Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: VAT RATES :: form 3cd :: TDS :: VAT Audit :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: TAX RATES - GOODS TAXABLE @ 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: empanelment :: cpt :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: ACCOUNTING STANDARD
« News Headlines »
 CBDT issues second round of Certificates of Appreciation to tax payers for their contribution towards Nation building
 FinMin looks at cut in corporation tax
 Draft Rules for prescribing the method of valuation of fair market value in respect of the trust or the institution-Chapter XII-EB of the Income-tax Act, 1961- reg.
 India is moving towards a flawed GST
 ICAI to organise two-day international conference in Hyderabad
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers
 Finance ministry warns tax officials of action against GST protest

Service tax does not apply to finance Cos for hire & purchase
November, 25th 2006

Auto finance companies are on a high. With sales of two and four wheelers heading upwards, these companies will never fall short of any clientele. They have one more reason to celebrate they may not be required to pay service tax on the entire basket of their services.

In a case involving Bajaj Auto Finance, the Central Excise and Service Tax Tribunal (CESTAT) discussed the issue whether the appellant company that is engaged in hire purchase finance is liable to service tax or not. The revenue departments stakes involved are too high to comprehend nearly Rs 26 crore were demanded and confirmed along with penalties and interest by holding that the service rendered by the company is covered under the category banking and other financial services which inter alia means financial leasing services, including equipment leasing and hire purchase by a body corporate.

Bajaj contended that they are not carrying on the business of hire purchase but that of hire purchase financing and therefore not liable to service tax. Whereas the revenue department emphasised that the two expressions are synonymous for the reason that in both cases, the hirer enters into agreement with the person who provides financial services to the hirer and in lieu of such services, hirer pays certain amount as finance charges / hire purchase charges.

Upon scrutinising the agreement entered into between the hirer and the applicants, the tribunal observed that the hirer identifies the vehicle that he wishes to purchase from the vehicle manufacturer/dealer, makes a part payment to the seller of the vehicle, applies to the applicants for financing the balance. Further, once the financing is sanctioned, he enters into an agreement with the applicants and provides as security, the right of repossession of the vehicle to the applicants in the event of his default in payment of instalments to the applicants.  

The tribunal found prima facie force in the submission of the company, coupled with the Apex Courts decision in Sundaram Finance Ltd. vs. State of Kerala wherein distinction between hire purchase and hire purchase financing was made.

The tribunal held that prima facie, the nature of the transaction between the applicants and their customers was a hire purchase finance transaction and prima facie hire purchase and hire purchase financing were not synonymous.  

Foreign banks

In an interesting, illustrative and enlightening order bound to have far reaching implications, the Income Tax Apellate Tribunal (ITAT) amidst settling other issues, expounded the principles to compute income accruing in India to a foreign enterprise here. The assessee is a Germany based non-resident banking company Dresdner Bank with branch in India. In the assessment proceedings, the bank maintained that the branch and head office transactions are transactions with oneself and emphasised that the incomes from inter-branch transactions are not taxable in India. The AO however differed from this view and held that this income of the assessee would be covered by section 9(1) of the Act. The same view was expounded by the Commissioner of Income Tax (Appeals).

After hearing the arguments the ITAT observed that for the income accruing or arising in India, an income which accrues or arises to a foreign enterprise company in India can essentially be only such a portion of income accruing or arising to such a foreign enterprise as is attributable to its business carried out in India.

The tribunal however observed that the expression income deemed to accrue or arise in India is concerned, section 9 of the IT Act elaborately deals with the same, but the expression income accruing or arising in India is not defined in the Act nor any judicial precedent has been cited. Seeing this ITAT observed that, to determine income accruing or arising in India to a foreign enterprise (general enterprise or as GE) one has to compute income attributable to such branch(es) in India, or other form(s) of presence (or permanent establishment or PE).

The only way to ascertain profits arising in is by treating the Indian PE as a fictionally separate profit centre. ITAT held that cross-border dealings within an enterprise, which necessarily concern at least two tax jurisdictions; need to be examined in a different perspective. The tribunal held that the interest earnings from the head office are to be taken into account for the purposes of computing profits arising in or accruing in India. It also held that the income to be accruing or arising in India and therefore, it is not really relevant whether the income can be treated as deemed to accrue or arise in India.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Organic SEO Outsourcing Organic Search Engine Optimization Outsourcing Organic Website SEO Organic SEO India Website SEO India Organic Search Engine Optimization India Organic Internet SEO India Organic Web

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions