2-YEAR M.A. (INTERNATIONAL TAXATION)

SEMESTER II TAX TREATIES- PART I

1.2.4 PERMANENT ESTABLISHMENT AND ALLOCATION OF BUSINESS PROFITS

Module I Permanent Establishment (Art. 5) General Definition (Art.5, paragraph 1) - Underlying concepts -Three Tests ( Place of business test - Power of disposition test- Functional Test), place of business test- - ‘Fixed’ place of business- location test-, permanence Test -Duration test; Power of disposition test- concept and scope Functional Test- Relevance of PE , Positive Examples of PEs-‘Place of management’- Branch- Office- factory and workshop- place of extractions ( Art 5, paragraph 2)- Construction and service PEs- Building Site- liaison office (Art.5 paragraph 3)-Exclusions (Art. 5, paragraph 4)- Exceptions for preparatory or auxiliary activities- Dependent Agents (Art. 5, paragraph 5)- Agent of an independent status (Art.5, paragraph 6)- Legal and economic independence of the agent- Agent acting in the ordinary course of its business- the subsidiary-PE clause (Art.5, paragraph 7), Comparative analysis of PEs in different DTAAs, BEPS Action Plan 7- Dependent and independent personnel

Module II Business Connection Concept of business connection under Sec.9(1)(i) of the Income-tax Act, 1961- Inclusions and Exclusions from business connection

Module III Business Profits and AE (Art. 7 and Art.9) Scope of business profits Allocation rule for business profits (Art.7, paragraph 1)- Business Profits and PE - Qualification of ‘profits’, Art. 7 and domestic CFC (Controlled Foreign Corporation) Rules- Attribution rule for business profits (Art. 7, paragraph 2)- Business Profits and Force of Attraction- Arm’s length price (Art. 9, paragraph 1)- Comparative study of business profits with Royalty income, Fee for technical services, interest income- Associate Enterprise and Arm’s length concept (Art. 9, paragraph 1), Applications of Art. 9 based on domestic laws

Module IV Shipping, Inland Transport and Waterways (Art.8) Ships/aircraft in international traffic: Activities covered by Art. 8, paragraph 1, Different models of taxation , allocation rule (Art. 8 and 1) -, Investment income related to shipping activities- Allocation rule for income from boats engaged in inland waterways transport (Art. 8, paragraph 2)- Definition of boats engaged in inland waterways transport, Enterprises not exclusively engaged in shipping, inland waterways transport or air transport- feeder vessels- Effective place of management of an enterprise aboard a ship/boat (Art. 8, paragraph 3)- Profits from the participation in joint activities (Art. 8, paragraph 4) situs of taxation-exemptions- Taxation of Non-resident Shipping companies under Sec. 172 and Sec. 44B of the Income-tax Act, 1961

1.2.5 BUSINESS PROFITS AND ASSOCIATED ENTERPRISE AND TRANSFER PRICING

Module I Basics of Transfer Pricing Concept of Transfer Pricing- Definitions- Transfer Pricing as Arm’s length concept, Arm’s length rule for interest and royalties-Arm’s length adjustments (Art. 9, paragraph 2)- Primary adjustments, Secondary adjustment, Safe Harbour Rules-Advance pricing agreements, Allocation controversy formulary apportionment, Methods of TP, Selection of filters, Tested Parties, Procedural aspects, Alternate Dispute Mechanisms and TPR guidelines

Module II Attribution of Profits Role of Transfer Pricing Rules in business profit allocation- Functional Analysis in highly intergrated value chains- Hard-to-value intangibles – Information Asymmetry- OECD Transfer Price Report - Unitary Approach, Formulary Apportionment, Thin Capitalisation Rules- Country-by-Country Reporting- Alternative Transfer Pricing Rules (African countries)

1.2.6 INCOME FROM IMMOVABLE PROPERTY AND CAPITAL GAINS

Module I Income from immovable property (Art.6)- Allocation rule (Art. 6, paragraph 1)-Definition of ‘immovable property’ (Art. 6, paragraph  2)- income from legal use of immovable property (Art. 6, paragraph 3)- income from immovable property of an enterprise (Art. 6, paragraph 4) and other treaty articles

Module II Capital gains (Art.13) Point of accrual - situs of capital asset Definition of ‘alienation of property’, Alienation of whole of enterprise Exit taxes (deemed realization), Cross border deals- Outbound transfer of an asset from a PE- Alienation of shares, Beneficial owner of capital gains, depreciation/losses, Redemption of securities.
Capital (Art.22)- Immovable property (Art. 22, paragraph 1)-taxation of non-residents of immovable property in the Source Country, capital represented by ships/aircrafts (Art. 22, paragraph  3) , Residual capital (Art. 22, Paragraph  4) Indirect transfers, Sec. 9 under Income-tax Act, 1961, Definition of Capital Asset and Transfer under Income-tax Act, 1961- the Vodafone and Cairn controversy