Taxing Offshore Services under Income-Tax Act: Are Service Tax Principles Relevant?

Income Tax Reports, (2014) 365 ITR (Journal) 30-48

19 Pages Posted: 8 Aug 2014

Date Written: August 4, 2014

Abstract

Taxation, as the right of every sovereign, has always witnessed constant repulsion and challenge by the subjects in as much as taxation per se is a compulsory exaction by the State . Any rationale for the compulsory acquisition notwithstanding, the sovereign State is often at odds with other sovereign States in so far as the taxation of cross-border transactions or persons having cross-border presence is concerned. The issues relating to taxation of income arising from supply of cross-border or offshore services have not received a differential treatment.

This article explores the legislative arena relating to taxation of income arising from the supply of offshore services under the provisions of Income Tax Act, 1961. The principle aim is to trace the prevailing controversies and examine the applicable rules to project the need for a serious overhaul, much of which has already been achieved in a sister legislation namely the Finance Act, 1994 levying Service Tax in India. The intent is to carry out a legislative cross-reference between the two legislations such that outstanding issues under the Income Tax Act on this aspect can be resolved while securing the tax-revenue but without much heart-burn and controversy.

Keywords: Income Tax, Offshore services, Service Tax, Place of Supply, Place of accural

JEL Classification: K34, H21, H25

Suggested Citation

Jain, Tarun, Taxing Offshore Services under Income-Tax Act: Are Service Tax Principles Relevant? (August 4, 2014). Income Tax Reports, (2014) 365 ITR (Journal) 30-48, Available at SSRN: https://ssrn.com/abstract=2441041

Tarun Jain (Contact Author)

Supreme Court of India ( email )

New Delhi
India

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