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India: Fees for technical services, UK treaty; interest converted into loan

India: Fees for technical services, UK treaty; interest

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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  • Applicability of provident fund contributions on allowances: The Supreme Court issued a decision as to whether certain allowances paid by an establishment to its employees would fall under the concept “basic wages” for computation of contributions towards a provident fund. Read a March 2019 report [PDF 578 KB]
  • Taxability of composite scheme of arrangements, demerger and amalgamation: The Delhi Bench of the Income-tax Appellate Tribunal issued a decision in a case concerning the tax treatment of a composite scheme of arrangement that includes the demerger of certain entities from the taxpayer-company as well as amalgamation of a wholly owned subsidiary with the taxpayer-company. The case is: Aamby Valley Ltd. Read a February 2019 report [PDF 825 KB]
  • Supply of certain engineering technical knowledge not taxable as “fees for technical service” under the UK tax treaty: The Mumbai Bench of the Income-tax Appellate Tribunal held that an amount received by the taxpayer from its affiliate with respect to consulting engineering services was not taxable as “fees for technical services” under Article 13(4)(c) of India-UK income tax treaty because the taxpayer did not “make available” technical knowledge, experience, skill, know-how, or process to the service recipient through the development and supply of a technical plan or a technical design. The amount received by the taxpayer was held to be business profits, and absent a permanent establishment in India, was not subject to tax in India. The case is: Buro Happold Limited. Read a February 2019 report [PDF 822 KB]
  • Deduction of interest not allowed on conversion of interest into a loan: The Supreme Court held that in view of section 43B of the Income-tax Act, 1961, the taxpayer was not entitled to claim a deduction of interest that was payable during the year but converted into a loan.  The case is: Gujarat Cypromet Ltd. Read a February 2019 report [PDF 694 KB]

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