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: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: empanelment :: list of goods taxed at 4% :: TAX RATES - GOODS TAXABLE @ 4% :: VAT RATES :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TDS :: articles on VAT and GST in India :: due date for vat payment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: form 3cd :: cpt :: Central Excise rule to resale the machines to a new company
 
 
« From the Courts »
 The Principal Commissioner Of Income Tax-4 Vs. Inter Globe Technology Quotient Pvt. Ltd.
 Akum Drugs And Pharmaceuticals Limited Through: Director Shri. Sanjeev Jain Vs. Income Tax Officer, Ward-2(1) & Anr.
 Pr. Commissioner Of Income Tax Central-2 New Delhi Vs. Meeta Gutgutia Prop. M/s Ferns „n? Petals
 Prabhatam Investment Pvt. Ltd vs. ACIT (ITAT Delhi)
 CIT vs. Laxman Industrial Resources Pvt.Ltd (Delhi High Court)
  State Of Jharkhand vs. Lalu Prasad Yadav (Supreme Court)
 CIT vs. Krishan K. Aggarwal (Supreme Court)
 Ambuja Cements Ltd. Vs. Commissioner, Service Tax Commissionerate, Delhi
 Director Of Income Tax (Exemptions) Vs. Vishwa Hindu Parishad
 ITAT Proposes Important Changes To Tribunal Rules
 Meherjee Cassinath Holdings Pvt. Ltd vs. ACIT (ITAT Mumbai)

Taxing liaison offices: Revenue to move HC
February, 20th 2009

Tribunal rules that the offices cannot be termed permanent establishments.

The revenue department has decided to challenge an Income Tax Appellate Tribunal (ITAT) order that liaison offices of foreign firms operating in India cannot be termed as permanent establishments (PEs).

The tribunals December 24 ruling concerned Tokyo-based Mitsui and Company, which has investments in various sectors in India, including machinery, chemicals, energy, lifestyle, iron and steel, information technology and food products.

The Income Tax Department had attributed 50 per cent of the income Mitsui earned from its Indian operations to the liaison office, which it termed a PE, for assessment year 2002-03. Tax officials said that if a company had a PE in India, the income would be taxed as business income. If a foreign company operating in India is taxed on its business income and the country does not have a specific double taxation avoidance treaty with India, the tax rate on income and gains is 55 per cent.

However, the department is in the process of filing a petition challenging the order in the high court since the ruling has revenue implications running into hundreds of crores. This is because almost all international tax cases hinge on whether or not the company has a PE in India.

The Organisation for Economic Co-operation and Development tax guidelines say a foreign firm is deemed to have a PE in a country if it employs an agent, other than an independent agent, to regularly act for it and conclude contracts on its behalf.

Although the order did not clearly specify the reason clearly, tax experts said the liaison office might not be termed as PE if it did not employ any agent to carry out the business or conclude contracts on its behalf. If a companys income is not taxed as business income, it is taxed as royalty or technical fees.

On PEs, the Supreme Court had in July 2007 ruled out any tax liability in India of US-based investment bank Morgan Stanley on income from its India-based outsourcing outfit, Morgan Stanley Advantage Services (MSAS). The Supreme Court quashed the Income Tax Departments contention that MSAS was not a PE.

Tax department officials do not agree with the tribunals ruling. When the economy was opened up in 1991, many foreign companies opened liaison offices to explore investment and other opportunities. In 1995, the ITAT had given a ruling that a liaison office was not a PE. However, these liaison offices are no longer mere offices as major investments are being made through these offices, said an official.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Portfolio

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