Does a foreign company that is liable to tax in India have to file a return even if it not actually paying tax?
In VNU International (Netherlands) v Director of Income Tax (international Taxation) the Authority for Advance Rulings (AAR), recently considered this question in the light of section 139(1) of the Income Tax Act, 1961.
In 2004, VNU, a tax resident of the Netherlands with no permanent establishment in India, transferred 50% of the shares it held in ORG-IMS Research, a company incorporated in India, to IMS-AG, which was incorporated in Switzerland. After the transfer, VNU was left with 50,765 shares of ORG-IMS, which amounted to 50% of its shares. Through a subsequent share purchase agreement, VNU transferred 50% of its remaining shares, which it had acquired for ₹461,500, to IMS-AG & Interstatistik AG for a total of US$7,408,643.
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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
