Income Tax litigations

Background

A foreign company having business relations in Inda is subject to tax in India as per the applicable provisions of the Income Tax Act and Double Tax Avoidance Agreement entered thereto with the respective country.

For Example, Company being registered in France having business contracts in India was subject to scrutiny in India for the older assessment years i.e., re-assessment, the department had raised the following concerns:

The company is a service PE as the employees are sent to India for work in India for more than 180 days in a financial year
The income declared in the income tax return is incorrect and the advances received by the company are not advances received and should be treated as income for the years under consideration and be taxed.

Challenges

The foreign company was subject to tax as per the DTAA between India and France.
Department was having information to the contrary of the actual information about the employees deployed in India by the company. It was a challenge to prove the department otherwise as they were reluctant to believe the facts.
The challenge here was to ensure that the Company is compliant with the provisions of Income Tax and that it is not a service PE as it would have resulted in tax implications according to the rules applicable to the permanent establishment of a foreign company as per the Income Tax Act, 1961.
That the income is computed and declared carefully while filing the income tax returns for the years under consideration.
A comprehensive study and extensive submission with evidence along with correct representation in front of the officer was required to be made to win the case.

UJA's Approach

A comprehensive study was carried out, an extensive submission was made along with the documentary evidence to prove the following:
- The Assessee Company has duly declared the income and has duly paid the taxes on the income.
- That the employees deployed in India are deployed for not more than 180 days in a financial year.
- That the tax rates applicable to the company is 10% as per DTAA and the tax rate includes the cess and surcharge applicable, and no cess or surcharge cannot be levied over and above 10% tax rate as applicable to the Assessee Company.
Assisted in representing the case before the Income Tax Officer with strong and thorough study and made sure that we have answers for every question/cross-objection put forth by the officer.

Outcome:

The case of the company was successfully resolved as we had strong and cent percent evidence for every aspect under consideration.
Compliance with Indian tax laws was maintained, avoiding any legal complications or penalties.
The person representing the case and the team involved in studying the case and the law applicable ensured that every word written in submission, spoken in front of the officer while representing the case is in line with the mandates, sections and rules applicable to the Assessee Company as per the Income Tax Act, 1961 and the Double Tax Avoidance Agreement between India and France.
This strategy implemented by UJA provided the foreign company with a complete solution to the income tax litigation and resulted in a win.

Conclusion

This case study exemplifies UJA’s expertise in direct tax litigation for foreign companies trying to establish and expand business in India a reassurance in ease of doing business and regular compliance assurance from the service provider i.e., UJA, demonstrating the firm’s ability to navigate the complexities of international tax laws. Through meticulous planning and strategic advice, UJA successfully minimized the tax burden for foreign company while ensuring full compliance with Indian tax regulations.