TaxandTrade

Dominance of DPS Article over Sec 5(2)(a) of the Domestic Law – British Gas reiterated . The AAR recently reiterated the principles of an earlier ruling in British Gas Ltd [AAR/725/2006] on taxability of salaries received in India by Non-Resident Indians.   In [1] Hewlett Packard [AAR 1217 of 2011, Jan 2018], the issue before the Authority was whether salary paid in India to Indian employees deputed abroad for services to a foreign company, was chargeable to tax in India; and whether in the year of their return to India, the Indian employer could grant credit of taxes paid abroad in computing the withholding tax u/s 192 of the Income Tax Act. The facts of the case briefly are that the employees of the Indian company were deputed to group companies in USA / Germany and over time they acquired status as Tax Residents of US / Germany owing to their presence in the said countries.   The em...

Budget 2018 – Transposing BEPS in the domestic law Budget 2018 reflects India’s aggressive efforts to plug leakage of tax on income that has its source in India. By transposing the yet recommendatory BEPS Action 1 [1] and 7 [2] and aligning the definition of ‘business connection’ to fall in line with Article 12 [3] of the MLI, the Budget proposes to significantly broaden the  all-important concept of ‘Business Connection’.   As one of the barometers to determine taxability in India, the enlargement will bring to tax substantial income which hitherto was supposedly untaxed in India.    The current Explanation 2 to Sec 9(1)(i) dealing with ‘business connection’ ( the domestic law equivalent of Dependent Agency PE in DTAA)     has been recast in two significant ways:   Firstly , the new Explanation 2 to Sec 9(1)(i) does away with the requirement that the Agent shoul...