1. 5 Big Income Tax Dilemma Faced by
Non-Residents/ Group Entities in India

2. `
PAN: A Chinese
Puzzle
Taxing the
Digital Frontier:
Capturing
Revenue in the
Digital Age
Trends in
taxation:
Embracing the
Future
AI at the Helm:
Charting a New
Era of
Intelligent
Taxation
1 2 3 4 5
Income
Reassessment:
When the Tax
Department takes
a second look!
Agenda
Untangling the
tax web for
other sources
of income

3. AI at the Helm: Charting a New Era of Intelligent Taxation

4. `
Digital Transformation in Tax Administration: Connecting the Dots
AI/ Data Analytics/ Machine Learning/ Blockchain - being extensively used in tax administration to
integrate reporting made by transacting parties, to identify and detect high-value/ high-risk
transactions for examination
CORPORATE
INDIVIDUAL
Softex
Forms
FCNR
Account
Bank
Statements
Customs
Records
USA: Compliance Data Warehouse
(CDW) collects data from several
databases and using forward
looking data analysis, examines
non-compliance
Australia: ANGIE (Automated Network
& Grouping Identification Engine)
creates maps of corporate entities/
related transactions across time
UK: Implemented big data
analytics in income tax segment
and observed an increase of
$5.4 billion in taxes
Italy: VeRa algorithm used to
compare tax filings.
1 million high-risk cases identified
Canada: Compares wealth based
on public sources with tax
returns. Sources public registers,
bank accounts to identify
undeclared assets and spending
Singapore: In-house network
visualizer with graph database
used to analyse multi-layered
relationships between entities
during audits/ investigations
Among countries belonging to OECD, 38% used AI or machine learning in tax administration in
2019, while another 34% were in development stage
As of May 20221, India has entered into 21 Tax Information Exchange Agreements (TIEAs) - Apart
from exchange of information, representatives of one country may be permitted to conduct tax
examinations in territory of another country, including interviews of individuals and examination of
records
1Source: Publicly available media articles
Visa
Records

5. `
INCOME TAX1
• Income Tax Transaction Analysis Centre - leverage data analytics in tax administration and undertake
tasks related to data integration, data processing, data quality monitoring, data warehousing, master
data management, data analytics, web/ text mining, alert generation, compliance management,
enterprise reporting and research support
• Compliance Management Centralized Processing Centre - Campaign Management Approach
(consisting of emails, SMS, reminders, outbound calls, letters) to support voluntary compliance
• Analyse pattern of inconsistencies between declared income and expenditure
• Combined harnessing of databases containing IT returns, TDS/ TCS statements, IT forms and forms
from multiple Regulators (say, MCA, RBI, GST etc) and social networking sites etc
Project Insights
Big Data Management System
Machine Learning
Project ADVAIT & BIFA
360-degree vision profiling
Indian Revenue's Initiatives
OIDAR
registration
and filing
EQ Levy 2.0
payments
SFT
reporting
Scrutiny of NR
investments
AIS
Statements
Filings with MCA
INDIRECT TAX1
• Expand taxpayer base and enhance tax compliance, pilot underway for Geotagging of
premises and Biometric authentication
• Identify fraudulent applications for input tax credits via false GST registrations
• Identify fake purchase invoices for claim of input tax credit
PROPERTY TAX1
• Discrepancies in data sets and ground survey, cross-verified using AI tools and
satellite imaging for property tax assessment
Integrating natural
intelligence with AI –
need for human
intervention
Data Privacy and
Confidentiality
Public disclosure of
Algorithms/
Selection
Parameters/ Model
Weights alike
Annual CASS
Circular?
Evolving tax laws
and differing
interpretations of
subtle provisions
The road ahead on technological advancements
1Source: Publicly available media articles
Digital Transformation in Tax Administration: The Game Changer

6. Dilemma 1 PAN in India: A Chinese Puzzle

7. `
Purchase of
Debentures/ Bonds
> INR 50,000
Sale/ purchase of
unlisted securities >
INR 100,000 per
transaction
Sale/ purchase of listed
securities (other than
shares)
> INR 100,000 per
transaction
Opening Bank/
Demat* Account
* Private Co shares could also
be dematerialised
NR required to quote PAN for designated transactions carried out in India [Section 139A(5)(c) rw Rule 114B]
1 Non quoting of PAN could trigger penalty of
INR 10,000 for each default
[Section 272B]
At the discretion of the
Assessing Officer
Alongside, PAN of NR required for SFT Reporting by Indian Reporting Entity
[Section 285BA rw Rule 114E]
Common transactions to be reported in Statement of Financial Transactions (SFT) in Form 61A
Issuance of bonds or debentures
Issuance of shares (including share
application money)
Buy back of shares by listed
companies
Dividend
2
- SFT filed by Indian Resident Entity could be considered defective by issuance
of Defect DQR
- Penalty for inaccurate statement: INR 50,000 [Section 271FAA] on Indian filing
entity
What if PAN of NR
recipient is not quoted?
≥ INR 10,00,000 per FY
≥ INR 10,00,000 per FY
≥ INR 10,00,000 per FY
No monetary threshold prescribed
PAN required by NR for EQ Levy 2.0 compliances in India
3
NR
E-commerce
Operator
2%
Open Bank account in India for facilitating deposit of taxes
Quarterly deposit of EQ Levy 2.0 - 7th of month succeeding the
quarter
Annual Compliance: Equalization Levy Statement (Form 1)
Penalty for failure to deposit
Interest for late deposit of tax 1% per month or part of month of
delay
Sum equal to the amount of
EQ Levy 2.0
INR 1,000 per day of default
Penalty1 for failure to furnish statement
Consequences of non-compliance
1Total amount of penalty cannot exceed the amount of tax in arrears
Tax Officer can suo moto allot PAN having regard to
nature of transaction irrespective of whether tax is
payable [Section 139A(2)]
Does NR need a PAN in India: At the Crossroads

8. `
Availing Tax Treaty benefit on India sourced income
4
Documents required
TRC from Revenue
Authorities of country
of residence of NR
Electronic Form 10F
NR to obtain PAN
for creating e-filing
profile?
Authorised Signatory
of NR to obtain DSC
to facilitate e-filing
Relaxation for NRs from e-filing Form 10F till September 30, 2023*
NR not having PAN in
India
NR not required to have PAN
as per relevant provisions of
the IT Act
AND
Does this mean only cases other than those covered under
discussed in Slide 7 are eligible for relaxation?
2
1 3
Cases where online Form 10F (and hence, PAN) may not be required
Where TRC contains prescribed
information
• Status
• Country of incorporation or registration
• TIN or unique identification number
• Period for which TRC applicable
• Address in country of residence
TRCs containing
prescribed
Information1
- Germany
- Sweden
- Singapore
- Brazil
- Australia
- Malaysia
TRCs not
containing
prescribed
Information1
- USA
- UK
- Spain
Issues around TRC
• Fiscal period could be calendar year • TRC not available at the time of transaction
• TRC issued only for specified income • Application for TRC made, not obtained
Judicial Interpretation2
Subordinate legislation (Notifications/ Circulars) cannot
impose additional conditions
Unilateral amendment of domestic law having the vice of
Treaty override may not be permissible
Ratio of following decisions could also apply:
(i) Eligible assessee cannot be denied Treaty
protection on grounds of non-furnishing of TRC
(ii) Section 206AA cannot override Treaty rate where
NR does not have PAN in India
1Refer Annexure 5 for sample TRC’s
2Refer Annexure 4 for caselaw citations
To avoid higher withholding tax rate of 20% [Section 206AA]
5
Reality: Relaxation from furnishing PAN by NRs, if following
information furnished to resident payer
Name, e-mail id,
contact number,
address
TIN or unique
identification
number
TRC
Does NR need a PAN in India: Up in the Air
* Notification No: DGIT(S)-ADG(S)-3/e-filing Notification/ Forms/ 2023/13420

9. `
Income Tax
Return
Tax Audit
Report
TP Report/
documentation
Event
Passive income in India taxed
as per the IT Act
(Royalty, FTS, Interest and Dividend)
Passive income in India, taxed
as per Tax Treaty
(Royalty, FTS, Interest and Dividend)
Active income in India
(Other than Royalty, FTS, Interest
and Dividend)
Non-taxable income, availing
Tax Treaty benefit [Restricted
definition, say 'make available'
under Treaty, PE vs SEP etc]
Non-taxable income
(Reimbursements)
Transaction with AE
Passive income in India taxed
as per the IT Act
(Royalty, FTS, Interest and Dividend)
Passive income in India, taxed
as per Tax Treaty
(Royalty, FTS, Interest and Dividend)
Active income in India
(Other than Royalty, FTS, Interest
and Dividend)
Transactions with third parties in India
TAX RETURN
1
1
Dividend, Interest
Fees for Technical Services
Royalty
Exemption from filing tax return in India for certain streams of income [Section 115A(5)]
Subject to tax withholding in India at rates prescribed under the IT Act
2
TP compliances by NRs
2
Compliance obligation on "Every Person" Includes NRs [Section 92E rw 2(31)]
Can reliance be placed on Indian AEs TP report and documentation?
Courts* have held NR to furnish TP Report and maintain documentation independently1
Penal consequences
Non-filing of TP Report
Failure to report a transaction in TP Report
INR 100,000
2% of value of international transaction
Non-maintenance of TP documentation
Is TP compliance/ ITR mandatory in the absence of taxable income in India?
Contradictory rulings1 – Machinery section cannot be called to aid where no liability/
charge of tax
TAXABLE
INCOME
NR compliances in India: Play by the Books
1Refer Annexure 4 for case law citations
1
2

10. `
NON-RESIDENT
Compliance trigger under
the Indian Income tax law
Obtaining PAN in India
Default jurisdiction allotted to NRs if not chosen
Ward/ Circle/ Range/
Commissioner
Circle International
Taxation 1, Delhi
Area Code DLC
AO Type C
Range Code 35
AO Number 1
COMMON REASONS FOR CHANGE IN JURISDICTION?
PROCESS FOR CHANGE IN JURISDICTION
File application
with existing
CIT of NR
Letter to capture:
- Reasons for change in
income tax jurisdiction
- Proposed income tax
jurisdiction
India finance and tax team
of the group operates out of
the registered office of
India group entity
Ease of representation for
assessment and appellate
proceedings
Geographical proximity of
the Company personnel and
authorized representatives
Administrative
convenience and
managing operational
challenges
Follow-up with
the CIT on the
application
Transfer Order
under Section
127 to be
issued by
existing CIT
Power to accept the
application for change in
jurisdiction lies with the
existing CIT and not the
proposed CIT
Challenges for transfer of
jurisdiction if
assessment/ appeal
proceedings ongoing and
outstanding tax demands
US Co (Parent)
I Co
(Subsidiary)
100%
Royalty
income
Income-tax
jurisdiction
(Bengaluru)
Nexus of tax
jurisdiction
with source of
income1
1Notification No 57/ 2014 dated November 3, 2014
Change in NR PAN Jurisdiction: Wrestling with complexities

11. Dilemma 2
Income Reassessment: When the Tax
Department takes a second look!

12. `
CORPORATE
Investments made by NRs and resultant
income (buy back/ dividend/ interest)
(Reported in SFT)
Department issues notice to several
US, British and French
multinationals that have closely held
subsidiaries in India
CREATIONS INVESTMENT LLC
DEPARTMENT PETITIONER
Section 148
notice issued
questioning NR
private equity
investment of
INR 2350 Mn
Investment is
capital account
transactions
clearly not liable
to tax in India
Notice issued by Delhi HC to Department, hearing on December 6, 2023
- Source of funds invested in India
- Basis of valuation
- Passport details of key
executives and their travel
history to India
- TRC
- Details of FEMA compliance
Next steps on receiving notice1
Check if information
relied upon by
Department is valid
If amount involved >INR
5 Mn, ensure notice falls
within 10 years
limitation period
Check for sanction/
approval from higher
Authorities
Consequences of
non-response to notice
• Tax Officer can make best
judgment assessment
• Adverse order with
demand and interest
• Imposition of penalty
Ensure notice is
issued within
limitation period of 3
years from end of AY
This decision
could have
repercussions on
several other
similar cases
E-commerce supply of goods or
services (Reported in OIDAR compliance/
EQ Levy statements)
Royalty/ FTS received from resident
payer (Reported in Form 27Q or EQ Levy
statement by resident payer)
01
02
03
04 Movement of employees of F Co to
India (Detected through scrutiny of
India group company)
Infrastructure, if any owned/
managed/ operated by F Co in India
05
Purchase/ sale of immovable property
Investment in securities/ mutual fund
Outward remittances from India
Deposit in FCNR account
Withdrawal of PF deposits
INDIVIDUAL
01
02
03
04
05
Details sought include:
• Source of fund for making investments/ deposits
• Employer details
• Form 16 issued by employer, if any
• Bank Account details
Transactions which have/ could lead to initiation of re-audit on NRs
Income Tax Department issuing re-assessment notices to NRs mainly based on
Exchange of information with other Government
departments (MCA/ GST/ RBI/ DPIIT)/ countries
Form 61A (SFT) filed by resident entity reporting NR
investments/ dividend paid/ buy back
Reporting/ filings of financial transactions by banks/
financial institutions
TDS Statements (Form 27Q)/ Form 15CA/
Form 15CB filed by resident entities
FDI/ ODI filings made by resident entities
Data generated by risk management
system/ contained in CBDT's Insight
Portal
Reassessment notices issued to NRs: Hitting like a bolt from the blue
1NR to obtain PAN if
not obtained

13. Dilemma 3
Taxing the Digital Frontier: Capturing
Revenue in the Digital Age

14. `
Vehicle
Aggregators
Online
Marketplace
Possible NR Businesses under the ambit of EL 2.0
Online Wallets/
Gateways
Cloud Computing
Services
Matrimony &
Dating Services
Online Food
Delivery Platforms
Online Content/
SaaS/ PaaS
Online
Entertainment
Online Auction
and Gaming
Search Engines &
Research
Platforms
Online
Advertisement
Online Travel
20
60
100
113.6
205.8
390
386.4
FY17 FY18 FY19 FY20 FY21 FY22 FY23
EL Collection (2% & 6%
categories)
(in INR Mn)
Digital Levy
EL Collections remained at almost same level during FY 22 and FY 23, inspite of
growing digital business, on account of uncertainties around BEPS Action Plan
implementation to tackle tax challenges of digitised world
Major Indian cities contributing to EL
collection
Bengaluru Hyderabad
Delhi Mumbai
Source: Mint Research and Business Standard
NR E-commerce Operator
(Turnover > INR 20 Mn)
Buyer/ Service Recipient
Own/ Operate/ Manage Digital/ Electronic
Facility/ Platform
Online sale of goods/services
Person Resident in India NR in specified circumstances
Person buying goods/ services using IP address located in India
Gross
Consideration
1 2
3
To pay EL 2.0 at
2% of
• Acceptance of offer for sale
• Placing or acceptance of
purchase orders
• Payment of consideration
• Supply of goods or provision of
services (partly or wholly)
Equalisation Levy 2.0: The new cash cow

15. `
Proviso to Section 163 of FA 2016
(Exclusion from EL)
Explanation 1 to Section 10(50) of IT Act
(Exclusion from income exemption)
Consideration taxable as Royalty
or FTS in India under IT Act read with
DTAA is excluded
Nuances in Terminology
Judicial Interpretation
A sum is chargeable to tax if it has
the potential of being assessed to tax
irrespective of whether tax is finally
levied*
Taxable connotes tax payable (ie
tax that is due to be paid)*
Income chargeable to tax as Royalty
or FTS in India under IT Act read with
DTAA not eligible to claim exemption
(clarificatory amendment)
Taxable as Royalty / FTS under IT Act
and DTAA and taxes paid
Taxable as Royalty/ FTS Description EQ Levy 2.0
Scenario
1
2
Software Royalty not taxed by virtue of
definition under DTAA and favourable
judicial precedence
Chargeable to tax but not taxable
3
Chargeable to tax but not taxable
FTS not taxable by virtue of "make
available" clause in DTAA
4
Transactions where EQ Levy at 2% is already
paid and subsequently ruled as Royalty/ FTS
by Revenue Authorities
Taxpayer Revenue Authorities
4
Courts have held that since EQ Levy at 2% is already
applied on payment under consideration, TDS to be
deducted at 8% (ie 10% - 2%)1
1Refer Annexure 4 for caselaw citations
Relief restricted
to TDS – No
discussion on
chargeability
No mechanism
to claim credit in
RoI of EQ Levy
paid
No mechanism
of claiming
refund of EL
Transactions where EQ Levy at 2% is already paid and
subsequently ruled as Royalty/ FTS by the Revenue
Authorities
Equalisation Levy 2.0: Decipher Implicit connotation

16. `
Website hosting, Database/
Cloud services
Supply of software and subsequent
updates, Internet of Things, Digital Healthcare
solutions, SEOs, SEMs, Online trading platforms,
Digital mailroom services, VR/ AR tech solutions
Subscription based media
(News, magazines, OTTs, Music
streaming, Online gaming),
Digital payments, Online
consultancy, E-auctions
Online supply of digital content (music, films,
games, entertainment broadcasts), distance
teaching- recorded classes
NR service provider to remit GST at
18% on B2C transactions
Important for NR service supplier to ask
the Indian service recipient for GST
Registration No, as non-submission of
this number could mandate the NR
service supplier to register in India and
discharge 18% GST on B2C
transactions B2B - GST under reverse charge mechanism, Indian
resident registered, service recipient to deposit
18% of invoice value and claim input tax credit
Cost step-up for NR B2C service providers
EQ Levy 2.0 could be applicable
on NR for B2B as well as B2C
supplies
No de-minimus turnover threshold for
OIDAR GST trigger. Applies even when
value of supplies to Indian markets is USD 1
OIDAR Services - Status Quo
Delivery of service through internet
or an electronic network
Essential automation
Human intervention
Conditions disabled/ enabled for OIDAR services (FA, 2023)
Online bookings-Events, Hotel
accommodation
Webinars
Live classes
Inclusions to Non-taxable online recipient (FA, 2023)
Unregistered person receiving OIDAR services for
Business purposes
Non-business purposes
Web- based learning plus Q&A with tutor
GST on OIDAR B2C supplies by NR corporations: Skating on thin ice

17. Dilemma 4
Untangling the Tax Web for other
Streams of Income

18. `
• 'Right to re-produce computer software' distinct from
'Right to use computer software'
• Transfer of all or any right in copyrighted article
(software) mandatory for classification as 'Royalty‘
• Designation given to transaction is not a decisive factor,
true effect of agreement needs to be considered
Transactions tested
• Import of software directly by end user
• Import of software by Indian distributor/
reseller
• Import of software from NR distributor/ reseller
• Import of software embedded in hardware
Principles emanating
No tax withholding in India for similar new age transactions on same principles
Access to computer software
[EY Global Services Ltd vs ACIT [2021] 133 taxmann.com 157 (Delhi HC)]
PaaS and SaaS providers/ Cloud computing service
[MOL Corporation vs DCIT [2022] 137 taxmann.com 286 (Delhi ITAT)]
Database subscription
[OVID Technologies Inc vs DCIT [2022] 138 taxmann.com 229 (Delhi ITAT)]
Online advertisement and marketing/ Bulk email platform
[Urban Ladder Home Decor Solutions (TS-773-ITAT-2021) (Bangalore ITAT)]
Webhosting and Cloud Computing
[Infosys Limited vs DCIT IT(IT)A Nos105 to 115/Bang/2021 (Bangalore ITAT)]
Cross border inter-group cross charges
[Autoliv ASP Inc vs DCIT [2022] 135 taxmann.com 263 (Delhi ITAT)]
Supreme Court of India1, put a happy end to 20-year-old dispute of taxation of cross-border payments made for import of software for sale in India, by delivering landmark
judgement in favour of taxpayers, stating that such transactions shall not be taxable as 'Royalty'
The Apex Court verdict on Software Royalty Tax: Fate for similar transactions
1Refer Annexure 4 for caselaw citations
Refer Annexure 3 for Beneficial Ownership

19. `
10%
15%
20%
- File ITR
- TRC
- Form 10F
- File ITR
- TRC
- Form 10F
10%
10.92%
- File ITR
- TRC
- Form
10F
Exempt
from filing
ITR
Tax Rate under Treaties
Country Rates
Singapore
10%
Switzerland
Germany
Netherlands
Malaysia
Luxembourg
USA
15%
UK
Philippines
Mauritius
Australia
Demark
20%
Italy
IT Act Tax Treaty
Which is beneficial?
Erstwhile
provisions of
the IT Act
10.92%
(10 % base rate
plus maximum
surcharge of 5%
and cess of 4%)
FA, 2023
(wef April 1, 2023)
21.84%
(20% base rate
plus maximum
surcharge of 5%
and cess of 4%)
IT Act
Which is beneficial?
Tax Treaty
Applicable
rate (A)
Applicable
rate (B)
Additional
tax in India
(A-B) =
4.08%
Erstwhile What's New!
Applicable
compliances
Applicable
compliances
Countries that do not have Tax Treaty with India would
definitely bear the full brunt of increased TDS, a smaller list
though
Business Income vs Royalty – Taxation on net vs gross
• Increased rate assumes 50% profitability in India
• NRs likely to transfer cost of higher rate to Indian companies, through tax
protected agreements or grossing-up arrangements
Additional tax
in India (A-B) =
9.08%
Tax on Royalty/ FTS: A moving puzzle
Refer Annexure 3 for Beneficial Ownership

20. `
1
FVOC in USD1 (1 USD = INR 50) 20
Less: Cost of acquisition in USD1
(1 USD = INR 45)
(22)
Capital Gains/ (Loss) in USD (2)
Particulars Amount Amount
20
(17.75)
2.25
Scenario 1 Scenario 2
In case of loss
Claim LTCL in RoI
Recent Mumbai ITAT Ruling3 changed
modus operandi for LTCG computation
for NRs
Computation of LTCG for NR
(1st proviso to Section 48 of IT Act)
Taxpayer’s position (transfer of unlisted shares
or debentures by NR)
Tax at 10%2
2A
Computation of LTCG at 10%
[Section 112(1)(c)(iii) of IT Act]
2B
Points to Ponder
• Does the ruling defeat the intention of legislature to provide
neutralisation of foreign exchange fluctuation to NRs?
• Can the denial of capital loss in foreign currency terms and taxation of
capital gains in INR terms be a subject matter of challenge on grounds of
being 'inequitable'?
• Is benefit of neutralisation of exchange rate fluctuation available only on
STCG from transfer of unlisted shares/ debentures?
1 Computed in accordance with Rule 115A of IT Rules
2 Plus applicable Surcharge and Health and Education Cess
3Refer Annexure 4 for caselaw citations
In case of gains - switch-over to Section 112(1)(c)(iii) of IT Act
FVOC 1000
Less: Cost of acquisition (800)
200
Particulars Amount
Capital Gains/ (Loss)
Tribunal's decision/ Revenue’s contention
Section 48 does not apply – Only Section 112(1)(c)
applicable
Key principles from ITAT Ruling
"Generallia specialibus non-derogant" ie specific provisions
(Section 112) prevail over general provisions (Section 48)
Section 112 also provides mode of computation of capital
gains on sale of unlisted shares along with tax rate
If capital gains should be determined only as per Section
48, it would render computation mechanism under Section
112(1)(c)(iii), otiose and redundant
Denied foreign
exchange
neutralisation
benefit and
resulting capital
loss
Section 112 does not provide for 're-computation' of capital
gains for the purpose of applying the rate
Capital Gains on FDI exits – Rupee Gains vis-à-vis Dirham loss, a wake-up call
Capital Gains/ (Loss) in INR
(1 USD= INR 50)
(100) 112.5

21. `
Sunset Clause
Exemption from filing RoI
• Interest income on RDB is
only income in India
• Tax withheld in accordance
with IT Act
Reference made to permission
granted by RBI to issue
RDBs outside India
Benefit of lower withholding tax rate
extended to INR offshore bonds
CBDT Press Release dated October 29, 2015 Memorandum to Finance Bill 2017
Proposed to extend the
benefit of Section 194LC
to RDB issued outside
India
Indian Company Non-resident
Issue of
RDB
Could "Overseas" mean
"Issued to person
outside India"?
Beneficial tax rate
and withholding tax
rate on interest
income
5%1
1Plus applicable Surcharge and Health and Education Cess Refer Annexure 3 for Beneficial Ownership
TAX RETURN
June 2023
30
Section 194LC
Interest payable in respect
of monies borrowed from a
"source outside India" by
way of "issue of RDBs"
Literal Interpretation
Equivocacy on
applicability of
lower rate
Issue of RDBs Issue of RDBs "Outside India"
Current FEMA framework – For INR denominated ECBs
RDBS
Issued
"overseas"
Private
Placement
overseas
Listed on
overseas stock
exchange Cos Act does not permit Indian
Co to issue bonds by private
placement outside India
Implications (benefit not allowed)
• Higher withholding tax rate: 40%1 (F Cos)
30%1 (other NRs)
• Obtain PAN and furnish Form 10F and TRC (to avail
Treaty benefit)
• Furnish RoI in India
VS
Interest on RDBs: Interpretational issues upsetting the apple cart

22. `
Country
Rate of
Tax
Date of joining
OECD
Lithuania 5% July 5, 2018
Colombia 5% April 28, 2020
Slovenia 5% July 21, 2010
Example of DTAAs with OECD member countries
with lower tax rate on dividends
• Can taxpayers still resort to judicial interpretation?
• Can pendency of SLP by Revenue be reason for
rejection of lower rate?3
• Does concept of self-operational (France) vs non-self
operational (Switzerland) MFN clause become
redundant ?
• Impact of MFN clause on other steams of income viz
FTS - importing "make available" clause etc
Dividend Income
Tax rate under Tax
Treaty beneficial ?
Eligible to claim Tax
Treaty benefit?
TDS at 20%1 under
Section 115A
MFN clause in Tax
Treaty?
TDS rate as per Tax
Treaty
TDS rate as per third
country beneficial
Tax Treaty
Yes
Taxability of dividend income for NR
shareholders
No
Yes
Yes
No
No
1 Plus applicable Surcharge and Health and Education Cess
2 CBDT Circular No 3/ 2022 dated February 3, 2022
CBDT Clarification2 on interpretation of MFN Clause
Separate notification
issued by India for
importing the benefits of
favourable third country
Treaty
India limits taxing
rights in relation to rate
or scope of taxation in
favorable third country
Treaty
Favorable third country
Treaty is entered between
India and State (B) which
is member of OECD at
the time of signing the
Treaty
Favorable third country
Treaty is entered after
signature/ entry into
force of subject Treaty
India
State A
[Netherlands, France,
Swiss Confederation,
Sweden, Spain and
Hungary
State B
Treaty with
beneficial tax rate
or scope more
restricted
Subject Treaty Favorable third
country Treaty
MFN clause:
Beneficial tax
treatment provided
to State B shall be
accorded to
State A
Operation of MFN Clause
Delhi High Court
Treaty with
MFN
Clause
Favorable rulings3 on lower tax rate on dividend invoking
MFN
• Concentrix Services Netherlands BV
• Nestle SA
• Deccan Holdings B V
• Cotecna Inspection SA
Major Arguments by Revenue in SLP preferred
before Supreme Court
• MFN Clause not backed by notification cannot be
implemented by Court’s writ
• Need for concurrency in OECD membership and
entering of treaty into force
5%
10% or
more
Key Questions
Dividends: Striking a chord with MFN clause
3Refer Annexure 4 for caselaw citations
Refer Annexure 3 for Beneficial Ownership

23. Dilemma 5
Trends in taxation: Embracing the
Future

24. `
Discretionary
Powers of
Tax Authorities
(cause for controversy)
Trends in taxation: Embracing the Future
Angel Tax: Valuation at
centre stage
Additional Burden to Prove
'Source of Source': Crossing
a river to get water
Foreign Tax Credit:
Caught in a cleft stick
Section 204 Amendment:
More than meets the eye?
Extra-territorial reach of
Capital gains tax
Place of Effective Management
Supply of FoC assets to
India by foreign group
entities: Coast is not clear
Indian Government has made several
notable developments in the taxation of NR
with steps taken to strengthen the Indian tax
systems and ensure that NRs sourcing
income from India are appropriately brought
within the tax net. It, therefore, becomes
imperative for NRs to get down to brass
tacks and learn the ropes of Indian tax law
that could have a bearing on commercial
transactions with India. This section covers
certain subtleties under IT Act and their
impact which could be relevant to NRs
Secondment: A Tug of war
with service tax
Changing Dynamics of
PE in India

25. `
Foreign Parent Co
India Group Co
Transfers
equipments
free
of
cost
Re-exports
equipment's
pursuant
to
project
completion
Taxmen's view
• Value of FoC assets is income in hands
of I Co
• To avoid increase in cost base, Parent Co
not shifting cost of FoC assets to Indian
Co
• Other 'Arrangements' to reduce Indian
taxes (indirect consideration)
Taxpayers’ Arguments
• Legal ownership of FoC assets always
with the overseas Parent Co
• Assets re-exported pursuant to project
completion
• No real income accrued
• FoC assets – Capital in nature
• FoC assets not received as consideration
for services provided - hence not 'benefit'
1 Refer Annexure 4 for caselaw citations
Treatment of FoC assets in the books of
F Co. Write-offs clearly detrimental!
Mapping of assets imported on FoC
basis with subsequent re-exports,
Reconciliation is the key
Standard Operating Procedures, if
any, for usage of FoC assets in India
Mandate I Co to submit usage
report(s) of FoC assets
Legal arguments by taxpayer predominantly derive strength from facts established, documentation
endorsing the same and by establishing robustness of internal procedures
Judicial precedents1 have upheld that Indian Co
derives benefit from FoC/ loan assets provided
by F Cos, taxed under Section 28(iv) of IT Act
Tax ramifications for Indian
Co and from overall group
tax cost perspective
− No guidance available on valuation
mechanism for determining value of benefit
− Not delved upon taxability of assets
re-exported, post usage in India
Intercompany service agreement
and global policy, capturing the
essence of arrangement
Bailor-Bailee relationship to be
established
Overall percentage of
scrapped/ discarded FoC
assets, if significant, could
establish benefit to I Co
Period of usage of FoC asset in
India, converging with useful
life of asset, could establish
benefit to I Co
Pattern of initiation of request for
shipment of FoC assets (whether by
F Co or I Co) also a key determining
factor
Supply of FoC assets to India by foreign group entities: Coast is not clear

26. `
EQ Levy 2.0
• Challan
• EQ Levy annual statement
Withholding taxes
• Form 16A
• Form 26AS
Transaction
Based Report
Direct tax payments
• Challan
• Form 26AS
EQ Levy 1.0
• EQ Levy annual statement
filed by I Co
• Confirmation from I Co
Taxes paid/ discharged in India
Eligibility of F Co to claim tax credit in home country in respect of taxes paid in India
F Co
DTAA
Governed by
Respective Foreign
Country Laws
General restrictions/ conditions imposed by Foreign Countries for claim of FTC
Filing of a specific form
(Ex: Form 1118 in US)
Tax payment in India to be
substantiated by
documentary evidence, either
at the time of filing the form or at
a later scrutiny stage
Tax credit for income offered to
tax as per tax period of home
country vis-à-vis financial year
in India
No tax credit may be allowed for
F Co having tax losses
Credit for taxes paid by I Co on
profits from which dividends are
paid to F Co may also be
claimed by F Co (subject to
shareholding criteria)
[Underlying tax credit]
• Mechanism of claiming tax credit
in respect of taxes claimed as
refund in RoI but denied by
Revenue Authorities in India – A
double whammy
• Can tax credit be claimed for
taxes withheld at higher rate due
to non-availability of prescribed
documents to claim DTAA benefit
– Will credit be restricted to DTAA
rate?
Points to Ponder
EL (being levied on gross consideration and not on
income) may not be eligible for tax credit in
Foreign Country as not levied under IT Act
US Regulations/ Tax Treaty -
Digital taxes not nexus based and
not in the nature of income tax –
not qualify for tax credit
Foreign Tax Credit: Caught in a cleft stick

27. `
Particulars
Effective from April 1, 2022
Proving "Source" Proving "Source of Source"
Type of taxpayer All taxpayer Companies All taxpayers
Nature of credits covered Any sum
Share Application, Share Capital,
Share Premium
Loan, borrowing or any
such sum
Applicability in case of
NR investor/ lender* Yes No Yes
LOANS AND
BORROWINGS
NR investor/ lender does not include venture capital fund or venture capital company as per Sec 10(23FB)
Initiative to counter the practice of conversion
of unaccounted money through masquerade
of loan/ borrowing
6 1
2
3
4
5
Whether "any such sum" includes proceeds from
issue of debentures/ CCDs or trade advances taken
during the normal course of business?
Can tax officer investigate "Source of Source" even
for share capital transactions? [Section 68 of IT Act
(second proviso)]1
NR lenders/ investors may be approached for private
financial documents to prove credit worthiness
and genuineness of source:
• Financial Statements
• Income Tax Returns
• Bank Account
Statements
• KYC Documents
• Board Resolutions
approving investment in/
lending to I Cos
Tax officer may issue notice under Section 133(6) of
the IT Act to source of amounts disbursed as loans/
borrowings or any such sum to I Co1
• Cash credits taxable at
60% in hands of I Co
• Higher surcharge of 25%
• No set-off of losses/
expenses against Cash
Credits
• Penalty – 10% of taxes
• Interest and other
expenses relating to loan
could be disallowed
Key
Considerations
Once initial onus of proving identity, genuineness of
transaction and creditworthiness of parties is
discharged, can tax officer proceed to make further
enquiry with investor/ lender?1
For
India
Co
Additional Burden to Prove 'Source of Source': Crossing a river to get water
1Refer Annexure 4 for caselaw citations

28. `
Overseas Group
Co
Indian Co
Seconded
employees
1
F Co employees
seconded to I Co
Salary flow
2
Reimbursement
of salary
expense
3
• Reimbursement considered as consideration for "contract for service" instead of "contract of service", service recipient liable to pay service tax on reverse charge basis
• Interpretation of ruling indicate that SC has considered F Co to be economic employer of the employees seconded to I Co
SC Ruling on service tax matter:
Northern Operating Systems
Private Limited1
Secondment: A Tug of war with Service Tax
Principles under income tax to determine whether seconded employees
are under employment of I Co and services not to be considered as FTS Snapshot of few income tax rulings1 on secondment arrangement
Delhi
Bangalore
Mumbai
• AT & T Communication Services (India) P Ltd (ITAT)
• Yamazen Machinery and Tools India (P.) Ltd. (ITAT)
• Yum! Restaurants (Asia) Pte. Ltd (ITAT)
• TPF Getinsa Euroestudios S L (ITAT)
• Serco India Private Limited (ITAT)
• Centrica India Offshore (P) Ltd (HC)
• Abbey Business Services (India) (P) Ltd (HC)
• Flipkart Internet (P) Ltd (HC)
• Google LLC (ITAT)
• Toyota Boshoku Automotive India (P) Ltd
(ITAT)
• Goldman Sachs Services (P) Ltd (ITAT)
• Juniper Networks Inc (ITAT)
• Food World Supermarkets Ltd (ITAT)
• Flughafen Zurich, AG (ITAT)
• Mark & Spencer Reliance
India (P) Ltd (HC)
• Owens Corning Insulating
Systems Canada LP (ITAT)
• Morgan Stanley International
Incorporated (ITAT)
• General Motors Overseas
Corporation (ITAT)
• Faurecia Automotive Holding (ITAT)
• John Deere India (P.) Ltd. (ITAT)
Ahmedabad
Burt Hill Design (P) Ltd (ITAT)
DIT vs Morgan Stanley
Chennai
Nippon Paint (India) Pvt Ltd (ITAT)
SC
1Refer Annexure 4 for caselaw citations
Pune
Test 2 – Economic Vs Legal Employer
Test 1 –
Contract of
Service vis-à-
vis Contract
for Service
Risks and
rewards of
with I Co (like
employer-
employee
relationship)
I Co to establish itself as real employer
Control,
Supervision,
Responsibility
Terms &
Conditions of
Employment
Payment for
Salary &
Social
Security
Legal
Recourse for
Salary dues
Lien on
employment?
Impact of SC Ruling on Income tax issue
Karnataka HC in case of Flipkart Internet1 laid down that SC
ruling is limited to service tax and has no applicability to income tax
Recently Delhi ITAT in case of Serco India1 upheld above
decision with following well settled principles:
• Interpretation of any expression used in context of any
statute not to be automatically imported while interpreting
like expression of other statutes
• Ratio decidendi of case from one enactment, cannot be
applied to an altogether different legislation

29. `
Indian
Company
Issue price > FMV
Included wef
April 1, 2023
NON-RESIDENT
Excess of issue price over
FMV taxed as
'Income from other
sources'
shares
Valuer: Merchant Banker
Validity of valuation report: Not older than 90 days from the date of
issue of shares
Safe harbor provision: 10% for forex fluctuation, bidding process
and variation in other economic indicators
Dichotomy
FMV
=
Cos Act
and FEMA
Subject to
Income taxes
Issue
Price
Implied
Requirement
to issue shares
at FMV
Draft Rule 11UA: FMV valuation methodology
DCF NAV
Probability Weighted
Expected Return Method
Option Pricing Method
Replacement Costs Method
Milestone Analysis Method
Comparable company
multiple method
▪ NRs often invest at > FMV with balancing rights in contracts (ie anti-dilution rights, liquidation preferences etc)
– Applicability of Angel Tax provisions would impact negotiation
▪ Preference of use of debt instruments for investments may enhance – changing deal dynamics
▪ 2 statutory valuations - Cos Act (Registered Valuer) and IT Act (Merchant Banker) – dis-alignment in valuation
and increased cost of compliance
Changing dynamics of Deals
Discretionary
Powers of
Tax Authorities
(cause for controversy)
Change in valuation method
Comparison of projections (revenue,
profits etc) with actuals
Questioning cashflows, discount factor,
assumptions etc
Rejecting valuation report on account of
disclaimers/ caveats made by valuer
Discretionary
Powers of
Tax Authorities
(cause for controversy)
Can valuation report accepted by RBI for
FEMA purposes be questioned?
Angel Tax: Valuation at Centre Stage

30. `
Massive shifts in Business Operating Models not requiring physical presence in India
Introduction of SEP
provisions
(vide FA 2018) to tax
such business models
based on factors of
revenue and users Digital Personal Data
Protection Norms
IT ((Intermediary Guidelines
and Digital Media Ethics Code)
Rules, 2021
Draft
E-commerce Rules
Mandates physical contact address in
India for local communication and
appointment of CXO level employees
Mandates appointment of CXO level
employees resident in India
Need for significant data fiduciaries to
appoint data protection officers based
in India for local representation
Enhanced risk of constitution of PE in India for F Co doing business in India
on account of evolving regulatory requirements
Changing Dynamics of PE in India
NETFLIX UNDER IT RADAR1
1 2
Presence of
Infrastructure in India
Employees seconded
from parent company to
India
Taxmen's contention for taxing Netflix in India:
1Source: Publicly available media articles
Does the reporting
requirement
impose an
obligation on NRs
to evaluate the
applicability of
SEP provisions?
Whether SEP is formed in
India is required to be
disclosed by NR in ITR?
Form 15CA/ 15CB
requires disclosure of
whether payments to NR
are taxable as business
income as per IT Act?
Resident Payer to ensure obtaining a
declaration of 'no business connection'
from NR
Reporting Requirements imposing additional burden on NRs
Income of
INR 550 Mn is
attributable to
Netflix’s PE in
India
(as per Revenue)
Penalty of
INR 0.1 Mn for
furnishing
inaccurate
particulars in Form
15CA on I Co
[Section 271-I]
Revenue Authorities probing on overseas digital firms for
providing e-commerce services in India

31. `
Key factors for consideration
Payments
Non-Resident
Resident Why the confusion?
Amendment to Section 204 vide FA, 2020
Insertion of clause (v) in Section 204 Person responsible for paying
NR payer
Person himself
Authorised person of NR
Agent of NR person
"includes"
Was Section 204(v) inserted only to facilitate operation
of procedural provisions of Section 194-O and not for
other TDS provisions?
Withholding obligations
applicable on NR?
Memorandum to Finance Bill, 2020
Widening the scope of TDS on e-commerce transactions
through insertion of a new Section 194-O
Consequential
amendment to
insertion of
Section 194-O
"Consequential amendments" proposed in Section 204 (to
define person responsible for paying any sum) – Clause (v)
inserted
Can similar implication be inferred on other TDS
provisions without such an extensive amendment?
Explanation 2 to
Section 195(1)
(Retrospective
Clarification)
Doctrine of
Extra
territorial
nexus
1 Obtaining TAN
2
Deducting and
depositing TDS
3
Filing TDS
returns
Any other presence in any manner whatsoever in
India
A residence or place of business or business
connection in India
Obligation to deduct applies and extends to all persons, R or NR,
whether or not the NR has:
1
2
Hon’ble SC1 held that Indian law can have extra-territorial operation subject to:
Establishment of "Nexus"
with India
No guidance available on how to determine
"Nexus"
Probable criteria to determine nexus with India
Business Connection
Existence of PE
Source of Income
in India
* Refer Annexure 4 for caselaw citations
1
2
Possible transactions where Section 204 could apply
Sub-
contracting
arrangements
Vendor
payments for
PO made by
NR
Service fee
for making
investments in
India (Ex DD/
valuation
report)
Professional
fee for setting
up LO/ BO/ PO
in India
Compliance
obligations if
Section 204
invoked
Section 204 Amendment: More than meets the eye?

32. Concluding Thoughts

33. `
Overall tax framework is in midst of an unprecedented overhaul
Dispute resolution - Indian Judiciary
continues to be burdened by high volume of
cases. Pressing need for an effective
gateway to streamline litigation process,
contributing to a more robust and responsive
tax system
Courts have held from time to time
that revenue neutrality does not
absolve taxpayers from their duty
to accurately report income, pay
taxes and abide by the law
Data harnessing by Tax Authorities on the rise to gain insights,
ensure accurate reporting and enforce tax regulations effectively
Banking Secrecy - no longer an economic resource.
Financial institutions are bound by robust regulations
to exchange information with Tax Authorities
Heightened reliance on international
jurisprudence and interpretation to analyse
taxability of various streams of income in India
Increase in inter-linked compliances,
thereby enhancing complexities and
ambiguities
Exploration of novel taxes and frameworks by the
Government to bridge tax gap as traditional
business models blend with digital innovation
Happy endings to age-old interpretational issues on Royalty/
FTS addressed by Courts while conversely burdening taxpayers
to look out for alternative ways to reduce tax outflow which are in
turn linked to increased compliances
Striking balance between fulfilling tax responsibility
and exploring legitimate tax planning avenues to
optimize tax positions without violating the spirit or
intent of law
Tax becoming a critical part of ESG conversations
New age of extending legal authority beyond
borders has made non-residents doubtful of the
efficacy of their compliance systems
What worked in the past may clearly not work in the future - Recent changes in income tax laws and mounting mirages of interpretations force
us to question the viability of several transaction structures used in the past and compliance systems that were in place before
Concluding Thoughts

34. Annexures

35. `
If value of Indian assets held directly or indirectly
• > INR 10 crores, and
• at least 50% of value of all assets owned by F Co as on
March 31 or last date of accounting year preceding date
of transfer
Valuation to be determined as per Indian Income Tax
Rules by Indian professionals: Merchant Banker or a CA
Gains attributable to assets located in India to be taxed in
India
Substantial Value Test Valuation
Illustrative list of transactions triggering Indirect
Transfer Provisions
• Transfer of shares pursuant to scheme of merger/
amalgamation
• Change in shareholding of F Co 2 on IPO
• Conversion of F Co 1 from company to LLP/ LLC
• Buyback or redemption of shares
1Refer Annexure 4 for caselaw citations
2Where the transferor of shares neither holds the right or management in F Co
nor holds voting power or share capital or interest exceeding 5% of total voting
power or share capital or interest of F Co
Judicial Interpretation on interplay of DTAA provisions with Indirect transfer provisions
Issues
• Explanation 5 to Section 9 of IT Act deems situs of capital asset to be in India – Whether this triggers
applicability of deeming provisions ie Section 50CA and Section 56(2)(x) of IT Act on offshore
transactions?
• Unintended impact on transactions (other than transactions qualifying for small shareholder
exemption2) in shares of F Co on a foreign stock exchange
• Multiple layers of holding – Multiple level of valuation requirements – Multiple level of taxation
"5. Gains from alienation of shares representing > 10% in
a Co resident of a contracting state (France) may be
taxed in that state (France)."
Excerpt 1: Article 14(5) of India – France DTAA
• Above Articles of DTAA adopt look-at approach1, not see-through approach
• Accommodating “see through" approach in above Articles would transgress the negotiated terms of DTAA
• Gains from transfer of shares of F Co taxable only in state of residence of F Co albeit such shares derive value substantially
from assets located in India
Excerpt 2 : Article 13(4) of India – Germany DTAA
"4. Gains from the alienation of shares in a company which
is a resident of a contracting State (Germany) may be
taxed in that State (Germany)."
Country outside India
F Co 2 (Holding)
F Co 3
100%
Transfer of
shares of F Co 2
F Co 1 (Parent)
India
I Co
Gains liable to tax in
India. Furnish form
3CT along with ROI
Withhold taxes at
applicable rates
and furnish Form
15CA/ CB and
Form 27Q)
Furnish Form 49D
and maintain
documents
Annexure 1: Extra-territorial reach of Capital gains tax

36. `
Where a person residing in India undertakes strategic decisions of F Co, it could trigger PoEM for F Co in
India. Guiding principles provided by Indian Revenue Authorities:
F Co Meeting
XXX
CEO
Video call
Location of BoD meeting relevant
Delegation of Authority to Senior
Management/ Others in India
Location of head office relevant
Circular resolution: Location of person
who has authority to take decisions
Strategic decisions: Key decisions at broader strategic and
policy level, and not routine operation level decisions
Existence of below factors standalone do not establish PoEM
• F Co is a wholly owned subsidiary of an I Co
• Foreign entity has PE in India
• One or some directors of F Co reside in India
• Local management is situated in India
• Support functions exist in India that are preparatory and auxiliary in nature
Tax Implications if PoEM is established
Global income of F Co subject to tax at 40 percent.
However, PoEM is a very debatable matter and
is totally based on facts and circumstances
Turnover of F Co> INR 50 crores
PoEM provisions
F Co could be considered as a tax resident as per the IT Act in India in any financial year, if:
• Key management and commercial decisions, in substance, made from India
• Such decisions are necessary for conduct of business
Annexure 2: Place of Effective Management

37. `
Owner
Beneficial
Rights to use or benefit
out of property, other
than legal title
1
2
Has "dominion and
control" over the property
Entitlement to receive
profits or proceeds
3
Official or formal owner
of a property
1
2 Having legal or rightful
title to something
Significance of "beneficial ownership" in DTAA
Qualifying condition for
claiming treaty benefits for
passive income
Concessional rate of tax
Benefits under MFN
Clause
2
Claiming FTC
1 3 4
Beneficial Owner – defined?
IT Act Tax Treaty OECD Commentary
01 Right to use and enjoy income
Guiding principles or indicative factors for satisfaction of
BO test
01
02
Beneficial ownership linked to income/ payment, not underlying asset/
share/ security
03 Assuming underlying risk and control of income received
04 No predetermined flow of fund from recipient to another party
Where legal owner has transferred economic ownership to another
person
05
Not constrained by contractual or legal obligation to pass on income
to another person
02
Power of enjoyment of IP, determine usage of IP and exclude other
from accessing/ using IP Royalty Income
06 Having underlying skillset, knowledge base and infrastructure to
render services FTS
Annexure 3: Beneficial Ownership: Spanner in the works

38. `
Annexure 4: Citations
Topic Principles replied upon Caselaw citations
Does NR need a
PAN in India: Up
in the air
Subordinate legislation (Notifications/ Circulars) cannot
impose additional conditions
Godrej & Boyce Mfg Co Ltd vs State of Maharashtra [2009] 5 SCC 24​ (SC)
Unilateral amendment of domestic law having the vice of
Treaty override may not be permissible
DIT vs New Skies Satellite BV [2016] 382 ITR 114 (Mad)
ACIT vs Reliance Jio Infocomm Ltd [2019] 77 IT(T) 578 (Mumbai Tribunal)​
Eligible assessee cannot be denied Treaty protection on
grounds of non-furnishing of TRC
Skaps Industries India (P) Ltd vs ITO [2018] 171 ITR 723 (Ahmedabad ITAT)
Ranjit Kumar Vuppu vs ITO [2021] 190 ITD 455 (Hyderabad ITAT)​
Section 206AA cannot override Treaty rate where NR does
not have PAN in India
Infosys Ltd vs DCIT IT(IT)A Nos 4 AND 1182 (Bang) OF 2014 (Bangalore ITAT)
Nagarjuna Fertilizers & Chemicals Ltd vs ACIT [2017] 55 ITR(T) 1 (Hyderabad ITAT)​ (SB)
NR compliances
in India: Play by
the Books
No obligation to fill ROI if income not taxable in India. ITR
need not be filed if there is no taxable income: Favourable
Factset Research Systems Inc, In re [2009] 317 ITR 169 (AAR – New Delhi)
Venenburg Group BV, In re [2007] 289 ITR 464 (AAR – New Delhi)
SmithKline Beecham Port Louis Ltd, In re [2012] 348 ITR 556 (AAR – New Delhi)
No obligation to fill ROI if income not taxable in India. ITR
need not be filed if there is no taxable income: Unfavourable
VNU International B V, In re [2011] 334 ITR 56 (AAR – New Delhi)
NR to furnish TP report and maintain documentation Convergys Customer Management Group Inc [TS-543-ITAT-2020(DEL)-TP]
The Apex Court
verdict on
Software
Royalty Tax:
Fate for similar
transactions
Cross-border payments made for import of software for sale in
India is not taxable as 'Royalty'
Engineering Analysis Centre of Excellence (P) Ltd vs CIT [2021] 432 ITR 471 (SC)
EY Global Services Ltd vs ACIT [2021] 441/ ITR 54 (Delhi HC)
MOL Corporation vs DCIT [2022] 195 ITD 1 (Delhi ITAT)
OVID Technologies Inc vs DCIT [2022] 194 ITD 768 (Delhi ITAT)
Urban Ladder Home Decor Solutions vs ACIT (International Taxation) IT(IT)A No 615 and 620/ Bang/ 2020
Infosys Limited vs DCIT IT(IT)A Nos 105 to 115/Bang/2021 (Bangalore ITAT)
Autoliv ASP Inc vs DCIT [2022] 95 ITR(T) 270 (Delhi ITAT)

39. `
Annexure 4: Citations
Topic Principles replied upon Caselaw citations
Capital Gains on FDI
exits: Rupee Gains vis-
à-vis Dirham loss
Change in modus operandi for LTCG computation for
NRs
Legatum Private Limited vs AO (International Tax) [TS-210-ITAT-2023(Mum)] (Mumbai ITAT)
Dividends: Striking a
chord with MFN clause
Lower tax rate on dividend invoking MFN clause
Concentrix Services Netherlands BV vs ITO(TDS) [TS-286-HC-2021(DEL)] (Delhi HC)
Nestle SA vs ACIT [TS-446-HC-2021(DEL)] (Delhi HC)
Deccan Holdings B V vs ITO [TS-1008-HC-2021(DEL)] (Delhi HC)
Cotecna Inspection SA vs ITO [TS-1132-HC-2021(DEL)] (Delhi HC)
Unless there is a stay obtained from a higher forum,
the mere fact of filing of an appeal will not entitle the
authority to not comply with the order of the Forum
Mohan Lal Santwani vs Union of India [2022] 449 ITR 476 (Allahabad HC)
Ghaziabad Development Authority vs Balbir Singh [2004] 5 SCC 65 (SC)
PCIT vs Associated Cables Private Limited ITA No 293 of 2016 (Bombay HC)
Asit Kumar Das vs J Panda, the Chief Post Master Central Civil Appeal No. 1227 of 2015 (SC)
Equalisation Levy 2.0:
Decipher Implicit
connotation
Where EQ Levy at 2% is already applied on payment
under consideration, TDS to be deducted at 8% (ie
10% - 2%)
Google Asia Pacific Pte Ltd vs CIT [TS-57-HC -2022 (DEL)]​ (Delhi HC)
Sabre GLBL Inc vs DCIT [TS–283–HC–2023 (DEL)]​ (Delhi HC)
Coursera Inc vs ITO [ TS–1142–HC--2021 (DEL)]]​ (Delhi HC)
Supply of FoC assets
to India by foreign
group entities: Coast is
not clear
Indian Co derives benefit from FoC/ loan assets
provided by F Cos, taxed under Section 28(iv) of IT
Act
Hewlett-Packard (India) Software Operation Pvt Ltd vs JCIT [2022] [IT(TPA) No 2575/ Bang/ 2019] (Bangalore
ITAT)
Marvell India Private Limited vs DCIT [IT(TP)A No 2082/ Bang)/ 2018] (Bangalore ITAT)
Brocade Communications Systems Private Limited vs DCIT [TS-322-ITAT-2020(Bang)-TP] - (FoC ground
raised but not adjudicated)

40. `
Topic Principles replied upon Caselaw citations
Additional Burden to
Prove 'Source of
Source': Crossing a
river to get water
Once the assessee presents the details of identity,
creditworthiness of investor and genuineness of
transaction, the onus shifts on AO to prove that the
evidence produced are wrong or non-satisfactory
DCIT vs Acro Exports Trade (P) Limited [2019] ITA No 903 and 905 of 2018 (Mumbai ITAT)
Abhijavala Developers (P) Limited vs ITO [2021] 187 ITD 222 (Mumbai ITAT)
AO may issue notice under Section 133(6) of the Act
directly to F Co lender to seek confirmation on the
transaction carried out with I Co
Talisman Securities Pvt Ltd vs DCIT [TS-482-ITAT-2022(Mum)] (Mumbai ITAT)
Depending upon the facts of the case, AO has the
jurisdiction to ascertain the source of the F Co
depositor in order to determine whether the depositor
is a mere name lender or not, irrespective of the
nature of the sum credited in books of accounts of I Co
CIT vs Sophia Finance Ltd [TS-11-HC-1993(DEL)] (Delhi HC)
Section 204
Amendment: More
than meets the eye?
Extra-territorial operation of Indian law
GVK Industries Limited vs ITO [2011] 239 CTR 113 (SC)
Vodafone International Holdings B.V. vs Union of India [2012] 1341 ITR 1 (SC)
Extra-territorial reach
of Capital gains tax
Interplay of DTAA provisions with indirect transfer
provisions under IT Act - Capital gains tax
Sanofi Pasteur Holding SA vs Department of Revenue, Ministry of Finance [2013] 354 ITR 316 (AP HC)
Sofina SA vs ACIT [2020] 79 ITR(T) 489 (Mumbai ITAT)
GEA Refrigeration Technologies GmbH (AAR) [2018] 401 ITR 115 (AAR - New Delhi)
Annexure 4: Citations

41. `
Annexure 4: Citations
Topic Principles replied upon Caselaw citations
Secondment: A
Tug of war with
service tax
Secondment of employees -
Favourable Rulings
DIT vs Morgan Stanley & Co [2007] 292 ITR 416 (SC)
Burt Hill Design (P) Ltd vs DDIT (International Taxation) [2017] 164 ITD 697 (Ahmedabad ITAT)
Director of Income Tax (International Taxation) vs Mark & Spencer Reliance India (P) Ltd [TS-178-HC-2017(BOM)] (Bombay HC)
Owens Corning Insulating Systems Canada LP vs DCIT, International Taxation ITA No 461 (Mum) of 2022 (Mumbai ITAT)
Morgan Stanley International Incorporated vs DDIT (International Taxation) ITA No 5985 (Mum) of 2012 (Mumbai ITAT)
AT & T Communication Services (India) P Ltd vs DCIT [TS-644-ITAT-2018(DEL)] (Delhi ITAT)
Yamazen Machinery and Tools India (P) Ltd vs ACIT [2023] 200 ITD 205 (Delhi ITAT)
DDIT vs Yum! Restaurants (Asia) Pte Ltd [2020] 81 ITR(T) 440 (Delhi ITAT)
TPF Getinsa Euroestudios S L vs ACIT, International Taxation ITA No 2400 (Delhi) of 2022 (Delhi ITAT)
DIT (International Taxation) vs Abbey Business Services (India) (P) Ltd [2020] ITA No 214 of 2014 (Karnataka HC)
Flipkart Internet (P) Ltd vs DCIT (International Taxation) [2022] 448 ITR 268 (Karnataka HC)
Google LLC vs JCIT (OSD)/ DCIT (IT) [2023] IT(IT)A Nos 167 (Bang) OF 2021 and 688 (Bang) of 2022 (Bangalore ITAT)
Toyota Boshoku Automotive India (P) Ltd vs DCIT, LTU [2022] IT(TP)A Nos 1646 (Bang) of 2017 & 2586 (Bang) of 2019 (Bang ITAT)
Goldman Sachs Services (P) Ltd vs DCIT [2022] 99 ITR(T) 104 (Bangalore ITAT)
Serco India Private Limited vs DCIT [TS-363-ITAT-2023(DEL)]
Juniper Networks Inc vs ITO (International Taxation) [TS-242-ITAT-2023(Bang)] (Bangalore ITAT)
Faurecia Automotive Holding vs DCIT, International Taxation [TS-417-ITAT-2019(PUN)] (Pune ITAT)
John Deere India (P) Ltd vs DDIT (International Taxation) [2019] 70 ITR(T) 73 (Pune ITAT)
Secondment of employees -
Unfavourable Rulings
General Motors Overseas Corporation vs ACIT/ DDIT (International Tax) [TS-134-ITAT-2020(Mum)] (Mumbai ITAT)
Centrica India Offshore (P) Ltd vs CIT [2014] 364 ITR 336 (Delhi HC)
Food World Supermarkets Ltd vs DDIT (International Taxation) [2015] 174 TTJ 859 (Bangalore ITAT)
Flughafen Zurich AG vs DDIT [2017] IT(IT)A Nos 1525 (Bang) of 2010, 1437 & 1438 (Bang) of 2013 & 244 (Bang) of 2015 (Bang ITAT)
Nippon Paint (India) Pvt Ltd vs DCIT (International Taxation) [TS-171-2019(CHNY)] (Chennai ITAT)

42. `
Country
Status (individual,
company, firm etc)
of the assessee
Nationality/ Country of
incorporation or
registration
Assessee's tax
identification number/
unique number in the
Country of residence
Period for which the
residential status is
applicable
Address of the
assessee in the
country or territory
outside India
Germany Implied Implied Yes Yes Yes
Singapore1 Implied Implied Yes Yes Yes
Australia Implied Implied Yes Yes Yes
USA1 Yes Implied Yes Yes Not Available
Sweden Implied Implied Yes Yes Yes
Malaysia Implied Implied Yes Yes Yes
Brazil Implied Implied Yes Yes Yes
Spain Implied Implied Yes Not Available Yes
UK1 Implied Implied Yes Not Specified Yes
1Screenshot of sample TRC available in the ensuing slide
Annexure 5: TRC

43. `
Certifies
residency as on a
date and not for a
specific period
Status of the entity
implied basis the
name
1
2
Status of the
entity implied
basis the name
1
Period of
residency
specified
2
United Kingdom United States of America Singapore
Status of the
entity specifically
mentioned
Address of the entity
not available
1
3
Period of residency
specified
2
Address available
3
Address
available
3
Annexure 5: TRC

44. Glossary

45. `
Sl
No
Term Abbreviation
1 AE Associated Enterprise
2 AI Artificial Intelligence
3 ADVAIT
Advanced Analytics in
GST
4 AIS Annual Information Statement
5 AO Assessing Officer
6 AR Augmented Reality
7 AY Assessment Year
8 B2B Business to Business
9 B2C Business to Customer
10 BEPS Base Erosion and Profit Shifting
11 BIFA
Business Intelligence and Fraud
Analytics
12 BO Branch Office
13 BoD Board of Directors
14 CA Chartered Accountant
15 CBDT Central Board of Direct Taxes
16 CCD
Compulsorily Convertible
Debentures
17 CIT Commissioner of Income Tax
18 Co Company
19 Cos Act Companies Act, 2013
20 CXO
Key managerial personnel or such
other senior employee of a
significant social media intermediary
Sl
No
Term Abbreviation
21 DCF Discounted Cash Flow
22 DD Due Diligence
23 DPIIT
Department for Promotion of
Industry and Internal Trade
24 DSC Digital Signature Certificate
25
DTAA/ Tax
Treaty/ Treaty
Double Taxation Avoidance
Agreements
26 DQR Data Quality Report
27 EQ Equalisation Levy
28 ESOP Employee Stock Option Plan
29 F Co Foreign Company
30 FA Finance Act
31 FCNR
Foreign Currency (Non-Resident)
Account
32 FDI Foreign Direct Investment
33 FEMA
Foreign Exchange Management Act,
1999
34 FMCG Fast Moving Consumer Goods
35 FMV Fair Market Value
36 FoC Free of Cost
37 FPI Foreign Portfolio Investor
38 FTC Foreign Tax Credit
39 FTS Fees for Technical Services
40 FVOC Full Value of Consideration
Sl
No
Term Abbreviation
41 GST Goods and Services Tax
42 FY Financial Year
43 HC High Court
44 I Co Indian Company
45 INR Indian Rupee
46 IP Intellectual Property
47 IPO Initial Public Offer
48 IT Act Income Tax Act, 1961
49 ITAT Income Tax Appellate Tribunal
50 ITR Income Tax Return
51 IT Rules Income Tax Rules, 1962
52 KYC Know Your Customer
53 LO Liaison Office
54 LTCG Long Term Capital Gains
55 LTCL Long Term Capital Loss
56 MCA Ministry of Corporate Affairs
57 MFN Most Favourable Nation
58 Mn Million
59 MNE Multi-National Enterprise
60 NAV Net Asset Value
Glossary

46. `
Sl
No
Term Abbreviation
61 NR Non-Resident
62 ODI Overseas Direct Investment
63 OECD
The Organization for Economic
Cooperation and Development
64 OIDAR
Online Information Database Access
and Retrieval services
65 OTT Over The Top
66 PAN Permanent Account Number
67 PE Permanent Establishment
68 PF Provident Fund
69 PO Project Office
70 PoEM Place of Effective Management
71 R Resident
72 R&D Research & Development
73 RBI Reserve Bank of India
74 RDB Rupee Denominated Bond
75 RoI Return of Income
76 SC Supreme Court
77 SEBI
Securities and Exchange Board of
India
78 SEM Search Engine Marketing
79 SEO Search Engine Optimisation
80 SEP Significant Economic Presence
Sl
No
Term Abbreviation
81 SFT Statement of Financial Transactions
82 SLP Special Leave Petition
83 STCG Short Term Capital Gains
84 TAN
Tax deduction and collection
Account Number
85 TCS Tax Collected at Source
86 TDS Tax Deducted at Source
87 TIN Tax Identification Number
88 TP Transfer Pricing
89 TRC Tax Residency Certificate
90 UN United Nations
91 USD US Dollar
92 VR Virtual Reality
93 wef With effect From
Glossary

47. Thank You
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Sandeep Jhunjhunwala
Sandeep specializes in the areas of corporate international tax
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providing inputs to aid in the development of new regulations. He
has worked on a number of leading multi-national companies in
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Sandeep has been an eminent speaker and panelist on tax and
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and has written several articles and contributed podcasts on tax
and regulatory matters. He has also authored a book on Real
Estate (Regulation and Development) Act, titled Decoding
RERA.
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