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Asia-Pacific Tax Bulletin
 
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Issue No. 5 - 2017 of the Asia-Pacific Tax Bulletin is now available online.

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Number 5 - 2017 contains the following:
ARTICLES
Australia
Discretionary Trusts and Franking Credits – The Case of Thomas
Anton Joseph
This article reviews the recent decision of the Full Federal Court of Australia concerning the streaming of franking credits on franked dividend distributions made by trustees to beneficiaries of a discretionary trust. The article also canvasses the decision of the Supreme Court of Queensland, which addressed the validity of trustee resolutions to facilitate the allocation of the franking credits. The author suggests that it is time for reform of the law relating to trust distributions of franking credits to beneficiaries.
Australia/India
Indian and Australian Perspectives on Demonetization and Its Tax Implications
Saurabh Jain and Amit Kamath
This article reviews the underlying rationale and tax aspects of the implementation of demonetization of INR 500 and INR 1,000 currency notes in India in November 2016. The authors consider suggestions for demonetization of AUD 100 bank notes in Australia and, in that context, contrast the cash transaction reporting requirements, penalties for undisclosed income and voluntary disclosure rules in Australia and India.
Hong Kong
Some Issues Relating to the Application of Hong Kong’s CRS Rules
Alfred Chan

In this article, the author contrasts terminology used in the OECD Common Reporting Standard and the Hong Kong rules to adopt it, which are set out in amendments to the Inland Revenue Ordinance in 2016 and 2017. The article discusses the inconsistencies in logic in the Hong Kong terminology. The author also compares the legislative practices of other offshore finance centres on the use of the same terminology, and advocates legislative amendment to rectify the discrepancies.

India
GAAR Becomes Operational in India
Radhakishan Rawal
On 1 April 2017, India’s general anti-avoidance rule (GAAR) came into effect. This article discusses the background to the introduction of the GAAR and provides an overview of its statutory provisions and administrative guidance. The author also raises some practical challenges to its implementation.
India
Interest on Outstanding Receivables – A Potpourri of Litigation?
Abhishek Dugar and Lakshita Bhandari
In this article, the authors examine the 2012 amendment to the Income-tax Act, which brought receivables and debts arising during the course of business with foreign associated enterprises within the definition of international transactions, which are subject to the transfer pricing rules. The article considers whether outstanding receivables constitute separate international transactions and whether interest on the receivables should be separately charged to tax. The authors canvass the variety of High Court and Appellate Tribunal decisions on these questions and caution Indian taxpayers with their reporting on outstanding receivables and the need to properly benchmark them.
APTBites
Singapore
Expect Heightened Transparency in Singapore
Desmond Teo and Luis Coronado
In this note, the authors summarize Singapore’s participation in BEPS-initiated international agreements to facilitate exchange of information. They contend that Singapore is motivated to commit to international standards on tax cooperation because of its objective of promoting a sound environment for long-term sustainable growth, including its private banking and wealth management industry, in an environment of internationally consistent implementation and administration of exchange of information. The consequence is a new transparency norm, which need not concern taxpayers that enter into business arrangements and transactions, which have a sound commercial and tax basis.
CASE NOTES
India
Arm’s Length Interest Rate Determined by Reference to Borrower’s Country
Abhishek Dugar and Lakshita Bhandari
This case note explains the Bombay High Court’s decision in Commissioner of Income Tax v. The Great Eastern Shipping Co. Ltd., which held that, where an Indian company advances a loan to a foreign associated enterprise, the arm’s length interest rate is to be ascertained by reference to the relevant rate of interest in the borrower’s country, and not that in India.
India
Tax Sparing Credit Allowed for Dividends Received Through Omani Permanent Establishment
Abhishek Dugar and Lakshita Bhandari
This case note discusses the decision of the Delhi High Court in Principal Commissioner of Income Tax v. Krishak Bharati Co-op Ltd, which allowed, in accordance with the India–Oman Income Tax Treaty, the taxpayer a credit against its Indian income tax liability for Omani tax deemed to be paid on dividend income derived through a permanent establishment in Oman.
India
Salary Reimbursement Payments Not Fees for Technical Services
Abhishek Dugar and Lakshita Bhandari
This case note canvasses the order of the Bombay High Court in Director of Income Tax (International Tax) v. Marks & Spencer Reliance India Pvt. Ltd that a payment made by an Indian company to a United Kingdom company as a reimbursement of salaries of employees seconded to the Indian company is not a payment of fees for technical services and, therefore, is not liable to withholding tax in India.
India
Payment for Outright Sale of Product Not a Royalty
Abhishek Dugar
This case note explains the ruling of the Madras High Court that payments for the outright purchase of a software product are deductible to the purchaser. A deduction cannot be denied by the tax department on the ground that the payment is a royalty, which should have had tax deducted at source.
INTERNATIONAL PERSPECTIVE ON ASIA-PACIFIC TAXATION AND INVESTMENT
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