India signs OECD pact to plug tax treaty loopholes

New Delhi, June 8, 2017:

India has signed a ground-breaking multilateral BEPS convention that will close loopholes in thousands of tax treaties worldwide. The multilateral instrument was signed by Finance Minister Arun Jaitley at the OECD headquarters in Paris on Wednesday.

The OECD multilateral convention aims to crack down on tax evasion around the world, be it companies or investors, anybody trying to create a structure primarily to avoid or evade taxes.

The convention will modify India’s treaties to curb revenue loss through treaty abuse and BEPS (Base Erosion and Profit Shifting) strategies by ensuring that profits are taxed where substantive economic activities generating the profits are carried out.

It will swiftly implement a series of tax treaty measures to update the existing network of bilateral treaties and reduce opportunities for tax avoidance by multinational enterprises.

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SABIC Innovative Plastics India Pvt Ltd. v. ACIT|Transfer pricing adjustments for intra-group services

5 April 2017

The Ahmedabad Bench of Income-tax Appellate Tribunal deleted a transfer pricing adjustment made by the Transfer Pricing Officer (as subsequently upheld by the Dispute Resolution Panel) concerning a payment for intra-group services made to a related party of the taxpayer. The tribunal rejected the Transfer Pricing Officer’s “nil” (zero) arm’s length price on management services under the comparable uncontrolled price method.

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DDIT v. Nipro Asia Pte Ltd. |Profits attributed to permanent establishment| transfer pricing study rejected

28 February 2017

The Delhi Bench of the Income-tax Appellate Tribunal held that the Assessing Officer correctly sought to apply Rule 10 of the Income-tax Rules, 1962 for purposes of determining the profits attributable to a branch in respect of the marketing activities related to direct sales made by the head office, absent a “correct” transfer pricing study report. The tribunal found 30% of the profits were attributable to the branch for its marketing activities in India.

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Pr.CIT v. Mitsui Prime Advanced Composites India Pvt. Ltd. |Penalty assessment for related-party transactions deleted

14 March 2017

The Delhi High Court agreed with the tribunal’s decision, to remove a penalty imposed on the taxpayer for an alleged concealment of income with respect to certain related-party transactions even though the taxpayer accepted the transfer pricing adjustment. The High Court held that because the taxpayer had entered a new line of business (manufacturing), the taxpayer’s failure to disclose certain benefits and advantages from related-party services could not have triggered the automatic presumptive application of the penalty.

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Hospira Healthcare India Private Limited v. DCIT|Related-party relationship upheld, sales constituted 20% of total sales

15 March 2017

The Chennai Bench of the Income-tax Appellate Tribunal held that under a provision of India’s tax law, “influence” implies dominant influence when “a person who purchased more than 1/5th of the total sales of the taxpayer would have a distinctly dominant influence on the pricing and can exercise a de facto control.” The tribunal, thus, concluded that sales to two customers constituting more than 20% of the taxpayer’s total sales constituted “dominant influence.” The related-party relationship was upheld.

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India-Korea DTAA: Advance pricing agreement with rollback option from Apr 1

The revised treaty with Korea provides for taxpayers to file for bilateral advance pricing agreement, along with rollback provision, for settling transfer pricing disputes from April 2017, the CBDT said today.

had revised the three-decade old Double Taxation Avoidance agreement (DTAA) with Korea in 2015 and the amended pact came into force from September 12, 2016.


In a statement, the today clarified that under the revised treaty beginning April 2017, applications for bilateral Advance Pricing Agreement (APA) involving international transactions with associated enterprises in Korea can be filed along with request for the rollback provision.
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HITT Holland Institute of Traffic Technology B.V. vs. DDIT (ITAT Kolkata)

Entire law on Permanent Establishment, Force of Attraction principle, taxability of software embedded in hardware as royalty, make available of technical services etc.(Feb 20, 2017)

 Under section 4 of the Act, the charge to tax is on the total income of every person. Section 5 of the Act explains the scope of total income of every person. Section 5(2) lays down the scope of total income of every person who is a non-resident. Any income received or deemed to be received in India and any income which accrues or arises in India or is deemed to have, accrued and arisen in India shall be included in his total income. Section 9 of the Act lays down as to when income shall be deemed to have accrued or arisen in India.

Section 90 of the Act provides that Central Government may enter into an agreement with the Government of any country outside India for avoidance of Double Taxation of income under the Act and under the corresponding law in force in that country. Section 90(2) provides that where such agreement exists with any country outside India, then in relation to an assessee to whom such agreement applies, the provisions of the Act, shall apply only to the extent they are more beneficial to that assessee.

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