India: Payments for use of online advertising, marketing, and IT facilities not taxable as royalties under tax treaties

Reports about recent tax developments in India

Reports about recent tax developments in India

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

  • Delay in tax residency certificate not grounds for rejecting relief under tax treaty: The Mumbai Bench of the Income-tax Appellate Tribunal held the taxpayer was entitled to relief regarding the treatment of interest income under the income tax treaty between India and the United States because there were justifiable reasons for the taxpayer’s delay in furnishing a tax residency certificate and Form 10F. The taxpayer did not file the tax residency certificate during the course of the assessment proceedings but filed it before the appellate authority. The case is: Haresh C. Sheth. Read an August 2021 report [PDF 338 KB]

  • Tax treatment of payments for use of online advertising, marketing, and IT facilities: The Bangalore Bench of the Income-tax Appellate Tribunal held that payments made by the taxpayer to non-resident entities for use of certain online advertising, marketing, and information technology (IT) facilities were not “royalty” payments under the tax treaties between India and Ireland and India and the United States. Therefore, the tribunal concluded that these payments were not “chargeable to tax” in India and that there was no requirement to withhold (deduct) tax at source from these payments. The case is: Urban Ladder Home Decor Solutions Pvt. Ltd. Read an August 2021 report [PDF 392 KB]

  • Debentures issued in lieu of interest are deductible:  The Supreme Court of India held that debentures issued to lender financial institutions (in lieu of paying outstanding interest) are deductible. The Supreme Court observed that the interest was to be considered as having been “actually paid” with the issuance of the debentures because the debentures extinguished the liability to pay interest and thus was an allowable deduction. The case is: M.M. Aqua Technologies. Read an August 2021 report [PDF 350 KB]


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