TaxandTrade

Among the litany of amendments in the direct tax section in the recent Finance Act, 2014, there is one piece of amendment that has perhaps not received the attention it deserves.   The amendment to Sec 2(14) of the Income Tax Act has redefined  the term 'Capital Assets' by bringing in all kinds of securities dealt with by Foreign Institutional Investors (FIIs) under the banner of 'Capital Assets'.   The implication of this is that after 1st April 2014,  securities held by FIIs  - even if they have been dealt as stock in trade - shall be considered as Capital Asset and not as Stock in Trade.  Is that one more amendment with 'malice'?  Read on to find how the differing interpretation of various Judicial Forums on FII investment left no option to the law makers but to bring about this amendment.   What are FIIs:   Currently there are more than 1450 FIIs registered with SEBI and with garguantuan funds avaiable at their disposal, the...

May 23, 2020  [2020] 116 taxmann.com 685 (Article) The Mumbai Tribunal in  Volkswagen Finance P Ltd.  v.   ITO  [2020] 115 taxmann.com 386 recently decided on the taxability of income earned by a Non Resident whose entire operations were carried on outside India. The decision was path breaking as the Tribunal did not follow the existing jurisprudence on the subject and deemed the payment made to the Non Resident u/s 9(1)( i ) based on the amorphous nature of the term 'business connection'. The case: Volkswagen Finance Private Ltd. ('VW' in short) was part of the Volkswagen group of companies engaged in manufacture and sale of automobiles. VW organized a lavish event in UAE, to launch the group's new AUDI 8L specifically for potential Indian customers. VW flew in a number of Indian customers to UAE and also roped in Celebrity Star and Oscar award winner, Jonathan Cage of US to stage an appearance in the event. It was a mega event organized outside India where Cag...

Domain Name Registration Service is ‘Royalty’ – A far fetched proposition The recent decision of the Delhi bench of Income Tax Appellate Tribunal [2018] 92 Taxmann.com 241 (Delhi-Trib) on domain name registration service, makes interesting reading. Go Daddy, a Non-Resident Entity with accreditation to the Internet Corporation for Assigned Names and Numbers (ICANN) is in the business of granting registration of domain names to Indian entities against payment of certain fee.   Along with this service, the Appellant also provides services of web hosting.   Go Daddy paid tax on Web Hosting Services treating it as Royalty Income, while it took a stand that domain registration fee is not taxable in India as it was neither in the nature of Royalty nor in the nature of Business Profits owing to absence of any business connection.   The department’s stand before the DRP and ITAT was that domain registration service was ...

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...