Aug. 4 – A recent Supreme Court decision has ruled that payment made in kind will also be subject to taxes in India.
This was based on an appeal made in court by local company Kanchanganga Sea Foods regarding its payment in kind to Hong Kong-based company Eastwide Shipping for lending the use of vessels and personnel. The Indian company gave Eastwide 85 percent of fish catch as payment. It was able to get its foreign partner official permission to fish in an Indian economic zone.
The Supreme Court ruling said that the foreign partner derived income in India even if the fish was sold outside the country, thus is required to still pay tax. Earlier, tax authorities said Kanchanganga was required to account for tax before the payment was made.
Kanchanganga questioned the tax ruling reasoning that no monetary value exchange happened and Eastwide did not sell the fish locally.
For more advice on tax compliance issues in India, e-mail Dezan Shira & Associates at india@dezshira.com.
