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
ę News Headlines »
 What to do when you receive a notice from the tax department
 How to use your Form 16
 Which ITR form applies to you for financial year 2017-18?
 Income tax returns filing form-2 released; should you use it? Find out
  Are you planning to file ITR 1 form? here's how to do it Income Tax Return (ITR) filing
 30 LPA-Opening Financial Controller
 ITR form 2 in java release by CBDT for return filing by individuals
 How to file your income tax return using ITR Form-1 Income Tax efiling for AY 2018-19
 Income tax returns (ITR) filing: Have you received I-T dept notice? Safeguard yourself; here is how
 Delayed release of electronic ITR forms may compel CBDT to extend the filing deadline
 Trading volume linked to tax return?

Global experts split over ITATs MNC taxation ruling
December, 07th 2007
The Income-Tax Appellate Tribunals (ITAT) decision on taxability of multinational companies operating in India has triggered a serious debate among global cross-border taxation experts. These include professor Klaus Vogel, considered guru of cross-border taxation, United Nations Tax and Trade Co-operation chief Michael Lennard and Philip Baker, the English barrister who edits the International Tax Law Reporter.

The order, which has become a subject matter of acrimonious debates at tax seminars worldwide, involved Sony Entertainment Television (Singapore). The order held that revenue generated in India by the foreign company is taxable in India even if they operate through an agent. The question before the tribunal was: when a foreign company operates in India through a dependent agent and when the agent is paid for the services at fair market value, can further profits of the foreign company be taxed in India.

Sony Entertainment Television did not dispute that they had a dependent agent in India and that the business was carried out through this agent, but contended that once an agent has been paid an arms length price, no further profits can be taxed in India.

The tribunal rejected this plea and held that whether the foreign company operates in India or not, the fees earned by the agent in India have to be taxed in India anyway. The ITAT bench, comprising Pramod Kumar and Madhavi Devi, held that the payment made to the companys agent in India, SET India, can at best be described as the expenditure incurred by the foreign company and this amount may be deducted for the purpose of taxing Sony Entertainment Television (SET).

While Mr Baker criticised the order in his comments in the London-based International Tax Law Reporter, Mr Vogel supported ITAT stand in the column Tax Treaty Monitor in the IBFD Bulletin on International Taxation, published from Amsterdam.

In his editorial remarks, Philip Baker wrote: One of the strongest argument of this (tribunals) approach is that it is impossible to apply that approach in case of a dependent agent and that this approach requires an abandonment of reality and an entirely hypothetical attribution, while an arms length world must still have some basis in reality. This approach he said, is simply a licence for arbitrary allocation of profits and that ultimately, that is what the tribunal did here. Late last year, the US released its new model convention in which amendments have been made to pre-empt such disputes.

Mr Vogel does not agree. One can understand that many have problems imagining how profits should arise to a permanent establishment, which the tribunal itself repeatedly states, does not exist in reality and is wholly hypothetical and fictional, and adds that such sceptics should, however, consider that the parent enterprise, as a rule, will aim at realising receipts from the contracts concluded by the dependent agent, which, apart from including agents commission, include a surplus profit, for otherwise the parent will lack any commercial reasons for employing the agent.

Mr Vogel also said fairness (international equity) requires that these surplus profits be taxed in the source state and that it is the rule that a profit, exceeding agents compensation, will be submitted to the agents state.

The UNs Mr Lennard, who was in India to attend an international tax conference last week, approved ITATs line. The decision was a correct one built upon sound conceptual foundation, Mr Lennard said. He also praised Indian tax judiciarys decisions, particularly ITATs.
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Content Management System developers CMS developers Content Management Solutions CMS Solutions CMS India Content Management System India CMS development India Website CMS Website Content Management India Portal CMS India CMS Outsourcing CMS Vendor Complete CMS Custom CMS Services

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