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TP - Once distributor is sufficiently compensated by overseas AE without providing return on marketing intangibles, then no further adjustment on account of AMP expense is warranted: ITAT (See 'Breaking News') DTAA - Income earned by overseas entity from Indian Customers with respect to subscription fees for Chemical Abstracts Services, is not taxable as royalty: ITAT (See 'Breaking News') CBDT issues clarification regarding definition of 'Fund Manager' under Section 9A(4)(b) (See 'Circular' in 'Intl Taxation') I-T - Issue of corporate guarantee by Indian taxpayer entity in favour of its overseas AE is 'international transaction' covered by provisions of Section 92B: ITAT (See 'Breaking News') DTAA - If 'right to use copyright' in software was never transferred by foreign company in favor of Indian customers, then sale proceeds cannot be characterized as 'Royalty': ITAT (See 'Breaking News') TP - Mere arrangement for use of AEs brand name is no basis to infer that parties were acting together to incur higher AMP expense for rendering brand building services: ITAT (See 'Breaking News') TP - Failure to upload electronically Form No 3CEB corroborated with bona fide explanation for such error will not attract penal provisions of Section 271BA: ITAT (See 'Breaking News') I-T - Commission paid to agents abroad for rendering services overseas is not income deemed to accrue or arise in India & hence is not taxable in India: ITAT (See 'Breaking News') TP - Onus on Indian taxpayer entity is limited to prove 'availing of services' & not 'accrual of benefit' w.r.t payments made to their overseas AEs: ITAT (See 'Breaking News') TP - CUP method is not apt for benchmarking export of finished goods to AEs if substantial differences persist on account of functions, geography, volume & risk: ITAT (See 'Breaking News') TP - Once there is transaction between two AEs, it ceases to be 'uncontrolled transaction' and, thereby, goes out of reckoning under Rule 10B(1)(e)(ii): HC (See 'Breaking News') TP - It is not expected from Writ Courts to undertake exercise of comparison which is essentially fact finding exercise: HC (See 'Breaking News') DTAA - Payments made by Indian end-users to foreign licensor of copyright, seeking permission for using software, amounts to royalty and hence attracts TDS: HC (See 'Breaking News') GST - Real Estate - FAQs are welcome but more needs to be done! (See 'The Cob(Web)' in TIOL) TP - Inclusion of FOB value of AE's contract in operating cost in order to determine its margin, is not permitted under TNMM as per Rule 10B(1)(e): HC (See 'Breaking News')
 
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CBDT invites comments on report pertaining to Profit Attribution to PE
By TII News Service
Apr 18, 2019 , New Delhi

    

Taxation of non-residents in India is governed by the provisions of the Income-tax Act, 1961 and the provisions of the Double Taxation Avoidance Agreement(s) [DTAA(s)] concluded or adopted by the Central Government under the powers conferred under Section 90 or 90A of the Act, respectively. The business income of a non-resident can be taxed in India if it satisfies the requisite thresholds provided under the Act as well as the threshold provided in the applicable tax treaty, by a concept of Permanent Establishment (PE), which is defined in Article 5 of Model Tax Conventions and tax treaties. Under Article 7 in the Indian treaties, profits are to be attributed to the PE as if it were a distinct and separate entity on the basis of the accounts of the PE and where such accounts are not available to enable determination of profits attributable to the PE, the profits attributable to the PE can be determined under the domestic laws. For the application of this method, the Assessing Officer in India can resort to Rule 10 of Income-tax Rules, 1962.

Recognizing the significance of issues relating to attribution of profits to a permanent establishment as well as the need to bring greater clarity and predictability in the applicable tax regime, a Committee was formed to examine the existing scheme of profit attribution to PE under Article 7 of DTAAs and recommend changes in Rule 10 of the Income-tax Rules, 1962. The Committee has submitted its report and it has been decided to seek suggestions/comments of the stakeholders and the general public. For this purpose, the notice seeking suggestions/comments of the stakeholders and the general public alongwith the report of the Committee on profit attribution has been placed in public domain and can be accessed at www.incometaxindia.gov.in . Suggestions/comments on the same may be furnished electronically at the email address usfttr-1@gov.in within 30 days of the publication of the aforementioned document on the website of the Department .

 
 
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