India: Long-term capital gains; attribution of profit; place of supply of intermediary services

Tax-related court decisions

Tax-related court decisions

The KPMG member firm in India prepared reports about the following tax-related court decisions (read more at the hyperlinks provided below).

  • Long-term capital gains on sale of unlisted shares by non-resident computed without giving effect to foreign exchange fluctuation: The Mumbai Bench of the Income-tax Appellate Tribunal held that a UAE company was required to compute long-term capital gains on the sale of unlisted shares of an Indian company under section 112(1)(c)(iii) without giving the effect of foreign exchange fluctuation under the first provision of section 48. The case is: Legatum Ventures Limited v. ACIT. Read a May 2023 report [PDF 446 KB] prepared by the KPMG member firm in India

  • Attribution of profit to permanent establishment (PE) of computerized reservation system companies: The Supreme Court recently dismissed a batch of revenue appeals in cases of non-resident taxpayers engaged in providing electronic global distribution services to airlines through the computerized reservation system. In these cases, the taxpayers constituted PEs in India and the debate was around how much profit would be attributed to the PE in India. The Supreme Court decided that the issue of what portion of the income could be reasonably attributed to the operations carried out in India is a question of fact. It also concurred with the orders of the tribunal on profit attribution to the PE, wherein relevant factors based on FAR analysis (functions performed, assets used, and risks undertaken) were considered. The case is: DIT v. Travelport Inc. & Others. Read a May 2023 report [PDF 389 KB] prepared by the KPMG member firm in India

  • Provisions on the place of supply of intermediary services held constitutionally valid:  A referral judge of the Division Bench of the Bombay High Court held that the provisions of the Integrated Goods and Services Tax Act, 2017 (IGST Act) stating that the place of supply for an intermediary service when the location of the supplier or location of the recipient is outside India is the location of the supplier of such services are constitutionally valid and intra-vires the IGST Act. The matter will now be placed before the Division Bench to pass the final verdict. The case is: Dharmendra M.Jani v. Union of India and Others. Read an April 2023 report [PDF 300 KB] prepared by the KPMG member firm in India


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