INSTRUCTION

Exchange of Information requests to BVI

CASE LAW

2016-TII-28-HC-DEL-INTL

CIT Vs HERBALIFE INTERNATIONAL INDIA PVT LTD: DELHI HIGH COURT (Dated: May 13, 2016)

Income tax - Sections 9(1)(vii), 37(1), 40(a)(i) & 195 - India-USA DTAA - Articles 12(4) & 26(3)

Keywords - administrative expenses - cost sharing arrangement - dead liability - fees for technical services - FTS - FIS - foreign remittance - forex fluctuation - leasehold improvements - other disbursements - permanent establishment - tax at source - TDS

Whether the Revenue can argue for the first time before the High Court, that ITAT has erroneously applied Article 26 (3) of the Indo-USA DTAA without returning a finding on the nature and character of the payment made by the assessee to its foreign AE, where the Revenue has itself throughout contended that such payment was in the nature of 'FTS' - NO: HC

Whether the expression 'other disbursements' occurring under Article 26 (3) of the DTAA includes within its ambit the administrative fee paid by an assessee to its foreign AE - YES: HC

Whether where no TDS is deducted from the payment of FTS made by the assessee to its foreign AE, such payment could not be allowed for deduction u/s 37(1) for computing the assessee's income chargeable under the head 'profits and gains of business' - YES: HC

Whether Section 40(a)(i) prescribing deduction of TDS only in case of payments made to a non-resident, is discriminatory and therefore, not applicable in terms of Article 26 (3) of the Indo-US DTAA - YES: HC

Whether the administrative fee paid by an assessee to its foreign AE is allowable for deduction u/s 37(1) - YES: HC

Revenue's appeal dismissed