India: Exemption rule for educational institutions; beneficial owner of fees for technical services (court decisions)

KPMG reports about two recent tax-related court decisions

18 January 2023

The KPMG member firm in India prepared reports about two recent tax-related court decisions (read more at the hyperlinks provided below).

Rule that educational institutions engage solely in educational activities applies prospectively: The Orissa High Court held that the decision of the Supreme Court in the case of New Noble Educational Society, in which the Supreme Court held that an educational institution must engage solely in education or educational activities in order to qualify for exemption (reversing its earlier “principal” or “main” activity test), applies prospectively. Thus, the rule could not be invoked by the tax authority to challenge the taxpayer’s qualification for the exemption before the Supreme Court’s decision. The case is: Sikhya ‘O’ Anusandhan v. ACIT. Read a January 2023 report [PDF 414 KB]
Beneficial owner of fees for technical services (FTS): The Delhi High Court held that the taxpayer was the beneficial owner of FTS and eligible for the beneficial tax rate provided for FTS under the India-United States income tax treaty. There was no back-to-back arrangement between the taxpayer and its holding company for passing on the fees received to the holding company. The taxpayer was playing the role of a service provider after procuring the same from other group companies, and it had dominion over the fees received by it. The case is: CIT v. Fujitsu America Inc. Read a January 2023 report [PDF 283 KB]

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 3712, 1801 K Street NW, Washington, DC 20006.