380-SC) the Hon’ble Supreme Court held that obligation under section 195(1) to withhold tax arrives only if the payment is chargeable to tax in the hands of non-resident recipient. Therefore, merely because a person has not deducted tax at source from a remittance abroad, it cannot be inferred that the person making a remittance has committed a failure in discharging his tax withholding obligations because such obligations come into existence only when recipient has a tax liability in India. Thus, the payments made to the GBAs/ BDAs are not subject to any withholding tax, such payments being not chargeable to tax in India.
The Heads of Tax Authorities of the BRICS countries, namely the Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China and the Republic of South Africa held a virtual meeting here today under the Chairship of India.Shri Tarun Bajaj, Secretary, Revenue, Government of India, in his capacity as Head of Tax Authorities in India, presided over this meeting.
The BRICS Tax Authorities engaged in discussion on the challenges faced by BRICS tax administrations in the digital era, coupled with outbreak of COVID-19 pandemic, sharing experience and devising strategies to overcome those challenges. The broad theme of the meeting was redefining business processes of tax administration amidst challenges posed by COVID-19 and in the digital era. During the meetings, the tax authorities also exchanged opinions and views based on existing commitment to the principles of mutual respect, consolidation and continuity as stated in the XIII BRICS Summit, New Delhi Declaration issued on 9th September, 2021.
The meeting was preceded by meetings of the Tax Experts of BRICS countries on 13th & 14th September, 2021. In this meeting, the tax experts discussed potential areas of cooperation, exchanged views and the experiences. The discussion took place around relevant topics which include digitisation of tax administration, leveraging technology for tackling tax evasion, changing role of tax administration from enforcement to service, preparedness and strategies to deal with challenges of COVID-19 and evolution of tax administration to enhance voluntary compliance by taxpayers.
A communiqué was also issued at the conclusion of the Tax Heads meeting.
(Ministry of Finance Press Release dated 15th Sept 2021)
New Delhi, the 13th August, 2021/ Sravana 22, 1943 (Saka)
The following Act of Parliament received the assent of the President on the 13th August, 2021, and is hereby published for general information:—
THE TAXATION LAWS (AMENDMENT) ACT, 2021 NO. 34 OF 2021
43 of 1961.
[13th August, 2021.]
An Act further to amend the Income-tax Act, 1961 and the Finance Act, 2012.
BE it enacted by Parliament in the Seventy-second Year of the Republic of India as follows:—
CHAPTER I PRELIMINARY
1. Short title.
This Act may be called the Taxation Laws (Amendment) Act, 2021.
Income deemed to accrue or arise in India.
9.(1) The following incomes shall be deemed to accrue or arise in India :— (i)all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.
Explanation 5.—For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India:
In section 9 of the Income-tax Act, 1961, in sub-section (1), in clause (i), in Explanation 5, after the third proviso, the following provisos shall be inserted, namely:—
“Provided also that nothing contained in this Explanation shall apply to—
(i) an assessment or reassessment to be made under section 143, section 144, section 147 or section 153A or section 153C; or
(ii) an order to be passed enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154; or
(iii) an order to be passed deeming a person to be an assessee in default under sub-section (1) of section 201,
in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May , 2012:
Provided also that where—
(i) an assessment or reassessment has been made under section 143, section 144, section 147 or section 153A or section 153C; or
(ii) an order has been passed enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154; or
(iii) an order has been passed deeming a person to be an assessee in default under sub-section (1) of section 201; or
(iv) an order has been passed imposing a penalty under Chapter XXI or under section 221,
in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May, 2012 and the person in whose case such assessment or reassessment or order has been passed or made, as the case may be, fulfils the specified conditions, then, such assessment or reassessment or order, to the extent it relates to the said income, shall be deemed never to have been passed or made, as the case may be:
Provided also that where any amount becomes refundable to the person referred to in fifth proviso as a consequence of him fulfilling the specified conditions, then, such amount shall be refunded to him, but no interest under section 244A shall be paid on that amount.
Explanation.—For the purposes of fifth and sixth provisos, the specified conditions shall be as provided hereunder:—
(i) where the said person has filed any appeal before an appellate forum or any writ petition before the High Court or the Supreme Court against any order in respect of said income, he shall either withdraw or submit an undertaking to withdraw such appeal or writ petition, in such form and manner as may be prescribed;
(ii) where the said person has initiated any proceeding for arbitration, conciliation or mediation, or has given any notice thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise, he shall either withdraw or shall submit an undertaking to withdraw the claim, if any, in such proceedings or notice, in such form and manner as may be prescribed;
(iii) the said person shall furnish an undertaking, in such form and manner as may be prescribed, waiving his right, whether direct or indirect, to seek or pursue any remedy or any claim in relation to the said income which may otherwise be available to him under any law for the time being in force, in equity, under any statute or under any agreement entered into by India with any country or territory outside India, whether for protection of investment or otherwise; and
(iv) such other conditions as may be prescribed.”.
AMENDMENT TO THE FINANCE ACT, 2012
3. Amendment of section 119.
In the Finance Act, 2012, in section 119, the following provisos shall be inserted, namely:—
“Provided that this section shall cease to apply to the person who fulfils the following conditions, namely:—
(i) where such person has filed any appeal before an appellate forum or a writ petition before the High Court or the Supreme Court against any order in respect of said income, he shall, either withdraw or submit an undertaking to withdraw such appeal or writ petition, in such form and manner as may be prescribed;
(ii) where such person has initiated any proceeding for arbitration, conciliation or mediation, or has given any notice thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise, he shall either withdraw or submit an undertaking to withdraw the claim, if any, in such proceedings or notice, in such form and manner as may be prescribed;
(iii) such person shall furnish an undertaking, in such form and manner as may be prescribed, waiving his right, whether direct or indirect, to seek or pursue any remedy or any claim in relation to the said income which may otherwise be available to him under any law for the time being in force, in equity, under any statute or under any agreement entered into by India with any country or territory outside India, whether for protection of investment or otherwise; and
(iv) such other conditions as may be prescribed:
Provided further that if any amount becomes refundable under the Income-tax Act, 1961 to the person referred to in first proviso as a consequence of him fulfilling said conditions, such amount shall be refunded to him, but no interest under Section 244A of the Income-tax Act, 1961 shall be paid on that amount.”.
Highlights of Taxation Laws (Amendment) Bill 2021 (To end retro tax on Indirect transfer)
The objective of Taxation Laws (Amendment) Bill 2021 is to make the indirect transfer provision apply prospectively i.e from May 2012. Consequently, all existing and future retrospective tax demands are sought to be nullified on this matter. Taxpayers who were impacted will need to withdraw proceedings in court or arbitration forums. Any amounts collected will be paid back in full by the tax authorities (without interest).
This is a bold move that addresses the concerns of many foreign investors. It also puts to an end many of the past arbitration cases pending which have created great embarrassment for India in international circles.
Majority of the members OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting(including India)adoptedyesterday ahigh-level statement containing an outline of a consensus solution to address the tax challenges arising from the digitalisation of the economy.
The proposed solution consists of two components- Pillar One which is about reallocation of additional share of profit to the market jurisdictions and Pillar Two consisting of minimum tax and subject to tax rules.
Some significant issues including share of profit allocation and scope of subject to tax rules, remain open and need to be addressed. Further, the technical details of the proposal will be worked out in the coming months and a consensus agreement is expected by October.
The principles underlying the solution vindicates India’s stand for a greater share of profits for the markets, consideration of demand side factors in profit allocation, the need to seriously address the issue of cross border profit shifting and need for subject to tax rule to stop treaty shopping.
India is in favour of a consensus solution which is simple to implement and simple to comply. At the same time, the solution should result in allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies. India will continue to be constructively engaged for reaching a consensus based ready to implement solution with Pillar one and Pillar two as a package by October and contribute positively for the advancement of the international tax agenda.
Ministry of Finance Press Release date 02 July 2021
Law Minister Shri Ravi Shankar Prasad launches ‘itat e-dwar’, an e-filing portal of Income Tax Appellate Tribunal
Portal will enable online filing of Appeals, Applications, documents etc. by various parties
Cases of Income Tax Appellate Tribunal should be integrated in National Judicial Data Grid: Shri Ravi Shankar Prasad
Posted Date:- Jun 25, 2021
Shri Ravi Shankar Prasad, Union Minister for Law & Justice, Communications and Electronics & IT, formally launched the e-filing portal of Income Tax Appellate Tribunal (ITAT), ‘itat e-dwar’, at 04.00 pm today, the 25 June 2021 in New Delhi.
Launching the Portal, the Minister explained the power of Digital India. He said Digital India means empowering an ordinary Indian with the power of technology – To bridge the digital divide between the digital haves and the digital have nots leading to digital inclusion achieved by technology, which is low cost, home grown and developmental. Digital India means a framework for transforming India with the power of technology. He highlighted that nearly 129 crore of the Indian population are enrolled for Aadhar which is the digital identity to supplement one’s physical identity. Nearly 40 crore bank accounts have been opened for the poor and linked to Aadhar. Using the power of Digital India about Rs.16.7 lakh crore has been transferred to the account of the poor as Direct Benefit Transfer, saving Rs.1.78 lakh crores which was, otherwise, being siphoned off by middlemen. Digital India has positioned our country as a world leader in digital payments. It needs to be highlighted that Aadhar, DBT, UPI and the health scheme, Ayushman Bharat, all are ‘made in India’. Another milestone achievement of Digital India is the establishment of Common Service Centres, which were only 75,000 in number in 2014, now stand at 4lakh. CSCs provide several services that are citizen centric and the Minister suggested that the lawyers must associate themselves in tendering legal advice to the needy through Tele Law programme, through the CSCs. Nearly 9 lakh advices were given during the last 4 years though Tele Law.
The Minister detailed how during the pandemic and the lockdown that ensued the Judiciary functioned through digital means and heard more than one crore cases. He stated that data about more than 18 crore cases are available in the National Judicial Data Grid (NJDG) and he suggested that cases of ITAT should also be integrated in the NJDG. He pointed out that VC facility has been provided in more than 800 jails so that the undertrials are able to appear before the Courts without the police having to bring them physically to the courts.
He further cautioned that this initiative of ITAT must not be seen as a solitary step. Instead, it should be seen as a larger narrative of transformation that the country is undergoing through digital medium. It enables innovation and empowerment and opens new avenues for growth. He expressed hope that ‘itat e-dwar’ will be widely accepted by the lawyers and tax litigants alike.
On this occasion, a virtual function was organized at the national level which was attended by the functionaries of ITAT from all the 28 stations. The members of various Bar Associations also joined the virtual function. It was also attended by the Officers of the Income Tax Department, Chartered Accountants, Taxpayers and other legal luminaries in the field of tax, from across the country.
Justice P.P. Bhatt, President of ITAT, on this occasion, informed the gathering that the launch of e-Filing Portal ‘itat e-dwar’ will enhance the accessibility, accountability and transparency in the day to day working of the ITAT. It would not only result in economization of the use of paper, savings in costs but also rationalization of the fixation of cases leading to quicker disposal of cases. On this occasion, Justice Bhatt also announced a plan to set up paperless courts in the ITAT with a pilot project being undertaken at Delhi Benches of ITAT. It was also informed that even during the period of Pandemic, by using the tools of information and communication technology, various benches of ITAT have functioned and kept up its activity of judicial dispensation. It was revealed that inspite of the restricted functioning of Benches, the adoption of Video Conferencing has brought down the pendency of cases to about 64,500 as against 88,000 on 1st April, 2020.
The newly developed e-Filing Portal would enable the parties to file their Appeals, Miscellaneous Applications, documents, paper books, etc., electronically.
On this occasion, Shri Anoop Kumar Mendiratta, Union Law Secretary also addressed and congratulated the ITAT for the initiative taken by it developing the new e-Filing Portal. Shri G.S. Pannu, Vice President (Delhi Zone) and Chairman, Computerization Committee, ITAT explained that with the combination of digital court room, virtual hearings and Mobile Application providing Judicial Information, paperless courts will soon be a reality in ITAT.
Ministry of Law & Justice Press release 25 June 2021
The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi has approved anAgreement between the Republic of India and Saint Vincent and The Grenadines for the Exchange of Information and Assistance in Collection with respect to Taxes.
Details of the Agreement:
i) This is a new Agreement between the Republic of India and Saint Vincent and The Grenadines. There was no such agreement in past between the two countries.
ii) Agreement mainly proposes to facilitate exchange of information between the two countries and to provide assistance to each other in collection of tax claims.
iii) Agreement also contains tax examination abroad provisions which provide that a country may allow the representatives of the other country to enter its territory (to the extent permitted under its domestic laws) to interview individuals and examine records for tax purposes.
Agreement between the Republic of India and Saint Vincent and The Grenadines will help in facilitating the exchange of information between the two countries including sharing of information held by the banks and other financial institutions encompassing the information regarding the legal and beneficial ownership. It will also facilitate the assistance in collection of the tax claims between the two countries. Thus, it will strengthen India’s commitment to fight offshore tax evasion and tax avoidance practices leading to generation of unaccounted black money.
There was no such agreement with Saint Vincent and The Grenadines in the past and India was negotiating this agreement since a long time. Finally, Saint Vincent and The Grenadines agreed to conclude this agreement with India which will promote tax cooperation between the two countries through exchange of information and assistance in collection of outstanding tax claims between the two countries.