News Share

The Tax Hub

Daily Tax Newsletter

India-Canada

12 September 2014

Responsive image

Indian Court Rules that Payment for Intranet Portal Access is a Taxable Royalty

The Indian High Court has ruled on whether or not payments by an Indian company to its Canadian parent for the use of an in-house intranet portal constitutes royalty payments subject to withholding. The payments were for the use of the portal as well as reimbursement to the parent company for related licenses and in-house development costs for the portal, with no markup. No license for the use of the portal was transferred to the Indian company.

The Indian taxpayer initially withheld and remitted tax on the payments, but later claimed a refund arguing that the payments should not be considered royalties. A claim denied by the tax authorities.

On initial appeal, the first appeal authority agreed that they payments were not royalties, but qualified instead as fees for technical services (FTS), which are also subject to withholding tax. However, on subsequent appeal, the appellate tribunal sided with the taxpayer and ruled that the payments were neither royalties or FTS subject to withholding tax because the payments were reimbursement of actual costs incurred by the parent company with no element of income. The tribunal decision was then appealed by the tax authorities to the High Court.

The High Court sided with tax authority and overturned the decision of the tribunal. In its decision, the High Court held that as a result of the payments the Indian taxpayer had effectively acquired the right to use the intranet portal owned by the Canadian parent company and that a license had been implicitly granted. Therefore, the payments qualified as a royalty under both the Indian Tax Act and the India-Canada tax treaty, and are subject to withholding tax.

Powerful Tax Tools

NEW

FX Rates

Global FX Rates including Tax Year Average FX Rates and Spot Rates for all Reporting Currencies.

NEW

Corporate Tax Rates

Corporate tax rates, surtaxes, and effective tax rates for the current year, as well as historical rates and approved future rates.

NEW

Country Analysis

Detailed tax guidance for companies doing business in over 100 countries, including summaries and snapshots of key tax facts and issues.

NEW

Cross Border Tax Calculator

Calculate total tax costs and benefits of a cross border transaction including withholding tax, participation exemption and foreign tax credit rules.

NEW

Cross Border Tax Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment streams.

NEW

OECD BEPS Project

Complete overview of the OECD BEPS Project, including daily BEPS news, country adoption of BEPS measures, and an overview of the 15 BEPS Actions.

NEW

Tax Calendar

Customizable calendar tool that tracks corporate income tax, value added tax and transfer pricing obligations by country or entity.

NEW

Tax Forms

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

NEW

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

NEW

Worldwide Tax Planner

Calculates the worldwide tax cost of what-if scenarios based on legal entity structure, taxable income, and cross border transactions.

NEW

Certified Rates Report

Customizable Certified Rates Report providing updated corporate and withholding tax rates at the end of each month for over 100 countries.

NEW

Withholding Tax Minimizer

Enables quick calculation of tax costs and benefits of cross border transactions considering all possible transaction combinations and optimal routes.

NEW

VAT Rates

Provides value added tax (VAT) rates, goods and services tax (GST) rates and other indirect tax rates for over 100 countries.

NEW

NOL Calculator

Country specific calculator to determine how net operating losses can be utilized in carryback and carryforward years.

NEW

Transfer Pricing Calculator

Calculates TP ratios under various TP methods and calculates the difference between target ratios and actual ratios.

NEW

Individual Income Tax Rates

Individual tax rates for over 100 countries.

Play of the Day

Translate Documents

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

We’re here to help

We’re here to answer any questions you have about the Orbitax products and services.

Send us a message

Who’s behind Orbitax?

We’re committed to providing high value, low cost tax research and management solutions.

Learn More