Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARD :: TDS :: empanelment :: form 3cd :: cpt :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: Central Excise rule to resale the machines to a new company :: VAT Audit :: due date for vat payment :: ACCOUNTING STANDARDS :: VAT RATES :: articles on VAT and GST in India
 
 
« News Headlines »
 10 ways you get benefited from filing your tax return
 Returns under CGST Act,2017 with Rules
 Ten facts to know about filing income tax return this year
 The Ten Commandments of Tax Filing
 How to claim income tax refund
 How to time your buys to have best of two tax regimes
 Here's why you must always check Form 26AS before filing tax return
 Want to file your income tax return after June 30? Having Aadhaar card is a must
 Timeline for filing of tax returns extended by two months
 Top 5 common mistakes to avoid while filing your income tax returns
 GST rollout on July 1: Deadline for filing tax returns extended

Foreign pension funds must pay tax
January, 30th 2007

Overseas pension funds, particularly those based in the US, now face a tax demand in India. The Authority for Advance Ruling (AAR), a quasi-judicial body, last week dismissed a miscellaneous application by General Electric Pension Trust (GEPT) for reconsideration of an earlier ruling, which said the American trust has to pay tax in India.

The AAR ruling was keenly awaited by the FII community in India as the order could reopen the tricky issue of taxability of foreign portfolio funds income in the country. The ruling may also come as a setback to foreign pension funds. GEPT is a $43-billion fund with $80 million invested in India.

The income-tax department has reopened a number of FII assessments, where the funds have invested in India directly from their respective home countries without routing through places like Mauritius, which has a double taxation avoidance pact with India.

The dismissal of the petition, if eventually upheld by higher courts, would result in the department imposing a 41.5% tax on FIIs net profit. This is the same rate that applies to the Indian branches of MNCs.

The miscellaneous application was against an earlier AAR order, delivered in 2005. While AAR rulings are binding only in specific cases, such orders often influence assessing officers. Dinesh Kanabar, partner of consultancy firm RSM, which filed the application on behalf of GEPT, said, AAR dismissed our petition last week. But I have not yet got a copy of the order and until I have the order in my hand I would not be able to comment.

AAR, in its original order, had concluded the FII was not eligible to be considered a resident of the US for the purpose of taxation since it enjoys tax exemption in that country. Therefore, it is not entitled to tax benefits accorded under the double taxation avoidance treaty (DTAA) between the US and India. The ruling could apply to other entities, which enjoy tax-exempt status in the US.

TP Ostwal, an expert on international tax issues, said, Similar views have been taken by judicial authorities in France and Japan in cases involving collective investment schemes. The OECD is yet to resolve the issue, which is being actively debated.

In the present case, GEPT was ready to show that it was a tax resident of the US by producing a certificate from the Philadelphia revenue authorities. But since the certificate was originally procured to be produced in Australia, AAR said it could not recognise a third party evidence.

The question of permanent residence was raised by GEPT. It said it does not have a permanent residence and since what it earned from India was in the nature of business income, under the provisions of the India-US treaty, it was eligible for exemption from taxation in India.

The rationale for the income-tax department was that since GEPT (being a trust) is not paying tax in the US, it is taxable in India from where it generates income.

AAR, in its original ruling, held the profits accruing to GEPT from the sale of portfolio investments in India will be treated as business income. Since GEPT is not entitled to avail the benefits of the Indo-US tax treaty, the business income of GEPT will be taxable under the Indian I-T Act. AAR had also observed that nothing was produced before it to show the object of the investment in shares of Indian companies was to derive only income by way of dividend.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Contact Us

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions