India: Offshore commission income earned by foreign company not taxable in India (tribunal decision)

A tribunal decision concerning offshore commission income earned by a foreign company

A tribunal decision concerning offshore commission income earned by a foreign company

The Mumbai Bench of the Income-tax Appellate Tribunal held that offshore commission income earned by a foreign company was not taxable in India.

The case is: DCIT v. Credit Suisse (Singapore) Ltd.

The taxpayer, a Singapore-based company, was a registered Foreign Institutional Investor with the Securities and Exchange Board of India. The taxpayer entered into a contract with an Indian-based asset management company to promote the company’s mutual funds to investors outside of India and earned commission income under the contract. The assessing officer found that the commission income was taxable in India under Article 23 (income not expressly mentioned) of the India-Singapore income tax treaty.

The Commissioner of Income-tax (Appeals) held that the commission income was in the nature of business income taxable under Article 7 (business profits) of the treaty and in the absence of a permanent establishment in India was not taxable in India.

The Tribunal agreed that the commission income was taxable as business profits under the treaty and observed that because the taxpayer conducted all operations outside of India, the income could not be treated as “reasonably attributable” to any operations carried out in India.

Read a June 2022 report [PDF 441 KB] prepared by the KPMG member firm in India

 

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.