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Online RMGs tell SC bet money is not taxable income under Income Tax Act
As per the Income Tax Act, a consideration is defined by law as any sum or value that is either received or recoverable from a user or a client in return for a service that has either been provided or will be provided. Since online RMGs do not accrue or receive the monies deposited by users for themselves, it cannot be considered taxable income, the counsel for the companies told the Court.
He further explained that when people play against the casinos, they settle with the winners and losers and then take whatever is left as surplus.
"We are not valuing the bet but the right to win. It's a different concept from bet value....As far as the face value of the bet is concerned, it belongs to the winner," he said. The court will continue hearing online RMGs' arguments until Friday.
In the last hearing, the companies had argued that the GST provisions before October 2023 were inadequate to impose a 28 per cent tax on online gaming operators in the manner attempted by the authorities. The government's reliance on Rule 31A of the GST Rules (value of supply in case of lottery, betting, gambling, and horse racing), introduced in 2018, was challenged because it lacked statutory authority under the Central GST (CGST) Act, the companies had said.
On Tuesday, online RMGs also contended that attempts to tax actionable claims like betting and gambling as 'goods' by amending the Goods Rate Notification were flawed. Until October 1, 2023, there was no entry for actionable claims in the Customs Tariff Schedule, making their classification as goods unsustainable under GST.
The petitioners (online gaming companies) explained to the court the distinction between platform fees, on which GST is already paid, and prize pool contributions made by players, which are held in trust and returned to winners. They claimed that prize pool contributions do not constitute consideration and thus cannot be taxed under GST.
In the case of online games, they argued that these games are played against each player, with the online gaming operator merely providing platform services, and that the platform operator, as the supplier of platform services, has discharged GST during the relevant period at the specified rate.
The division bench of Justices J B Pardiwala and R Mahadevan is hearing the case, which deals with the absence of clear taxing provisions to enforce tax collection before the October 2023 overhaul. The case, with an estimated financial impact of Rs 2.5 trillion, is one of the biggest tax battles in India's history. The matter will continue on Wednesday.
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Time of India
42 minutes ago
- Time of India
SC says Hyatt's India operations are taxable under PE norms
In a ruling that has significant implications for multinational companies operating in India, the Supreme Court Thursday held that UAE-headquartered Hyatt International Southwest Asia , which provides hotel consultancy and advisory services in India as part of its business operations, has a fixed place Permanent Establishment (PE) in India for tax purposes. Upholding a Delhi High Court order that ruled against the hotel company, a bench comprising Justices J.B. Pardiwala and R. Mahadevan dismissed various the appeals by Hyatt International Southwest Asia Ltd, while affirming the findings of the HC that Hyatt had a fixed place PE in India within the meaning of Article 5(1) of the DTAA, and that, the income received under the strategic oversight services agreements (SOSA) is attributable to such PE and is, therefore, taxable in India. Explore courses from Top Institutes in Please select course: Select a Course Category Public Policy Leadership PGDM Finance Design Thinking Cybersecurity CXO Technology Digital Marketing Data Science Artificial Intelligence Healthcare MBA Project Management Operations Management Data Science Degree Management Others others healthcare Product Management MCA Skills you'll gain: Duration: 12 Months IIM Calcutta Executive Programme in Public Policy and Management Starts on undefined Get Details Skills you'll gain: Economics for Public Policy Making Quantitative Techniques Public & Project Finance Law, Health & Urban Development Policy Duration: 12 Months IIM Kozhikode Professional Certificate Programme in Public Policy Management Starts on Mar 3, 2024 Get Details The top court said that was undisputed that Hyatt's executives and employees paid frequent and regular visits to India to oversee operations and implement SOSA. 'The finding of the assessing officer, based on travel logs and job functions, establish continuous and coordinated engagement, even though no single individual exceeded the 9-month stay threshold,' according to SC Under Article 5(2)(i) of the agreement between the government of India and the United Arab Emirates for avoidance of double taxation (DTAA) Under Article 5(2)(i) of the DTAA, the relevant consideration is the continuity of business presence in aggregate – not the length of stay of each individual employee. Once it is found that there is continuity in the business operations, the intermittent presence or return of a particular employee becomes immaterial and insignificant in determining the existence of a PE, Justice Mahadevan, writing for the bench stated, adding the HC was correct in concluding that Hyatt's role was not confined to high-level decision making, but extended to substantial operational control and implementation. The Dubai-based company's ability to enforce compliance, oversee operations, and derive profit-linked fee from the hotel's earnings, demonstrate a clear and continuous commercial nexus, and control with the hotel's core functions, the judgment said, adding that this nexus satisfied the condition necessary for the constitution of a fixed place of PE under Article 5(1) of the India – UAE DTAA. The top court further said that 'the extent of control, strategic decision-making, and influence exercised by the appellant clearly establish that business was carried on through the hotel premises, satisfying the conditions under Article 5(1)…the hotel itself was the situs of the appellant's primary business operations, carried out under its direct supervision and aligned with its commercial interests.' 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For the Assessment Year 2009-10, Hyatt filed its return of income declaring 'Nil' income and claiming a refund of around Rs 88 lakh. The Assessing Officer had passed assessment orders for 2009-18, holding that Hyatt's activities constituted a business connection under Section 9(1)(i) of the Income Tax Act; a PE under Article 5 of the DTAA; royalties and fees for technical services under both the Income Tax Act and DTAA. However, Hyatt asserted that its income was not taxable under the Act as there was no specific Article under the DTAA for taxing Fees for Technical Services. It further stated that it did not have any fixed place of business, office, or branch in India, and that the presence of its employees in India during the relevant previous year did not exceed the nine-month threshold under Article 5(2) of the DTAA. Therefore, the appellant claimed that it did not have a PE in India and that its business income was not taxable under Article 7 of the DTAA. 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Business Standard
an hour ago
- Business Standard
SC dismisses Hyatt International Southwest Asia's appeal in tax case
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The Hindu
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