Tax Hotline February 22, 2001

PIL challenges Foreign Television Companies' Tax on Advertising Income

Advocate B.L. Wadhera has filed a Public Interest Litigation ("PIL") in the Delhi High Court, challenging two circulars previously issued by the Central Bureau of Direct Taxation ("CBDT") pertaining to the taxation of foreign television companies (the "companies"). Wadhera says these circulars endow undue benefits on the companies by levying a tax on the presumptive profit of 10% earned by them through advertisements in India.

According to the PIL, the impugned circulars have resulted in the effective rate of tax of 3.8% for the companies during the assessment years 1995-96 to 1997-98 and 3.3% from the assessment year 1998-99. The petition also alleges that the CBDT has not carried out a review of the guidelines based on the "reasonableness of the rates of interest", as promised. This has resulted in a substantial loss of revenue to the exchequer in particular and the public at large.

Source: Economic Times, February 22, 2001

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