Income TaxDeemed Accrual of Income Income Deemed to Accrue or Arise from IndiaAn Extended Reading

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers Income Tax--Deemed Accrual of Income Income Deemed to Accrue or Arise from India--An Extended Reading Srivatsan Ranganathan In the case of Volkswagen Finance Pvt. Ltd v ITO [ITA No. 2195/Mum/2017 2020 TaxPub(DT) 1812 (Mum-Trib) an interesting issue emerged. In this case the assessee Volkswagen had to pay to USD 440,000 to an event management entity to bring in celebrity endorsement for the promotion of their Audi A8L model for which the event happened in Dubai. No TDS was done while remitting the amount of USD 440,000. the ITAT held that the said income could not fall into royalty but would squarely be covered under Section 9(1)(i). Since the celebrity belonged to USA but the payment to USA alone cannot be fit into Indo-US DTAA when the event happened in Dubai and such an aspect would certainly need to be seen from the aspect of business connection angle in the Income Tax Act. Hence the income was held to be one arising or accruing or deemed to accrue or arise from India. TDS obligations were held to be subsisting on the assessee. Learned author explains the judgment. The decision of Mumbai ITAT Volkswagen Finance Pvt. Ltd v ITO [ITA No. 2195/Mum/2017 Assessment Year 2015-16 rendered on 19th March, 2020] : 2020 TaxPub(DT) 1812 (Mum-Trib) is unique on many fronts. As to why it is so is what we are discussing here in. 1. Scope of income The scope of income in Section 5 decides what is taxable for an assessee based on his residential status. Simply said a resident is taxed on global income, a non-resident is taxed on income arising or deemed to accrue or arise out of India. The exempt portion for a non-resident from the arms of taxation are incomes which are earned outside India by a non-resident. 2. Income deemed to accrue or arise in India What is this income deemed to accrue or arise in India? This is subject to interpretations and based on the nature of income. Certain passive incomes are deemed to accrue or arise in India if they are received by a non-resident from India. Example of these being royalties, fees for technical services, Interest etc. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--Deemed Accrual of Income

Income Deemed to Accrue or Arise from India--An Extended Reading

Srivatsan Ranganathan

In the case of Volkswagen Finance Pvt. Ltd v ITO [ITA No. 2195/Mum/2017 2020 TaxPub(DT) 1812 (Mum-Trib) an interesting issue emerged. In this case the assessee Volkswagen had to pay to USD 440,000 to an event management entity to bring in celebrity endorsement for the promotion of their Audi A8L model for which the event happened in Dubai. No TDS was done while remitting the amount of USD 440,000. the ITAT held that the said income could not fall into royalty but would squarely be covered under Section 9(1)(i). Since the celebrity belonged to USA but the payment to USA alone cannot be fit into Indo-US DTAA when the event happened in Dubai and such an aspect would certainly need to be seen from the aspect of business connection angle in the Income Tax Act. Hence the income was held to be one arising or accruing or deemed to accrue or arise from India. TDS obligations were held to be subsisting on the assessee. Learned author explains the judgment.

The decision of Mumbai ITAT Volkswagen Finance Pvt. Ltd v ITO [ITA No. 2195/Mum/2017 Assessment Year 2015-16 rendered on 19th March, 2020] : 2020 TaxPub(DT) 1812 (Mum-Trib) is unique on many fronts. As to why it is so is what we are discussing here in.

1. Scope of income

The scope of income in Section 5 decides what is taxable for an assessee based on his residential status. Simply said a resident is taxed on global income, a non-resident is taxed on income arising or deemed to accrue or arise out of India. The exempt portion for a non-resident from the arms of taxation are incomes which are earned outside India by a non-resident.

2. Income deemed to accrue or arise in India

What is this income deemed to accrue or arise in India? This is subject to interpretations and based on the nature of income. Certain passive incomes are deemed to accrue or arise in India if they are received by a non-resident from India. Example of these being royalties, fees for technical services, Interest etc.