Aniket Kulkarni - Chartered Accountant’s Post

Tax credit should be given to taxes paid in Japan, even though the AO is of the view that taxes ought not to have been paid in Japan: ITAT Mumbai Amarchand Mangaldas & Suresh A Shroff & Co. Vs ACIT (ITAT Mumbai) Appeal Number : ITA No. 852/M/2024 Facts: 1. The AO, on perusal of the return of the income, noticed that the assessee has claimed relief u/s 90 of the Income Tax Act for the income received for services rendered in Japan. Since, the receipt was in the nature of independent personal services, it is not taxable in Japan, the tax was not required to be withheld there. Thus, AO’s view is that the credit of such withholding tax is not allowable to the assessee in India. 2. The assessee maintained that, the legal services provided by the assessee would squarely fall within the ambit of ‘consultancy services in view of the decision of the Hon’ble Supreme Court in the case of GVK Industries Lid. vs. ITO. So the credit of taxes paid in Japan should be allowed. ITAT Mumbai held as below: 1. Article 14 of the India-Japan DTAA was applicable only to individuals and thus not applicable to the Appellant, which is a partnership firm. 2. The fees earned by the Appellant firm in Japan was taxable as fees for technical services under Article 12 and that tax credit ought to have been granted to the Appellant firm for the taxes withheld in Japan. 3. When the source jurisdiction has taken a reasonable and bonafide view, which is not manifestly erroneous, that taxes should be withheld at source, foreign tax credit should be provided by the resident jurisdiction even though the legal position in the residence jurisdiction may not be the same. CA Mrattunjay Varshney

Tax credit should be given to taxes paid in Japan, even though the AO is of the view that taxes ought not to have been paid in Japan: ITAT Mumbai Amarchand Mangaldas & Suresh A Shroff & Co. Vs ACIT (ITAT Mumbai) Appeal Number : ITA No. 852/M/2024 Facts: 1. The AO, on perusal of the return of the income, noticed that the assessee has claimed relief u/s 90 of the Income Tax Act for the income received for services rendered in Japan. Since, the receipt was in the nature of independent personal services, it is not taxable in Japan, the tax was not required to be withheld there. Thus, AO’s view is that the credit of such withholding tax is not allowable to the assessee in India. 2. The assessee maintained that, the legal services provided by the assessee would squarely fall within the ambit of ‘consultancy services in view of the decision of the Hon’ble Supreme Court in the case of GVK Industries Lid. vs. ITO. So the credit of taxes paid in Japan should be allowed. ITAT Mumbai held as below: 1. Article 14 of the India-Japan DTAA was applicable only to individuals and thus not applicable to the Appellant, which is a partnership firm. 2. The fees earned by the Appellant firm in Japan was taxable as fees for technical services under Article 12 and that tax credit ought to have been granted to the Appellant firm for the taxes withheld in Japan. 3. When the source jurisdiction has taken a reasonable and bonafide view, which is not manifestly erroneous, that taxes should be withheld at source, foreign tax credit should be provided by the resident jurisdiction even though the legal position in the residence jurisdiction may not be the same. CA Mrattunjay Varshney

“Maybe taxed” terminology used in DTAA: 1. There are instances under the Double Taxation Avoidance Agreements (DTAA)s signed with various countries, where the terminology used is ‘shall be taxed’. In such cases there cannot be any doubt as to the position that the income has to be taxed in that state only. 2. But what happens in case the term used is ‘may be taxed’? The questions that arise are whether this does not give absolute power to that State to tax such incomes or whether it intends to give equal power to both the States to tax the same income or it snatches away the power to tax from one State to another? 3. The Central Government had issued a notification 91, dated 28-08-2008, clarifying the expression “may be taxed” as when the term ‘may be taxed’ is used in a DTAA, such income shall be included in total income chargeable to tax in India and relief shall be granted following the method for avoidance of double taxation. It provides that the tax credit shall be allowed for the taxes paid in foreign countries 4. In Essar Oil v. ACIT (28 ITR (Trib.) 609 (Mum.) 2014),  Indo-Oman treaty was in consideration, wherein the Tribunal, while considering the meaning of “may be taxed” in light of 2008 Notification and section 90 of the Income Tax Act, held that the phrase “may be taxed” gives non-exclusive taxing right which enables both the States to have the option to exercise the right with or without limitations. In this situation, the credit of taxes is given under the treaty. 5. It is also clear that the said notification has been introduced in order to remove any ambiguity arising in drafting of the treaty, out of the use of the term ‘may be’. With this for a resident of India, the situation is very clear, if an income which ‘may be’ taxed in other State, India has all the right to tax the same in the assessee’s hand, however credit of taxes paid in that other State has to be given in India in order to eliminate double taxation. TaxByte by CA Aniket Kulkarni

India tax space is seeing an interesting debate on SAAR v. GAAR provisions currently. The matter has reached the Apex Court of India now and a hearing is scheduled on July 15, 2024. I have tried to summarise with quick pointers so that we can stay up to date on this matter. 1. The case involved a taxpayer (Ayodhya Rami Reddy Alla) who used the bonus stripping scheme to create artificial losses and offset taxable gains, thereby reducing their tax liability. The tax authorities challenged this as an impermissible avoidance arrangement under the General Anti-Avoidance Rules (GAAR). 2. The taxpayer argued that the transactions fell under the Specific Anti-Avoidance Rules (SAAR), specifically Section 94(8) of Indian domestic tax law, and thus GAAR should not apply. They contended that the transactions involved shares, not units of a mutual fund, as mentioned in Section 94(8). 3. Tax Authorities alleged the transactions were a deliberate attempt to evade taxes, lacking commercial substance. They argued that the issuance of bonus shares was artificial and aimed at tax avoidance. 4. The Telangana High Court ruled in favor of the tax authorities, stating that GAAR has an overriding effect over SAAR due to a non-obstante clause. The court rejected the taxpayer's argument that Section 94(8) applied, as the issuance of bonus shares was an artificial arrangement without commercial substance. The judgment by the apex court will provide much-needed clarity on the relationship between GAAR and SAAR.

GST Bodies Get Power to Waive off Certain Penalties The government has notified changes to goods and services tax (GST) laws, empowering GST authorities to Waive off Certain interest and penalties on past tax demands. The change will come into effect November 1, the Central Board of Indirect Taxes and Customs (CBIC) said Friday in its notification on the insertion of Section 128A into the rules. Section 128A provides for waiver of penalty or fee. The changes were approved by the GST Council at its 53rd meeting with the objective of reducing tax litigation in respect to cases where evasion was not wilful or was due to interpretation of law or the industry practices. "Our intent is to make the GST assesses life easier, simpler and less cumbersome". We are working towards less and less compliance, union finance minister Nirmala Sitharaman, chairperson of the council, had said after the meeting held in the capital. The GST Council also notified a provision which enables businesses to rectify and claim any missed input tax credit (ITC) during the specified period, effective September 27. This provision seeks to mitigate the risk of disputes or penalties over past ITC ineligibility. "These changes collectively demonstrate the government's commitment to reducing compliance challenges and fostering a more business friendly tax regime," said Rajat Mohan, executive director at accounting and advisory network Moore Singhi.

**The Delhi Bench of the Income-tax Appellate Tribunal (ITAT) has issued a significant ruling concerning the establishment of a service permanent establishment (PE) or virtual service PE in India for a taxpayer under the India-Singapore tax treaty.88 Key Points: The ruling clarifies that to constitute a service PE, the actual performance of services in India is essential. Therefore, only when services are rendered by employees physically present in India during the relevant fiscal year can a service PE be established. The ITAT emphasized that the provision for virtual service PE is not mentioned in the India-Singapore tax treaty. As a result, the existing service PE provision, requiring physical rendition of services in India, should be applied. The case involved a taxpayer based in Singapore, providing legal advisory services to Indian clients during FYs 2019-20 and 2020-21. The taxpayer neither had premises in India nor did its employees physically visit India during AY 2020-21 and AY 2021-22. The Assessing Officer initially claimed that the taxpayer constituted a service PE in India based on the physical presence of its employees. However, the ITAT ruled that since the employees were present in India for less than the threshold period, and considering exclusions for vacation days and business development activities, no service PE was constituted. The ruling also clarified that no virtual service PE could be established under the India-Singapore tax treaty, as the provision for it is absent. The ITAT's decision underscores the importance of physical presence for the establishment of a service PE under tax treaties, aligning with previous judicial interpretations. Taxpayers are advised to assess the impact of this ruling on their specific circumstances, particularly regarding the establishment of a service PE in India under tax treaties.

M&A Tax: Can the tax authorities request the NCLT to reject an amalgamation scheme? Sec. 72A of the Income Tax Act, 1961 ("the Act") provides (subject to certain conditions) for deeming an amalgamating company’s accumulated loss and unabsorbed depreciation as accumulated loss and unabsorbed depreciation of the amalgamated company. But can the tax authorities request the Indian National Company Law Tribunal (NCLT) to reject an application for approval of a scheme of amalgamation—merely on the ground that the amalgamation could cause significant revenue loss to the exchequer? Though this question may, perhaps, appear merely academic, it is not. There are instances where the tax authorities have made such requests, and there are judicial precedents. For instance, in a relatively recent case, the tax authorities requested the NCLT to rejecte a scheme of amalgamation because, if it was approved then, by virtue of Sec. 72A of the Act, the exchequer would suffer significant revenue loss. In an interesting decision of the Income Tax Appellate Tribunal (ITAT), the taxpayer company argued that the Government of India was made a party in a petition (before the High Court) for approval of a scheme of amalgamation. At that time, the tax authorities had not filed any objections before the High Court. Therefore, as per the taxpayer company, the tax authorities could not subsequently object to the scheme of amalgamation. In that context, the ITAT considered ‘the doctrine of acquiescence’. In yet another case, the tax authorities requested an Indian High Court to reject an application for approval of amalgamation of two loss-making companies. 𝗜 𝗵𝗮𝗱 𝗮𝗻 𝗼𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝘆 𝘁𝗼 𝗲𝘅𝗮𝗺𝗶𝗻𝗲 𝘁𝗵𝗲𝘀𝗲 𝗮𝘀𝗽𝗲𝗰𝘁𝘀—𝗮𝗻𝗱 𝘁𝗵𝗲 𝗮𝗯𝗼𝘃𝗲-𝗺𝗲𝗻𝘁𝗶𝗼𝗻𝗲𝗱 𝗷𝘂𝗱𝗶𝗰𝗶𝗮𝗹 𝗽𝗿𝗲𝗰𝗲𝗱𝗲𝗻𝘁𝘀—𝗶𝗻 𝗮𝗻 𝗼𝗽𝗲𝗻 𝗮𝗰𝗰𝗲𝘀𝘀 𝗮𝗿𝘁𝗶𝗰𝗹𝗲 𝘁𝗵𝗮𝘁 𝘄𝗮𝘀 𝗷𝘂𝘀𝘁 𝗽𝘂𝗯𝗹𝗶𝘀𝗵𝗲𝗱. Will share the access link in the comments section below. #taxlaw #amalgamation #NCLT

The Calcutta High Court has recently issued an interim stay on the adjudication order concerning tax recovery, along with any related demands, effectively halting these actions until the end of December 2024 or until further notice from the court. This decision comes in response to a petition filed by an individual who argues that the notifications released in May 2024, which extended deadlines for various tax proceedings, should not be applicable to the tax period spanning from April 2019 to March 2020. The petitioner asserts that there was no force majeure event during that specific timeframe that would justify the extension of deadlines. In its preliminary assessment, the court has expressed a supportive stance towards the stay, drawing parallels to similar interim relief that was granted in the OSL Exclusive case. The court has indicated that it will further evaluate the jurisdictional aspects of the matter after both parties have exchanged affidavits. The writ petition is set to continue its progression through the legal system. The petitioner has referenced notifications issued by the Central Board of Indirect Taxes and Customs (CBIC), which detail extensions of time limits for recovery orders under certain provisions of the West Bengal Goods and Services Tax (WBGST) and Central Goods and Services Tax (CGST) Acts. In light of these developments, the Advocate General representing the petitioner has requested additional time to prepare and submit an affidavit in opposition to the claims made by the respondents. This case is formally identified as Shiv Murat Seth alias Shumurath Seth v. Senior Joint Commissioner of State Tax, & Ors. [WPA 20964 of 2024], and it highlights ongoing legal discussions surrounding tax recovery processes and the implications of force majeure on tax deadlines. The outcome of this case could have significant ramifications for similar tax proceedings in the future, particularly regarding the interpretation of force majeure and its impact on statutory deadlines.

Understanding Property Transfer Taxes in Thailand Visit our website for more detail: https://bit.ly/46WyJWm When purchasing or selling a condominium in Thailand, it’s essential to understand the taxes and fees associated with the transaction. These taxes can significantly impact the total cost of ownership or sale proceeds. Below is a guide to the taxes and fees you should expect when buying or selling a condominium in Thailand, followed by an example calculation to give you a clearer picture. Taxes and Fees When Buying a Condominium in Thailand Transfer Fee: The transfer fee is typically 2% of the government-assessed property value. This fee is usually split between the buyer and the seller, but the arrangement can vary. Specific Business Tax (SBT): SBT applies to sellers and is charged at 3.3% of the selling price or government-assessed value, whichever is higher. This tax is only applicable if the seller has owned the property for less than five years or if the property is part of a business sale. Stamp Duty: If Specific Business Tax does not apply, a stamp duty of 0.5% of the registered sale price or government-assessed value (whichever is higher) must be paid. This is a one-time payment made by the seller. Withholding Tax: Withholding tax applies to both individuals and companies selling the property. For individuals, the rate depends on the property’s assessed value and the duration of ownership. For companies, the withholding tax is 1% of the sale price or government value, whichever is higher. Activate to view larger image,