Author: admin

ISSUE:

Whether Indian Tax Authorities have the jurisdiction to tax a transaction between two non-resident entities, which took place outside India but involved underlying assets in India?

Whether a transaction involving a transfer of shares of a foreign company, which indirectly possesses assets in India, can be taxed in the country?

RULE:

Section 9(1) of the Income Tax Act, 1961 talks about the income arising directly or indirectly from any business connection situated in India or through the transfer of capital assets situated in India to be considered taxable.

Section 195 of the Income Tax Act, 1961 mandates the person who is responsible for paying a non-resident or a foreign company shall deduct income tax rates thereon at the rates in force.

Section 163 of the Income Tax Act, 1961 mentions who exactly can be treated as an agent. It lays out certain conditions for an individual to become so.

Section 2(14) of the Income Tax Act, 1961 mentions what assets can be treated as capital assets. Exceptions are stock in trade, ornaments used for personal purposes, agricultural land, gold bonds, and special bearer bonds.

ISSUE:

Whether certain receipts or gains should be considered taxable income under the Income Tax Act, 1961?

Whether a particular receipt or gain is of a capital nature or a revenue nature?

RULE:

The Residential Status of a company for income tax purposes is determined by the place where its management and control are exercised. This is also known as the "Place of Effective Management" test.

ISSUE:

Whether the said technical fee of 30.5 million US Dollars, payable in five equal installments every year, to be treated as revenue expenditure or capital expenditure?

RULE:

The distinction between revenue expenditure and capital expenditure. The payment of technical know-how and royalty was revenue expenditure. The payment of technical know-how and royalty was not for the acquisition of any fixed asset or the setting up of the plant and machinery for the manufacture of cars in India.

ISSUE:

Whether income had accrued or arisen to the taxpayer?

Whether the right to receive the amount was vested in the taxpayer?

RULE:

Income cannot be said to accrue or arise to an assessee unless there is a right to receive the amount, and the compensation for managing agencies did not constitute income that was taxable under the Income Tax Act.

ISSUE:

Whether the various processes that the tobacco leaves underwent, transformed the nature of the income received from their sales into agricultural income or general business income?

Whether the said income, if agricultural falls under Section 2(1) of the Income Tax Act, 1922?

RULE:

Basic Operations v. Subsequent Operations is the primary distinguisher that is applied in similar cases is the determining factor, in the sense that basic operations are those which are essential for the cultivation of land, and subsequent operations differ when acts are done to the produce after it is harvested to make it marketable. The basic relationship between agricultural produce and operations performed on land is of utmost importance.

The Principle of Agency Contracts governs the consent, fiduciary relationship, and binding effect on two or more parties to act on behalf of the other, processes such as terminations, ratifications, and remunerations are carried out using agency contracts.