Should Non-Residents be granted further exemption!

This (1 of 2004) is a circular providing administrative relief. CBDT has done what it can do.

Now if the BPO industry is asking for tax exemption like Section 10A for the non-resident companies; it is a substantial matter to be decided by the Parliament. It is beyond CBDT’s jurisdiction.

In our submission, there should be no blanket exemption from Income-tax. It has more disadvantages & dangers to the economy than the advantages. Indian Government is in the process of removing all blanket tax exemptions. Reducing rates of tax & removing exemptions is the right policy. But then this is another subject for discussion.

Conclusion:

We have summarised the circular in paragraph II.1 and in our submission, this is the correct, present position of law in India. This circular is small but important step in the process of emerging E-Commerce tax law in India. There is a long way to go.

References.

Following five items are available on our website: –

Circular No. 1 of 2004.: http://www.rashminsanghvi.com/cir_1_cbdt.htm

 Circular No. 23 of 1969: http://www.rashminsanghvi.com/cir_23_cbdt.htm

Rashmin Sanghvi’s report on E-Commerce for the 2001 Congress of IFA.:

http://www.rashminsanghvi.com/ecommerce_tax1.htm

Indian Supreme Court’s decision in the case of CIT Vs. R. D. Aggarwal. This is a case on “Business Connection” or BC.

“Business Connection” is, under the domestic law; a substitute of the concept of “Permanent Establishment” which is available under Double Tax Avoidance Agreements (DTA).

http://www.rashminsanghvi.com/business_conn.htm

E-Commerce Committee Report. Ministry of Finance, Government of India had appointed a committee to give its views on ‘E-commerce Taxation’. The Committee’s report is also available on this web-site. The Committee has analysed the situation and made some basic observations. In view of the fact that the global view on E-Commerce is still emerging, the Committee has not made any recommendation on the tax provisions. The matter has been kept pending for the next study.

http://www.rashminsanghvi.com/finmin.htm

For the Indian Income-tax Act, and the Indo-U.S. D.T.A., please see Indian Income-tax department’s website:

Section 9 of the Indian Income-tax Act. (Business Connection.):

http://www.incometaxindia.gov.in/Acts/INCOME%20TAX%20ACT/9.asp

 Indo-U.S. DTA.:

http://www.incometaxindia.gov.in/DOUBLE%20TAXATION%20AGREEMENT/UnitedStatesOfAmerica.asp

The links for OECD discussions on the subject of E-Commerce taxation in the world are:

Attribution of Profit to a Permanent Establishment involved in Electronic Commerce Transactions: