Income tax authorities have in recent times been initiating stricter action against delays in depositing tax deducted at source, or TDS.

The Special Judge of Economic Offences recently sentenced the managing director of a Hyderabad-based company to three months’ imprisonment, together with a penalty of Rs 5,000 for each default, for failing to deposit TDS within the prescribed time.

The decision follows internal guidelines released in August, asking revenue officers to initiate prosecution proceedings even where the delay between deduction and deposit of tax is less than 12 months.

Foreign profits are taxable here

In a recent ruling, the Mumbai Income Tax Appellate Tribunal held as taxable the foreign profits earned by an Indian company through a Permanent Establishment located abroad.

The issue relates to the interpretation of the term “may be taxed”, which exists in the clause related to taxability of business income under tax treaties entered with various countries. The taxpayer relied on earlier rulings that interpreted “may be taxed” to imply India cannot tax foreign profits.

Based on the interpretation of a notification issued by the Government (assigning meaning to this term), the tribunal held that India too can tax such profits. With this notification effective from April 2003, the tribunal departed from its earlier favourable interpretation and upheld taxability starting April 2003.

Ambiguous FDI policy haunts Tata JVs

India is generally perceived as having a complex legal regime — for taxes or otherwise. Currently the exchange control regulations, specifically the FDI (foreign direct investment)policy, is at the centre of debate. While the norms were recently relaxed to allow a higher stake for foreign airlines in Indian carriers and Tata’s joint venture with AirAsia was cleared, the Delhi High Court recently admitted a petition questioning the joint venture. The contention is that the liberalisation was meant for existing Indian airlines and not start-ups.

The decision is likely to impact Tata’s other proposed joint venture with Singapore Airlines as well. Clarity is needed at the earliest.

Unlisted cos can go out for dollars

In the wake of unrelenting crisis in balance of payments and the steadily weakening currency, Finance Minister P. Chidambaram is seeking to attract dollar inflows by allowing unlisted Indian companies to list abroad without prior or simultaneous listing on an Indian exchange.

The scheme is to be implemented on a pilot basis for two years, after which it would be reviewed by regulators. The listing would be made possible on exchanges located in jurisdictions that satisfy prescribed criteria and in countries with which SEBI has bilateral agreements. The prescribed conditions for listing include compliance with the FDI (foreign direct investment) policy when raising resources abroad.

Published on October 14, 2013