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January 2016

Direct Tax Amicus: October 2015

Article in this October 2015 issue of Direct Tax Amicus titled “Month-end Provisions and Reversal – Is TDS called for?” discusses the monthly provision for various expenses in ERP system at the end of each month and concludes that mere book entries, being notional and interim in nature should ideally be not subjected to deduction of tax at source. It however notes that the legal position is quite perplexing for the taxpayers.

Notifications and Circulars portion of the Amicus cover amendments made by the CBDT in the Income Tax Rules allowing for use of a “range model” for determination of arm’s length price (ALP) and “use of multiple year data” for undertaking a transfer pricing comparability analysis. Fresh guidance on implementation of Transfer Pricing (TP) provisions have also been issued to streamline the process of TP scrutiny and ALP determination.

Ratio decidendi in this issue provides summary of Karnataka High Court decision holding that liaison office established for purchase of goods does not constitute PE. Delhi High Court has held that mere passing of the book entries, which are reversed, would not give rise to an obligation to deduct tax under Section 195 of the Income Tax Act by the assessee. ITAT has held that both the conditions of income being subject to lower taxes as well as taxation being on receipt basis only in the other contracting country have to be satisfied before benefits of the DTAA can be restricted. Further, the Authority for Advance Rulings has held that payment for procurement of goods, and specialized service of market research is taxable as Fees for Technical Services (FTS). More on these orders can be seen from the summaries provided in this issue.

 

October, 2015/Issue-15 October, 2015/Issue-15

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