Income Tax dept lowers pitch on tax demands on multinationals

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The income tax department will withdraw from a few hundreds of tax cases with multinational corporations pending in tribunals by the end of this fiscal.

This marks a significant softening of approach given its high-pitched income reassessments for MNCs in recent years, mainly by contesting the pricing of their cross-border transactions.

Sources said the department, which has advance pricing arrangements (APAs) with 16 MNCs and aims to sign 150 such deals on the broad principles for future valuation of inter-country transactions for tax purposes, is willing to extend the conciliatory approach to transactions in the past four years too. Once the mutually agreed principles in an APA are applied to past transactions, the department would not pursue tax demands made earlier.

Wherever the department is the appellant in tribunals, it will withdraw the appeals. The move, part of the government’s efforts to reduce tax litigation and boost investor confidence, is set to benefit several large corporations including technology companies like Microsoft and IBM.

Tax tussles

* I-T department has resolved 45 double taxation disputes so far with the US bilaterally
* India and 16 MNCs have agreed on pricing of cross-border transactions under APA scheme, target 150 for the year
* APAs to allow agreements on pricing of transactions in the past years as well
* On this basis, tax department will withdraw from many disputes pending before tribunals

In the case of related-party cross-border transactions of MNCs alone, alleged tax dues has touched Rs 2.7 lakh crore. Earlier the government had decided not to appeal to the Supreme Court decisions of the Bombay High Court that held companies like Shell and Vodafone were not liable to tax on the alleged undervaluation of certain share transactions among group companies.

So far India has signed 16 APAs in the business of telecommunication, oil exploration, pharmaceuticals, finance, banking and software development and expects another 140 or so to be completed by the end of the fiscal. An APA is an agreement between the tax authority and companies on the principles of valuation of certain transactions, which will exempt the company from rigorous tax audits on cross-border deals.

Many of the tax demands raised on MNCs on cross-border transactions in the last few years have led to disputes. Scores of cases are pending with the Income Tax Appellate Tribunal. The government wants to stop these disputes from escalating to the higher judiciary. The number of cases in which the tax department has received favourable orders from tribunals are not very encouraging.

Finance minister Arun Jaitley has promised that all legacy tax disputes would soon be resolved through administrative or judicial means.

While an APA between a company and the tax department will resolve a dispute in India, the possibility of double taxation would be fully addressed only when the tax authority in the company’s home country too becomes party to such agreement. The US, which is home to many technology firms facing tax disputes in India, has recently started steps to implement such “bilateral APAs”.

Source: http://www.financialexpress.com/article/economy/income-tax-dept-lowers-pitch-on-tax-demands-on-multinationals/148358/

Vodafone gets a reprieve in Rs. 8,500-cr transfer pricing case

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The Bombay High Court on Thursday gave a favourable ruling to Vodafone in the transfer pricing case related to the sale of the company’s call-centre business to Hutchison and assignment of call options to Vodafone International.

The tax dispute, which dates back to 2007-08, arose after the tax authorities added Rs. 8,500 crore to the taxable income of the call centre unit. It had initially received a tax claim of about Rs. 3,600 crore.

While the Income-Tax Appellate Tribunal had upheld the I-T department’s claim, the High Court has accepted Vodafone’s position that the Department had no jurisdiction.

The court was of the view that there is no transfer of the ‘call options’ and, hence, the transaction does not fall within the purview of transfer pricing.

The I-T Department can challenge this order in the Supreme Court.

“We will study the order of the Bombay High Court on the Vodafone transfer pricing issue and then take a call,” Revenue Secretary Hasmukh Adhia said.

The I-T Department had issued its draft transfer-pricing order in December 2011. In 2012, Vodafone India Services moved the High Court challenging the Department’s jurisdiction.

This is the second major victory for Vodafone in tax-related cases in India. In October, the Bombay High Court had ruled that Vodafone is not liable to pay Rs. 3,200 crore in taxes in a 2009-10 transfer pricing case.

However, a verdict is still awaited in the $2.5 billion capital gains tax case, where the Department had asked Vodafone to pay tax for acquiring Hutchison’s telecom operations in India.

(This article was published in the Business Line print edition dated October 9, 2015)
http://www.thehindubusinessline.com/todays-paper/vodafone-gets-a-reprieve-in-rs-8500cr-transfer-pricing-case/article7740178.ece

STPI to sponsor over 100 start-ups for CeBIT show

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To promote domestic start-up companies, state-run Software Technology Parks of India (STPI) will sponsor over 100 such new age IT firms during the three-day CeBit India exhibition, which is scheduled to begin from October 29 in Bengaluru.

“We are collaborating with CeBit to promote start-ups. Last year, we sponsored 127 start-up companies and looking for similar number this year as well,” STPI Director General Omkar Rai told PTI.

He said that STPI has written to states for nominating best start-up companies from their territory and they will be then shortlisted by STPI.

“Start ups are not required to pay anything. STPI will spend around Rs 50 lakh… Around 10 start-ups were able to make to the show in Hannover where Prime Minister Narendra Modi had also visited,” Rai said.

Hannover Milano Fairs organised CeBit show in Germany.

Around 450 firms are expected to participate in CeBit India, which included major participation from STPI, Hannover Milano Fairs India Managing Director Mehul Lanvers-Shah said.

“We are expecting 10 per growth in CeBit India participation and even we are seeing traction from foreign companies. Last year 25 countries participated in the show. This year we have 27 with participation increasing from Taiwan, China, Germany and Canada,” Shah said.

Australia to collaborate with Indian researchers

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The Australian government, through the Australia-India Strategic Research Fund (AISRF), would collaborate with Indian researches in the field of agriculture, mining, energy, health etc. The Australian government has earmarked $84 million to be spent over three years in creating infrastructure, awarding fellowship and scholarship to promote research between the two countries.

“The Australian government greatly values strong relationship with India, particularly in education and research. We have a roadmap to promote bilateral research between the two countries. During his visit to Australia, Prime Minister Narendra Modi identified sectors like agriculture, mining, energy, health etc for research, so we have decided to enhance cooperation between the two countries in these areas, ” said Australian Minister for Education and Training Christopher Pyne, who is in India to promote research collaboration between the two countries and also to highlight the opportunities for enhanced collaboration between Australia’s world-class education system and Indian institutions.

The AISRF is Australia’s largest fund dedicated to bilateral research with any country and one of India’s largest sources of support for international science.

The AISRF helps Australian researchers from public and private sectors to participate with Indian scientists in leading-edge scientific research projects and workshops.

Taking a step forward in this direction, the minister on Saturday officially opened new facilities at the Indian Institute of Technology Bombay (IITB)-Monash Research Academy.

The collaboration between the IITB and Monash University will see students receive a joint PhD from both institutions, with the added benefit of exposing a large cohort of young researchers to cutting-edge international research.

“The Australian government, through the AISRF, was one of the early contributors to this joint venture, providing $1.5 million in seed funding to establish the IITB-Monash Research Academy,” he said.

Meanwhile, he also visited Delhi Public School and launched a pilot project linking schools in India and Australia.

The Australia-Asia Building Regional Intercultural Dialogue and Growing Engagement, or BRIDGE, connects Australian teachers, students, and school communities with their peers in Asia so they can exchange knowledge.

“The BRIDGE programme connects Australian schools to schools around the world so that students and teachers alike can learn from one another and build lasting cultural ties and skills,” Pyne said.

“Strengthening partnerships between school leaders, teachers, and school communities in India and Australia helps us build strong education relationships and share our ideas and knowledge,” he said.

Source: http://www.business-standard.com/article/current-affairs/australia-to-collaborate-with-indian-researchers-115082500054_1.html

India signs 16 advance pricing pacts with MNCs

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The income tax department has signed 16 advance pricing agreements (APAs) with multinational companies (MNCs) so far, exempting their transactions with local units from rigorous tax audits.

APAs were introduced to give tax certainty to MNCs that agree on certain principles in the valuation of their cross-border transactions.

These companies are in the business of telecommunication, oil exploration, pharmaceuticals, finance, banking and software development.

India has also resolved 45 tax disputes with multinational companies, especially US-based IT and IT-enabled services firms, under provisions in a bilateral tax treaty for avoiding double taxation. Sources said the tax department is working on another set of disputes for resolution. The India-US treaty provides for tax authorities of both the countries to bilaterally apportion the income of MNCs from cross-border operations to be taxed in each country and avoid double taxation.

The scheme, called mutual agreement procedure (MAP), offers MNCs a quick dispute resolution mechanism.

Most of the large US-based software companies having contract research and development operations in India have faced tax disputes on how much of the local arms’ revenue from services to the offshore parent is taxable in India.

“We are working on signing as many as 50 APAs, including some bilateral ones and resolving about 100 tax disputes under MAP soon,” said a person privy to the development.

Additional Fees for delay in e-filing under Companies Act, 2013

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MCA had changed the structure of Additional Fees to be levied for delay in filing E Forms over the companies while filing their Balance Sheet and Annual Returns with concerned Registrar of Companies through MCA Portal. Such change of Additional Fee Structure encouraged the Corporate to file their returns as early as possible so that they can avoid the heavy additional fees. That has resulted in increase the percentage of filing within the due time.

Pursuant to rule 12 of the Companies (Registration of Offices and Fees) Rules, 2014, following table of additional fees shall be applicable for delays in filing of the forms other than for increases in Nominal Share Capital

Sl  No. Period of delay  Additional fees for the period of delay
01 Up to 15 days (sections 93,139 & 157)         One time
02 More than 15 days and up to 30 days (Sections 93, 139 & 157) and up to 30 days in remaining forms.         2 times of normal filing fees

 
03 More than 30 days and up to 60 days         4 times of normal filing fees
04 More than 60 days and up to 90 days         6 times of normal filing fees
05 More than 90 days and up to 180 days         10 times of normal filing fees
06 More than 180 days and up to 270 days         12 times of normal filing fees

 

Further Note:

1) The additional fee shall also applicable to revised financial statement or board’s report under sections 130 and 131 of the Act and secretarial audit report filed by the company secretary in practice under section 204 of the Act.

(2) The belated filing of documents /forms (including increasing in nominal capital and delay caused thereon) which were due to be filed whether in Companies Act, 1956 Act or the Companies Act, 2013 Act i.e due for filing prior to notification of these fee rules, the fee applicable at the time of actual filing shall be applicable.

(3) Delay beyond 270 days, the second proviso to sub-section (1) of section 403 of  the Act may be referred.

MCA asks companies to submit annual filings on time

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To ensure that there is no last-minute congestion on its e-filing portal, the Ministry of Corporate Affairs (MCA) has asked companies to submit their financial statements and annual returns at the earliest.

The Ministry’s message assumes significance as this would also be the first year that corporates would be making their filings under provisions of the Companies Act, 2013 — which came into effect from April 1, 2014.

“To avoid last minute rush and system congestion on the MCA 21 portal on account of annual filings during month of October/November 2015, companies are requested to file their financial statements and annual returns at the earliest without postponing it to the last few days permitted for the same,” the Ministry said in a notice.

MCA 21 is the portal for companies to submit their filings electronically to the government under the Companies Act.

A raft of provisions have been introduced in the new law that replaces the nearly six-decade old Companies Act, 1956.

In terms of compliance, companies have slightly different requirements under the new Act and new electronic forms (e-forms) have been issued by the Ministry.

The Ministry, which is implementing the Companies Act, had earlier faced glitches with respect to functioning of MCA 21 due to various factors.

Most provisions of the Companies Act, 2013 came into force from April 1.

Among others, corporates are now required to furnish Permanent Account Number (PAN) while submitting their annual returns to the government, a move that would help in sharing of information between different departments.

So far, companies were not asked to provide PAN in the electronic form used for filing annual returns.

A new column has been inserted for providing PAN in the MGT-7 form — which is used for submitting the annual returns.

Meanwhile, the Ministry has already made a draft of changes to the Companies Act, 2013. Besides, various rules have been amended.

Amid concerns expressed in various quarters about certain provisions in the new Act, a high-level panel has also been set up to look into the issue.