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: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT Audit :: VAT RATES :: cpt :: TDS :: articles on VAT and GST in India :: form 3cd :: due date for vat payment :: ACCOUNTING STANDARDS :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company
 
 
News Headlines »
 Is government tapping your phone?
 Income tax department to use analytics to look for discrepancies in bank accounts
 GST Council fails to break deadlock over indirect tax regime, next meet on Dec 11 and 12 to hammer out differences
 Invoking Writ Jurisdiction For Income Tax Matters
 How to file income-tax returns online
 How Income Tax Returns Are Scrutinised
 All About New Income Disclosure Scheme to make Demonetisation successful
 Your deposit may draw income tax notice
 Accepting payment under IDS 2016
 New disclosure scheme could see 50% tax and 4-year limit on cash use for unaccounted deposits
 Pay 50% tax on unaccounted deposits, or 85% if caught, says Modi government

Lex reflex
December, 05th 2006

Dominant intent

A key issue which arises for consideration in indirect taxation is whether a particular supply is that of goods or of services, so that either the sales tax or the service tax is applicable and not both.

The Supreme Court, in its decision in the BSNL case, has held that the dominant intent of the parties would be the basis for this determination. In a recent decision in Idea Mobile Communications Vs CCEX (2006-TIOL-857), the tribunal has held that since on supply of SIM cards by cellular service providers to customers sales taxes had been paid, it was a sale of goods and has accordingly held that no service tax would apply.

The tribunal did not ascertain the dominant intent of the parties. However, in a subsequent decision, albeit an interim one in the form of a stay order, the tribunal in Bharati Hexacom Vs CCEX (2006-TIOL-1283) has held that the dominant intent in such a situation was not the sale of SIM cards but was the provision of cellular services.

It has consequently arrived at a prima facie view that service tax would be applicable on such supplies of SIM cards and the fact that the service provider had paid sales tax on the supplies was not relevant.

In Transit

Theres some respite for employees of Indian companies who are sent on deputation abroad to a foreign affiliate, parent or an office of the Indian company. They do not have to pay tax in India, for the period that they become a resident of the foreign country, even if the salary is received here.

As residents of a foreign country these employees, in any case, have to pay tax there on the income that they earn. They will not be taxed once again in India on the same income when the two countries have a double taxation avoidance pact. This is the essence of a verdict by the Authority for Advance Ruling, which will ensure that an employee is not taxed twice on the same income.

Of course, the AARs ruling is for a specific taxpayern this case the two employees of British Gas India. The verdict also has a persuasive value in the case of other tax payers. British Gas India had sought a ruling on the tax liability of two of its employees who were sent on deputation to a group company in the UK and had become non-residents in India.
 
The AAR was of the view that the salary paid here by British Gas India to these employees was taxable here under the provisions of the domestic law. At the same time, however, the authority went by the provisions of the double taxation avoidance treaty (DTAA) between India and the UK because these two employees had become residents of the UK.

The Indo-UK tax treaty has a provision on dependent personal services. Going by this provision, the AAR held that the salary paid in India to the employees deputed outside India will not be taxable here as the same was taxed in the UK.

Functional separation

Mumbai branch of Germany-based Dresdner Bank AG has denied its taxability on the interest receivable from its overseas branch head office on the ground that the branch and the foreign company are single entity and no profit can accrue between them.

Mumbai Tribunal noted that intra-organisation transactions can be ignored only when the entire profits are computed. In a scenario like a branch PE of a foreign entity, profits computation has to be similar to functionally separate entity. Thus it held that such interests are to be taxed in India.

The tribunal referred to the decision of ITAT, Kolkata bench, in the case of ABN Amro Bank, wherein the interest payable by branch to its overseas HO was disallowed based on the single entity concept. Interestingly, the tribunal noted that their decision can result in an incongruity and gave an option to taxpayer to have a larger bench decision, which was not opted.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Publishing Management System PMS News Management System Publishing Management System Development Online News Management System for media company custom Publishing management system development Survey management system Market Res

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