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India: Marketing, business development services; conversion of loan into equity

India: Marketing, business development services

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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  • Marketing and business development services: The Mumbai Bench of the Income-tax Appellate Tribunal held that marketing and business development services are not in the nature of “fees for technical services,” but that the payment for such services is in the nature of business income. Because the foreign entity did not have a permanent establishment in India, such business income was not taxable under the India-Singapore income tax treaty. The case is: Fractal Analytics Pvt Ltd. Read a March 2018 report [PDF 554 KB]

  • Disallowed expenditure relating to exempt income: The Supreme Court held that the deduction of an expenditure relating to exempt income from a strategic investment / stock-in-trade was not allowed under section 14A of the Income-tax Act, 1961. When an expenditure is incurred with respect to earning exempt income, that expenditure is disallowed and cannot be treated as a business expenditure. The case is: Maxopp Investment Ltd. Read a March 2018 report [PDF 496 KB]

  • Conversion of loan into equity as part restructuring: The Kolkata Bench of the Income-tax Appellate Tribunal held that a transaction involving the conversion of a loan into equity and completed by the taxpayer by means of book entries (without any physical outflow of funds) was not in violation of provisions of section 269T of the Income-tax Act, 1961. The case is: Arkit Vincom Pvt Ltd. Read a March 2018 report [PDF 666 KB]

  • Deduction under section 10AA: The Delhi Bench of the Income-tax Appellate Tribunal held that once a claim for deduction under section 10AA of the Income-tax Act, 1961 has been accepted in the first year of the taxpayer’s operations, then that claim cannot be withdrawn in subsequent years after examining the factors that were necessary for maintaining the claim in the first year of the claim. The case is: Macquarie Global Services Pvt Ltd. Read a March 2018 report [PDF 561 KB]

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