In a fillip to the increasing global ambitions of Indian industries, the Delhi High Court, in Maruti-Suzuki India Ltd. v. ACIT, clarified the application of transfer pricing provisions to the use of foreign trademarks in India. The issue arose out of the Maruti-Suzuki collaboration all of us are well aware of, and was a good example of judicial intervention to stifle the parochial approach of the...
Legal character of an overdraft facility
Earlier this month, a division bench of the Bombay High Court considered an important question regarding the legal character of an overdraft facility offered to a customer. The issue before the Court in Sargam Foods v. State of Maharashtra, was whether the cash credit facility offered by a bank can be attached in recovery proceedings against one of its customers. The relevant provision was Rule...
Fees for Technical Services – Ashapura Minechem
We have discussed at length the controversy last year over taxation of fees for technical services. In brief, the Supreme Court had taken the view in Ishikawajma that s. 9(1)(vii) of the Income Tax Act, 1961 applies only when services by a non-resident are both rendered and utilized in India. This appeared inconsistent with the plain text of the provision, and with a subsequent Explanation...
“Professional Services”
It is often said that the importance of careful analysis of statutory language cannot be overstated, especially in fiscal matters. One will not be surprised to find, therefore, that the term “professional services” has recently engendered an interesting controversy as to its true scope. It arose before the Bombay High Court in Dedicated Health Care Services TPA v. ACIT, where it was argued that...
Conference on Goods and Services Tax
The School of Law, Christ University, in collaboration with Lakshmi Kumaran & Sridharan, Bangalore, are organizing a conference on the GST on 26 June 2010. Mr. Gautam Chawla of Christ University sends the following invitation, which might be of interest to readers: The replacement of the state taxes by the Value Added Tax in 2005 marked a significant step forward in the reform of domestic...
Insurance policies and the tax/fee distinction
Recently, the Bombay High Court had occasion to consider an important issue regarding the transferability of life insurance policies, and the restrictions that the LIC has the powers to place on such transferability. The background to the facts of this case is provided by another decision of the Bombay High Court in Insure Policy Plus Services v. LIC, decided in 2007. The petitioners in this case...
Bombay HC on the Binding Nature of AAR Ruling
(The following post has been contributed by Ravichandra S. Hegde of J. Sagar Associates) The Bombay High Court on April 29, 2010, while allowing a Writ Petition against the Income Tax Department has ruled on the binding nature of the decision rendered by the Authority for Advance Rulings (“AAR”). The Court has clarified that the decision given by the AAR would be binding on the applicant, the...
Insurance Companies and Income Tax
The Bombay High Court, in an important case decided last month, clarified the position on the taxation of insurance companies. This was the decision in ICICI Prudential v. ACIT (2010 Bombay High Court). The controversy stemmed from the implications of the Insurance Regulatory and Development Authority (Actuarial Report and Abstract) Regulations, 2000 and the Insurance Regulation and Development...
Porrits & Spencer: Form over Substance Reaffirmed
We have extensively discussed issues around tax avoidance previously; and one of the questions in this regard is the exact relationship between the 5-Judge Bench decision in McDowell and the subsequent 2-Judge Bench decision Azadi. To briefly recapitulate, in McDowell, Justice Chinappa Reddy took a strong stance against tax avoidance and effectively equated avoidance with evasion. Under Justice...
Meaning of ‘work’ under section 194C
In a decision last delivered last month, the Bombay High Court once again visited the debate over the meaning of ‘sale’, in the process of clarifying the scope of the obligation to deduct tax at source under section 194C of the Income Tax Act. The factual matrix before the Court involved a unique business model adopted by pharmaceutical companies. Pharmaceutical companies adopt three methods for...
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