Monday, May 13, 2013

ITAT on the most dreaded Rule of - "FORCE OF ATTRACTION" >

Thursday, May 16, 2013
Taxmann Daily
A Tax & Corporate Laws Daily
The rule of ‘Force of attraction’ (‘FOA’) supports the philosophy that when an enterprise sets-up a permanent establishment (‘PE’) in another country, it brings itself within the fiscal jurisdiction of that another country to such a degree that such another country can tax all profits that the enterprise derives from that country - whether through the Permanent Establishment (PE) or not. Following issues have been dealt with in this article in context of rule of Force of Attraction:
a) Categories of Force of Attraction rule;
b) It’s existence in OECD and UN Models;
c) It’s applicability to tax treaties;
d) Judicial precedents explaining applicability of Force of Attraction rule.
Also Read yet another case (notably, argued by SED)>

Linklaters & Paines Versus Income-tax Officer, (International Taxation)

Feb 21, 2013 – 5085/Mum/2003 was relating to application of force of attraction ... inArticle 7 of UN Model Convention which is akin to the provision of Article 7(3) ...force of attraction principle in the case of the assessee, has given rise to a .... He submitted that Article 7(1) of India-UK DTAA has to be read with ..... Can't Say ...

  1. December 2012 report - KPMG
    Jan 8, 2013
ADIT vs. M/s Clifford Chance (ITAT Mumbai Special Bench)

<> May 14, 2013 at 10:42 am

Reaction (for sharing own thoughts):
On the first blush, one would urge that, in none’s (legal pundits being no exception) considered opinion, the view taken by the ITAT, could conceivably be rightly assailed or logically faulted to be without substance or merits in law. For, it is seen to be prima facie strictly within the four corners / parameters of the applicable rules of jurisprudence; especially, having been based upon the commonly acceptable /accepted understanding of the concept of “extra-territorial jurisdiction “, within the meaning of its origin being the “common law”.

The fact that the Revenue /tax authorities, or any other governmental authority, in any other country, in the course of administration of any of its fiscal or other laws are increasingly accustomed to taking a different view ought not to, in one’s longstanding conviction, be taken for guidance or relied on as a justification; or be a influencing factor for questioning the right direction the ITAT has chosen to take and follow.

In short, what ought not to be forgotten or sidetracked is, – the fundamental principle that any domestic enactment (a man-made law), in order to be successfully enforceable / properly enforced, more so in a global environment, must stand the ultimate wholesome tests namely, :

whether or not any such highly disputable (ted) provision, in order to stand the tests of incisive judicial scritiny, has, -
 (A) sound reasons to support, based on ‘common sense’, being the touch stone of ‘logic’; and

 (B) ‘logic’ for its corner stone.

(Left unedited; for experts on international taxation to pitch (chip!) and putt >>>>)


On one of the decptively  ingenious but truly artful RULE – IN INDIVIDUAL’S OWN OPINION, that offends the nature-given human faculty OF SOUND REASONING AND LOGICAL THINKING- given BY HUMAN unto himself – the Rule of Force of Attraction:
A feedback (wholly and exclsively well-intended one; sole objective is to share the info. as it appeared, certainly not to ‘educate’)
@Taxmann Daily>
Rule of ‘force of attraction’ given in Article 7 of UN Model treaty can’t be imported into Article 7 of India-UK DTAA

Taxman Daily
Rule of ‘force of attraction’ given in Article 7 of UN Model treaty can’t be imported into Article 7 of India-UK DTAA
Articles 7(1)(b) and 7(1)(c) of the UN Model Convention as well as of the UN Model Convention Commentary can’t be relied upon to come to a conclusion that the connotation of “profits indirectly attributable to permanent establishment” used in Article 7(1) of the Indo- UK treaty incorporated a force of attraction rule
- ADIT V. CLIFFORD CHANCE [2013] 33 200 (Mumbai)

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