26 三月 2024

Direct Tax Amicus: January 2024


Interplay between foreign taxpayers’ global profits and PE profit attribution
By Karanjot Singh Khurana, Prachi Bhardwaj and Loveena Manaktala

The article in this issue of Direct Tax Amicus discusses the issue of attribution of profits in case of losses at the global level, which has once again gathered spotlight as the Delhi High Court in Hyatt International Southwest Asia Limited has expressed its prima facie disagreement with the decision in Nokia Solutions and has referred the issue of attribution of profits to a Larger Bench. Tracing the background of the dispute starting from a Special Bench ruling in case of Motorola Inc., the article elaborately analyses the two abovementioned decisions while stating that the essential principle of hypothetical independence of PE while attributing profits, which is the essential principle of profit attribution envisaged in Article 7 of DTAA, was not discussed in Nokia Solutions. They in this regard also discuss the three options available under Rule 10 of the Income Tax Rules, 1962, and state that the Larger Bench decision will have a major impact on start-ups outside India which may be incurring losses at global level and have significant presence in India for undertaking marketing of goods and services.

Notifications & Circulars

  • TDS by e-commerce operator – Guidelines on Section 194-O
  • Income earned by non-residents from portfolio/funds is exempt
  • Additional mode of investment notified for Section 11(5)
  • Forms ITR-1 and ITR-4 notified for AY 2024-25
  • Specified person for the purposes of Section 10(23FE)

Ratio decidendi

  • Jurisdiction under Section 144B and the old Faceless Assessment Scheme, 2019 does not change with substitution of law in view of Section 24 of General Clauses Act, 1897 – Karnataka High Court
  • Fee received by domain name registrar would not fall within the ambit of ‘royalty’ under Section 9(1)(vi) – Delhi High Court
  • Any communication by any income tax authority without a Document Identification Number (‘DIN’) is non-est – ITAT Delhi and Chennai
  • Determining ‘market value’ for the purpose of deduction under Section 80-IA – Supreme Court

August 2024/Issue-112 January 2024/Issue-112

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