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India: Determining “place of effective management;” export commission

India: Determining “place of effective management”

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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  • Writ petition is maintainable against initiation of reassessment proceedings: The Supreme Court of India held that a writ petition challenging the initiation of reassessment proceedings by issuing notices under Section 148 of the Income-tax Act, 1961 is maintainable before the High Court. A common issue in the batch of appeals was with regard to maintainability of writ jurisdiction under Article 226 of the Constitution of India challenging the issuance of notice under Section 148 of the Act. The case is: Jeans Knit Private Limited. Read a January 2017 report [PDF 369 KB]
  • Determination of the “place of effective management” of a company: The Central Board of Direct taxes issued guiding principles to be followed for determination of the place of effective management, concerning rules related to whether a company is a resident in India. Read a January 2017 report [PDF 311 KB]
  • Supreme Court grants immunity from prosecution on payment of sum specified in the settlement order: The Supreme Court of India granted immunity from prosecution to the appellant on payment of the sum specified in the settlement order, beyond the time granted by the settlement commission but before filing the special leave application with the Supreme Court. The case is: Sandeep Singh. Read a January 2017 report [PDF324 KB]
  • Sales promotion by pharmaceutical companies: The Mumbai tribunal held that expenditures incurred in holding seminars, sponsoring lectures, sponsoring travel and accommodation for conferences, small gifts with logo and brand names and cost of samples given to medical practitioners are in the nature of sales promotion expenditure incurred for the business of the taxpayer. Since the Indian Medical Council regulations are not applicable to pharmaceutical companies, no violation of any law is committed; and therefore, the expenditure is not impaired by Explanation 1 to Section 37(1) of the Income-tax Act, 1961. The case is: PHL Pharma P Ltd. Read a January 2017 report [PDF 335 KB]
  • Amendments to the “modified special incentive package” scheme: The cabinet has approved amendments that are intended to boost electronics systems design and manufacturing in India. Read a January 2017 report [PDF 294 KB]
  • FAQs on the taxation and investment regime for Pradhan Mantri Garib Kalyan Yojana, 2016: The Central Board of Direct Taxes has issued a circular clarifying certain tax and investment guidance in the form of 12 frequently asked questions (FAQs).Read a January 2017 report [PDF 302 KB]
  • Participation in management, associated enterprises: The Ahmedabad Bench of Income-tax Appellate Tribunal held that the mere fact of participation by one enterprise in the management or control or capital of the other enterprise, or the participation of one or more persons in the management or control or capital of both the enterprises does not make them associated enterprises under sub-section (1) to Section 92A of the Income-tax Act, 1961 unless any of the criteria specified in sub-section (2) to Section 92A is fulfilled.The case is: Veer Gems. Read a January 2017 report [PDF 413 KB]
  • GST council meeting decisions: At its ninth meeting, the GST council made decisions regarding dual control over the taxation base, cross empowerment, and implementation date of goods and services tax (GST). The GST deadline has now been deferred to 1 July 2017. Read a January 2017 report [PDF 315 KB] 
  • Export commission not taxable in India absent specific “fees for technical services” article in tax treaties: The Ahmedabad Bench of the Income-tax Appellate Tribunal held that the amount of export commission paid to non-resident commission agents is not taxable in India, since there is no specific fees for technical services article in respective tax treaties. Further, the non-residents do not have permanent establishment (PE) in India. The case is: Welspun Corporation Limited. Read a January 2017 report [PDF 378 KB]
  • Validity of penalty proceedings under Income-tax Act: The Hyderabad Bench of the Income-tax Appellate Tribunals held that since the Assessing Officer (AO) did not mention whether the notice issued was for concealment of income or for furnishing of inaccurate particulars of income, the notice issued by the AO under Section 274 read with Section 271(1)(c) of the Income-tax Act, 1961 is not valid and consequently, the order passed by the AO for concealment of income under Section 271(1)(c) of the Act is not valid. The case is: Sri Nilaya AR Projects. Read a January 2017 report [PDF 367 KB]

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