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) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
Direct Tax »
 ITR-4 launched on e-filing portal; total 3 ITRs available now
 CBDT directs income tax department to hold grievance redressal fortnight for taxpayers in June
 Income tax return form-2 in Java format released for e-filing for FY2017-18
 3 ITRs available now ITR-4 launched on e-filing portal
 Businesses, small taxpayers to gain from new direct tax code
 New direct tax code to benefit corporates, income tax payers
 CBDT releases ITR Form-4 for presumptive income from business and profession
 Know how you can save tax through various deductions under Section 80 Income Tax
 CBDT issues notification, seeks suggestions to bring more transparency in cross-national transactions
 CBDT seeks suggestions to bring transparency in cross-national transactions
 What to expect from new direct tax law

CBDT for tightening norms proposed in Direct Taxes Code
November, 12th 2009

The Central Board of Direct Taxes (CBDT) has urged tightening of the provisions on international taxation proposed in the new Direct Taxes Code, 2009.

According to official sources, two issues needing a close look are clarity on general anti-avoidance rules (GAAR) and widening the definition of permanent establishment (PE).

The ministry of finance is currently reviewing the Code for finalisation, following diverse feedback.

GAAR empowers the tax department to declare an arrangement or structure worked out by a company for any business purpose as an impermissible if it is wholly aimed at avoiding tax. While the Income Tax Act of 1961 did not have any such provisions, the new Code does, albeit with riders.

Officials added that the original intent for including this provision was to override provisions in double taxation avoidance agreements (DTAAs). Officials say while the provisions of individual DTAAs have their own relevance, it should not act as a tool for avoiding taxes.

A case in point is the recent discussion by the central government with tax-haven countries like Mauritius, where many Indian or foreign companies are creating special purpose vehicles to route business into India just to avoid paying taxes.

If it is felt that the objective of a structure is only to evade tax in India, then GAAR should prevail over any DTAA or any other provisions, said officials.

However, the Code also says that between any treaty and the Code, whichever comes into effect later should prevail.

Officials say DTAAs have been worked out under the Income Tax Act, 1961. They have to be reworked so as to ensure its relevance under the new Code. Going by this, provisions of DTAAs will prevail, since they will be reworked only after the new taxes code get finalised.

Therefore, it should be clearly stated in the Code that a GAAR provision should prevail over any treaty or any agreement if certain business arrangements have been entered into only for the purpose of avoiding taxes.

At present, there is no concept of PE for taxing income deemed to arise in India under Section 9 of the Income Tax Act, 1961, meant to tax income of foreign entities operating in India. Currently, the relevance of PE is restricted to provisions in transfer pricing.

While the definition has been incorporated in the draft Code, the scope is limited, since it only refers to a fixed place through which the business operates. CBDT has suggested reworking the definition on the basis of the model tax convention of the United Nations which includes a business site, a construction, assembly or installation project or supervisory sites, assembly and installation projects.

Besides, the UN model tax convention requires only a period of six months from the time of the setting up of such an arrangement to assume it as a permanent establishment.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Enterprise Resource Planning Solutions ERP Solutions Enterprise Resource Planning Software Solutions ERP Software Solutions Supply Chain Management Solutions SCM Solutions Supply Chain Management Software Solutions SCM Software Solutions Enterprise Resource Planning Solutions India ERP Solutions India Enterprise Resource Planning Software Solutions India ERP Software Solutions India Supply Chain Management Solutions India SCM Solutions India Supply Chain Management Software Solutions India SCM Software Solutions India

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