01 January 0001

Direct Tax Amicus: February 2018

Taxing compensation receipts – Whittling away the relief?

The liberal interpretation of the term ‘income’ and ‘business’ has not been wide enough to bring into the tax net certain receipts like compensation on termination of managing agency, profit from transfer of DEPB scrip, non-compete fee, etc., and a number of such items were inserted in of Income Tax Act, 1961 specifically as being taxable. Finance Bill, 2018 proposes to insert new sub-clause (e) in Clause (ii) of Section 28 of the Income Tax Act, to enable the tax authorities to tax compensation received or receivable in connection with the termination or modification of the terms of any contract shall be taxable as business income irrespective of whether it is capital or revenue in nature. Though the amendment is quite wide in its scope, there is still a need to closely examine the taxability of compensation/ amounts received under different circumstances...


Finance Bill 2018 - Key direct tax proposals

  • Taxation of Long Term Capital Gains (LTCG) on transfer of certain securities
  • Tax benefits to transactions in International Financial Service Centre (IFSC)
  • Reduction in corporate tax rate for domestic companies having turnover upto INR 250 crores
  • Widening of scope of business connection to tax income in India
  • Deemed Dividend taxation in hands of payer company
  • New scheme for scrutiny assessment


Ratio decidendi

  • No TDS on salary paid in India to employees deputed abroad – AAR
  • TDS liability on purchase from foreign vendor – ITAT, Hyderabad


February, 2018/Issue-42 February, 2018/Issue-42

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