India: Tax treaty treatment of fees for technical services, of minimum alternative tax

14 February 2020

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).

  • Treatment of “fees for technical services” under Protocol with Switzerland: The Mumbai Bench of the Income-tax Appellate Tribunal held that fees for technical services are to be taxed on the gross basis under provisions of the Protocol to the income tax treaty between India and Switzerland. The tribunal agreed with the taxpayer that given the term “at the request of the enterprise” as contained in the Protocol, the taxpayer was able to decide the tax treatment on the gross basis or net basis. The case is: AGT International GmbH. Read a February 2020 report [PDF 310 KB]

  • No reduction of book profits for computation of minimum alternate tax allowed using tax treaty provisions: The Delhi bench of Income-tax Appellate Tribunal held that the minimum alternative tax provisions do not allow an exclusion of income using an income tax treaty. Therefore, the tribunal concluded that the taxpayer was not able to reduce book profit using the tax treaty measures. In this case, the taxpayer had excluded from its minimum alternative tax calculations, an amount of income earned from projects in Bangladesh, Malaysia, and the UK by asserting that this income earned in foreign countries was not taxable in India under the applicable income tax treaty provisions. The tribunal disagreed, noting that nowhere is the exclusion of income pursuant to an income tax treaty permitted under the minimum alternate tax provisions. The case is: IRCON International Limited. Read a February 2020 report [PDF 321 KB]


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