THE income-tax department has moved the Supreme Court challenging the
findings of the Authority for Advanced Rulings, which had said that the
foreign firms are not liable to pay tax on the assignment amount
charged from their Indian subsidiaries if the contract was signed
outside the country.
The quasi judicial body gave this ruling in a case concerning Swiss firm Honeywell Technologies SARL, which had received a fee from Honeywell Turbo India for supplying equipment to Tata Motors.
Solicitor general G E Vahanvati appearing for the Revenue said that the AAR ruling would have a snowballing effect as this could lead to similar innovations by foreign companies. This would deprive the Indian exchequer of legitimate taxes, said Vahanavati.
A bench headed by Justice Ashok Bhan issued notice to Honeywell Technologies asking it to respond to the petition.
The AAR, on an application by the Swiss company, had early this year ruled that since the assignment contract with Honeywell Turbo was entered into in Switzerland, the assignment amount was not covered under the Income Tax Act, 1961.
Honeywell group had entered into a pact with Telco (now Tata Motors) in September 2003 for supply of turbochargers for its passenger car. The group later transferred its rights and interests in the Indian business to its 100% subsidiary Honeywell Turbo for 7.5 million euros.
According to Revenue, the AAR was wrong in holding that Honeywell had no business connection in India and the assignment fee was a consideration received in lieu of transfer of these rights and interest to the Indian unit.
The tax department has said that AAR failed to evaluate the profit earned by Honeywell from sale of engines to Tata Motors and income to be earned from Indian operations.
Every time an offender stealthily leaves India to take refuge in another country, the Government of India starts all over again with its strategy of bringing him back to the nation to make him stan More
Helplinelaw can set up your session with quality and experienced lawyers to discuss and resolve your legal matters. You can avail consultation in form of sending questions, phone call or webchat discussion More