01 January 0001

Direct Tax Amicus: July 2018

Extensive control of non-resident over Indian entity – A taxing relation

The Authority for Advance Rulings (Income Tax) in its recent ruling in the case of FRS Hotel Group has brought a question mark on the issue of operation and management contract for hotels. Though involvement of foreign players for operation and management of hotel properties is a common phenomenon, far-reaching implications of such contracts were not seriously considered till this ruling. The AAR based its ruling on the tests for fixed place PE, as laid by the Supreme Court in the case of Formula One World Championship Ltd., and was of the view that since the applicant had in substance taken over all the important functions in relation to operation and management of the Indian hotel under various agreements, the fixed place being the Indian hotel was rightly at the disposal of the applicant through which its business was carried on. It was held that the Indian hotel constituted fixed place PE of the applicant in India and the income received under different agreements by the applicant were taxable in India as business profits. In short, where the person enters into multiple agreements for a particular project (including agreements which are ancillary in nature), all the agreements are to be read together as a whole because reading of the agreements in isolation may lead to absurd and incongruent result...



  • Monetary limits for filing of appeals by the department, raised


Ratio decidendi

  • Transfer pricing - Rejection of comparables does not give rise to ‘question of law’ – ITAT Karnataka
  • Interest payable for non-deduction of TDS even if assessee not an ‘assessee in default’ as per Section 201(1) - ITAT Bangalore
  • Exercising revisionary jurisdiction over CIT (A) order when not justified - Karnataka High Court
  • Commercial benefits relevant to distinguish capital and revenue expenditure - Madras High Court
  • Income from exercising voting rights in a company in a particular way is capital receipt - Calcutta High Court
  • Penalty under Section 271(1)(c) not tenable when disclosed particulars are accurate - Delhi High Court
  • Ironing, packing, etc. of garments is manufacture - Deduction under Section 10B - Calcutta High Court
  • Portfolio Management Fees not deductible while computing capital gains on sale of shares - ITAT Mumbai
  • Section 50C cannot apply in case of transfer of booking rights - ITAT Kolkata
  • ‘Corporation established by an Act’ includes institution notified under the Act - Supreme Court


July, 2018/Issue-47 July, 2018/Issue-47

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