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
« News Headlines »
 Can file revised return after notice issued by I-T ITAT
 How to file income tax returns online if you don't have Form 16 ITR 2018-19
 These 5 websites can help you file your ITR Income tax e-filing
 Here's why some retirees no longer have to file a tax return
 How to file different categories of ITR forms online Income tax e-filing
 Here are other documents you need to file online ITR Got your Form-16 for FY18?
 10 must have documents to file your tax return
 Know all about how to file ITR FY 2017-18
 Government extends sale of pre-GST goods with stickers of revised price till July 31
 All 7 ITR forms for assessment year 2018-19 activated for e-filing: Income Tax Department
 Check if new salary structure is income tax efficient

Sometimes, a comma can cut you both ways
August, 25th 2006
Whats in a comma? A lot, if you are a corporate and fighting a case relating to taxation of royalty. The innocuous looking comma can create a deep hole in a companys finances, altering the interpretation of the sections and clauses of tax laws as seen in the case of AsiaSat which faces a tax liability of Rs 200 crore as the comma in the I-T Act altered the definition of royalty. At the same time, the absence of a comma in the Indo-US Treaty saved PanamSat from a liability of Rs 77 crore. The comma became conspicuous when the Delhi Tax Tribunal held that the revenue earned by providing data transmission services through satellites does not amount to royalty under the provisions of the Indo-American Tax Treaty(under article 12(3)(a). Royalty is taxable under the provisions of the Indian Income-tax Act. However, the same tribunal, in 02, held in the case of AsiaSat that the revenue earned through the same manner is taxable. According to TP Ostwal, senior chartered accountant, the AsiaSat decision was flawed in many respects. In the context of treaties, the ITAT decision on Panam is on the right track, he added. Samir Gandhi, tax partner, Deloitte Haskins and Sells said, This appears to be the correct interpretation of royalty. The Delhi tribunal gave the reasons why it took variant views on two similar cases in which facts are almost the same. And it is in the rationale provided by the tribunal that the comma figures prominently. India has no tax treaty with Hong Kong. A process is involved in the activity carried out by both Hong Kong-based AsiaSat and the US -based PanAm. In the I-T Act, the provision defining royalty necessitates the involvement of a secret formula, or process. The comma that followed the term formula assumed critical importance, as far as the Delhi tribunals reasoning goes. The Delhi tribunal interpreted the provision this way. Since the comma follows the term formula, the term secret qualifies only to the word formula. The element of secrecy applies exclusively to the formula and not to the process. Which means revenue arising from transaction of a secret formula can be construed royalty, while revenue arising from transaction of a process which is not secret but is in the public domain can also be considered royalty. This is the way the tribunal decided that ASiaSat was liable to pay tax on the royalty. The implication of the reading is that even if a process is in the public domain, it can be termed royalty and hence taxable. However, in the Indo-US Tax Treaty, the words describing royalty are as follows -secret formula or process Since there is no comma in between, the term secret qualifies both words. Which means both the process and formula require to be secret in order to be classified under royalty payment. Now, in the case of PanamSat there appears to be no secret technology. The element of secrecy is not here in the operation of transponder, and the payment for it does not amount to royalty.
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Integrated Software Solutions Integrated Software Development Integrated Software Services Integrated Software Solutions India Integrated Softw

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