FOREIGN TIE-UPS OF TRUSTS ARE TAXABLE IN INDIA

In a verdict that will have a bearing on tax exemptions given to Indian trusts, especially educational trusts, the Authority for Advance Ruling has held that tax is to be paid in India on all cross-border transactions, even if the parties involved are exempt from taxation in their respective countries. The I-T department claimed that though Sri Ramachandra trust is exempt from the Indian Income-Tax Act, the US based Harvard Medical International is not exempt from taxation in India. Further, Sri Ramachandra Education & Health Trust may be exempt under section 12AA of the I-T Act, which
exempts tax on teaching/educational activities, but the "annual alliance development and administrative / maintenance fees" that the trust has agreed to pay to Harvard Medical International do not come under the classification of payment for teaching or educational purposes.