India: Tax treatment of non-compete fee; no permanent establishment from UAE liaison office

India: Tax treatment of non-compete fee

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).

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  • Payment of non-compete fee: The Delhi Bench of the Income-tax Appellate Tribunal held that “non-compete fees” paid for not disclosing confidential information relating to the business and for not competing in a similar line of business in certain territories for a period of five years are capital expenditure. Further, the tribunal held the taxpayer is not entitled to claim depreciation for such capital expenditure. The case is: Hindustan Coca Cola Beverages. Read a May 2020 report [PDF 306 KB]

  • Permanent establishment of liaison office of UAE based company: The Supreme Court held that the liaison office of a UAE based company did not constitute a permanent establishment in India. The Supreme Court observed that activities carried on by the liaison office in India were of a preparatory or auxiliary character and given that such activities are specifically exempt under Article 5(3)(e) of the India-UAE income tax treaty, the liaison office did not constitute a permanent establishment in India. The case is: U.A.E. Exchange Centre. Read a May 2020 report [PDF 368 KB]

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