India: Tax withheld at source and deductibility of related expenses; foreign tax credit on taxes withheld in Singapore

The KPMG member firm in India has prepared reports about recent tax developments.

The KPMG member firm in India has prepared reports about recent tax developments.

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

  • Appellate procedure; additional argument cannot initially be raised before appellate tribunal: The Bangalore Bench of the Income-tax Appellate Tribunal held that in a case concerning a taxpayer challenge to an assessment of the divided distribution tax, the taxpayer cannot initially raise an additional ground relating to the tax liability in the current appeal before the tribunal. Rather, the taxpayer can appeal the issue before the Commissioner of Income Tax (Appeals). In this matter, the tribunal observed that because the taxpayer had a bonafide belief that it could contest the dividend distribution tax liability as an additional ground before the tribunal, the taxpayer had not filed file an appeal before the Commissioner. Accordingly, the tribunal directed the Commissioner to take a liberal view regarding the taxpayer’s delay if the taxpayer were to perfect this appeal before the Commissioner regarding the dividend distribution tax liability. The case is: JCIT v. Texas Instruments India Pvt Ltd. Read an April 2022 report [PDF 333 KB]
  • Tax withheld at source and inability to deduct related expenses when not able to identify payees: The Bangalore Bench of the Income-tax Appellate Tribunal held that because the taxpayer did not withhold tax at source (often referred to in India as “tax deducted at source”), this affected the taxpayer’s ability to deduct certain amounts as expenses. Accordingly, because the taxpayer was liable to withhold tax at source from the year-end provision for certain expenses, the related expenses were disallowed. The tribunal further held that if the taxpayer is able to prove that the payees could not be identified in respect of particular expenses, then the mechanism under the tax withholding provisions would fail, and the assessing officer would not be allowed to demand tax and interest with respect to the tax related to those expenses. Still, the taxpayer has the burden of preparing a list of expenses for which payees could not be identified at the time of making provision and the reasons for the inability to identify the payees. The case is: Biocon Ltd. v. DCIT. Read an April 2022 report [PDF 361 KB]
  • Foreign tax credit available in India on taxes withheld on commission income in Singapore: The Delhi Bench of the Income-tax Appellate Tribunal issued a decision in a case concerning a claim for a foreign tax credit in India on taxes withheld (deducted) in Singapore with regard to commission income. The tribunal observed that the commission income was taxable in both Singapore and India pursuant to a provision of the residuary article of the India-Singapore income tax treaty and that the taxpayer was eligible to claim a foreign tax credit in India with respect to the taxes withheld in Singapore. The case is: Dynamic Drilling & Services Pvt. Ltd. Read a March 2022 report [PDF 447 KB]

 

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