Business income of NR isn’t taxable if its dependent agent is remunerated on ALP basis and is charged to tax

ANL SINGAPORE PTE. LTD V. DY. DIT (Mumbai - Trib.)

Where AE of assessee also constituted its PE and was remunerated on ALP, then nothing further was left to attribute to PE

The Tribunal held in favour of assessee as under:

1. It was observed that the income in respect of voyages which had been considered as chargeable to tax in India as per Article 7 of the India-Singapore DTAA was the amount on which the assessee paid commission, etc., to CMA, which was its AE and also a dependent agent;
2. The receipt in the hands of the CMA had been determined at ALP under due process of law;
3. Where the AE also constitutes a PE and was remunerated on ALP, then nothing further was left to attribute to the PE. Thus, it was held that income in respect of voyages couldn’t be included in the hands of the assessee. 

ITAT elucidates law on condonation of delay; arguments as to sufficient cause isn’t a license to file belated appeal

PRASHANT PROJECTS LTD. V. DY. CIT (Mumbai - Trib.)

Liberal view in condoning delay is one of the guiding principles in the realm of belated appeals, which can't be equated with a license to file appeals at will-disregarding the time-limits fixed by the statutes

In the instant case the assessee moved an application before the FAA for condoning the delay in filing appeal. The FAA dismissed the appeal filed by assessee.

On appeal, the Tribunal explains basic principles of condonation of delay as under:

1. If sufficient causes for delay are presented, discretion is available to the FAAs to condone the delay and admit the appeal. The expression 'sufficient cause' is not defined, but it means a cause which is beyond the control of the assessee;
2. Any cause which prevents a person approaching the FAA within given time limit is considered as a sufficient cause. The test whether or not a cause is sufficient is to see whether it could have been avoided by the party by the exercise of due care and attention;
3. In every case of delay, there is some lapse on the part of the assessee. If there are no mala fides the FAA should consider the application of the assessee. But when there is reasonable ground to think that the delay was occasioned otherwise than a bonafide conduct, then the FAA should lean against acceptance of the explanation;
4. The application for condonation of delay should be supported by an affidavit, showing that there is sufficient cause for condonation. Condonation of delay, though an equitable relief, yet, cannot be accorded merely on sympathy or compassion and the grounds offered have to be evaluated to test whether the party in default had been guilty of conscious and deliberate inaction.

Based on the above principles it held in favour of revenue as under:

• Adopting a liberal view in condoning delay is one of the guiding principles in the realm of belated appeals, but liberal approach cannot be equated with a license to file appeals at will-disregarding the time-limits fixed by the Statutes;
• For a period of more than three years, assessee did not bother to find out the outcome of the appeal it had filed. The behaviour of the assessee could be termed as personified inaction and negligence which would not constitute reasonable cause;
• Assessee, a corporate-assessee, filing returns of income of lakhs of Rupees and assisted by highly qualified professionals couldn't take umbrella of ignorance of the provisions of law. Therefore, the order of FAA was to be upheld.

Protocol to India-Australia DTAA – ‘Force of attraction’ concept removed; PE redefined

The protocol amending the agreement between the Government of India and Australia was signed on the December 16, 2011. However, it has been notified on September 20, 2013. It is effective from April 2, 2013. Now Force of attraction' concept is removed from Article 7(1) with insertion of new Article 7(1). As per the new clause, the business profits of the enterprise may be taxed in the other State but only so much of them as are attributable to that PE.

Threshold limit for establishing Service PE has been increased to 183 days. Earlier treaty did not provide for any threshold limit for establishing construction PE. However, the protocol provides for threshold limit of 183 days and 90 days on use of substantial equipments and on activities in connection with exploration of natural resources.

How Can NRIs Invest in Indian Stock Market?

Going by the Foreign Exchange Management Act (FEMA) 1999, Non-Resident Indian (NRI) is a person who is residing outside India but is either a citizen of India or is a Person of Indian Origin (PIO). Indians putting up in overseas find tremendous scope for investment in India as the country is rapidly growing. They have always been allured to put in their money in the Indian markets. NRIs can make investments in India through bank deposits, real estate as well as securities and debts.

NRIs can invest in Indian Stock Markets but for that purpose firstly they need to have an account with an Indian bank. For quite a few years, Indian market is being viewed as a growing and profitable one by Indians living overseas. As per the guidelines laid by the Government of India, NRIs can invest in Indian stock market either directly or via portfolio investment schemes.

When an NRI travels through portfolio investment scheme in order to invest in the Indian stock market they do not have to seek permission from the Reserve Bank of India or from the Government of India.

However, there may be some cases wherein NRIs have to seek permission from Foreign Investment Promotion Board (FIPB) where investment in plantation or agriculture is required.

How can an NRI Invest in Indian Stock Markets?

• In order to begin with investments in Indian Stock markets, an NRI firstly need to have an operational NRE/NRO bank account with a reputed bank. Reputed bank here applies to bank or financial institution which is approved by Reserve Bank of India for carrying forth investments in Indian Stock Market.
• Your next step would be seeking permission from the bank in order to carry out investments. This is known as obtaining a PIS approval. You may seek their permission for routing your investments in Indian Stock Market through their channel or network.
• Once this is done your next step would be to get a Demat Account opened in your name. This would serve your purpose of holding and trading your stocks with the specific depositary participant.
• To make your work more easy and convenient you may also get yourself registered with some authorized broker. The broker with whom you get yourself registered would aid you in carrying forth your selling and buying of stocks.

It is always advisable for NRIs to open three accounts in India which are Non-Resident External Rupee (NRE) Account, Non-Resident Ordinary Rupee (NRO) Account or Foreign Currency Non-Resident Account (FCNR)-with an Indian bank.

An NRE account will help you to send back money to the country of your residence. The NRO account would help you with the local currency that is Indian rupee. In FCNR account you can hold your funds in foreign currency.

The amount that you wish to invest in Indian Stock market would get directly debited from your NRO/NRE account. The same can also be received by way of inward remittances that can be routed through regular banking channels. You can also route the amount by sending a rupee draft/cheque that is issued by an exchange house abroad which would be drawn on its correspondent bank in India.

If you make your investments by way of drafts or cheques you will be required to attach a foreign inward remittance certificate (FIRC) along with your application. A letter issued from the bank that confirms the source of funds will also work in the same manner.

Along with that the documents that include a copy of passport, Pan Card, Overseas Address be it permanent address or correspondence address is also to be submitted.

NRIs can also track their money by giving Power of Attorney (POA) to someone in India who can take decisions on their behalf. The one who has gained PoA has to produce the original PoA or an attested copy of the same to the fund house in order to start operating on behalf of the NRI.

NRIs can also appoint nominees in the mutual fund schemes in which they have invested. A resident can be appointed as a nominee by the NRI. NRI is also allowed to have joint holding with a resident Indian as allowed by the fund houses.

If the question of redeeming the proceeds is ticking your mind then you need to know that the proceeds of redemption will either be directly credited to your account or paid through cheques. Investments that are made via NRE/FCNR accounts or through inward remittances are fully repatriable. Thus, the earnings that are made through redemption of units or via dividends are fully repatriable.

Points to Remember for NRIs Investing in Indian Stock Market

• Prior to making any kind of investments in India NRIs need to go through the guidelines of Reserve Bank of India in order to equip themselves thoroughly with the rules and regulations of investments.
• If an NRI plans to buy the shares of any particular Company, he/she cannot exceed the limit of 5% paid up value of shares.
• When NRIs make investments through their NRO account the principal amount is not repatriable but the capital appreciation is repatriable.
• The investments that are made by NRIs in Indian Stock Market need to be made in Indian currency.
• Intraday Trading is not allowed to NRIs in the Indian Stock market.