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The Supreme Court of India has requested Clifford Chance to provide details of its India-billings of more than a decade ago in its long-running dispute against the Deputy Commissioner of Income Tax (DCIT).
The case is important to determine international firms’ income tax liabilities while billing for work in India.
According to the Press Trust of India the Supreme Court has now issued notice to Clifford Chance to supply it with details on why it should not pay tax on Rs 9.16 crore (around $3m at the time)of fees billed between 1996 and 1998 and four infrastructure projects.
A Clifford Chance spokesperson told Indian legal website LegallyIndia.com that the firm would not comment on the details of its tax affairs, adding: “We take tax compliance very seriously and of course comply with orders made by the Indian courts.
“We’re in the process of complying with this particular order which is a request for information in relation to a claim by the Indian income tax department.
“The claim raises essentially the same issues as were raised in a case recently decided in our favour by the Bombay High Court. The Indian tax authorities are now appealing that decision but we have every expectation of prevailing.”
According to court documents, Clifford Chance is represented in the Supreme Court by advocates Ankur Chawla, Meenakshi Grover, Jayant Mohan and Rahul Pratap.
The Supreme Court case follows the international firm’s Bombay High Court win in January of this year, which ruled that foreign firms should only be taxed on work performed in India.
The firm, represented in the Bombay High Court by senior counsel Harish Salve, had appealed against the income tax authority in the Bombay High Court claiming that only the minority of its fees in those projects transactions - $871,000 - was billed within India.
It argued that the majority and the rest being billed by lawyers outside of India acting predominantly for non-Indian clients and should be taxable in the UK under the UK-India Double Taxation Avoidance Agreement (DTAA).
The Bombay High Court accepted Clifford Chance’s arguments and decided a non-resident could only be taxed on income for services, if that service was rendered within India and was part of a business or profession carried on by such person in India.
The current Supreme Court case concerns the appeal of the DCIT, represented by attorney general G E Vahanvati, which now requires Clifford Chance to provide precise details of the fees billed in India.
The case has been closely watched by other international firms billing work on the ground in India.