CA Parminder Kaur who qualified as a Chartered Accountant 3 years back has set up her own Practice in Jalandhar, Punjab. Her major expertise is in…

CA Parminder Kaur who qualified as a Chartered Accountant 3 years back has set up her own Practice in Jalandhar, Punjab. Her major expertise is in the field of consultancy to her clients regarding Global Accounting, Foreign Exchange related Legal matters, International taxation & promoting Financial Literacy. Through reference of an NRI relative, she recently bagged a contract of providing her services to the corporate house “SIMRAJ", a venture of Raj Arora & Simran Arora, husband & wife, based at Frankfurt, Germany. Raj & Simran met each other during their post-graduation days in London School of Economics and became best friends there. While Simran was simultaneously involved in the construction business of her father in London, Raj was always a kind of creative person who would like to promote innovations in the field of Healthcare and Pharmaceuticals. At present, Simran is successfully running her construction business by the name of Simran Constructions GmbH in Germany, while Raj has set up his venture by the name of Raj Pharma AG, incorporated in Germany and 63% of its shares are held by Simraj (P) Ltd., an Indian company. Raj Pharma AG has its presence in India also. Simran's one of the biggest construction project was being executed in India at Amritsar through Sim Contractors Pvt. Ltd., another company based in India, shortly known as “SIMCO”, which is a foreign operation of Simran Constructions GmbH, primarily set up to execute construction projects in India. The functional currency of Simran Constructions GmbH is Euros. 78% of SIMCO's finances have been raised in USD by way of contribution from Simran Constructions GmbH. SIMCO's bank accounts are maintained in USD as well as in INR. Cash flows generated by it are transferred to the German Company on a monthly basis in USD in respect of repayment of finance received from the German Company. Revenues of SIMCO are in USD. Its competitors are globally based. Tendering for the construction project happened in USD. SIMCO incurs 80% of the cost in INR and remaining 20% costs in USD. While carrying out this construction project in Amritsar, SIMCO was in need of a heavy excavation machinery “XALTI” which was not available in India. CA Parminder arranges a meeting of SIMCO's Manager in India with one of her clients, Mr. Amit Juneja, at the request of Simran to enter into a contract of importing this machinery from out of India. Mr. Juneja has been in the business of trading in heavy machineries used in construction business since the past 5 years and had been planning since long to start importing highly technical machines from outside India to include in his trade segment. He felt it to be the right time and opportunity to enter into the Global market. He imported “XALTI" from Malta Machineries based in France. CA Parminder guides and helps Mr. Juneja to execute this import transaction following all the general guidelines as laid under the domestic laws of India. Along with this transaction, Mr. Juneja requires to transfer U.S. $ 15,000 for remittance towards hiring charges of transponders to be paid to Ross and U.S. $ 20,000 to be paid to Chandler for payment related to call back services of telephones, both being foreign nationals. Raj Arora is very curious to know about the compliances to be made by Raj Pharma AG. He provides the following details to CA Parminder Kaur relating to Raj Pharma AG for the P.Y. 2023-24: Particulars India Germany Fixed assets at depreciated values for tax purposes (₹ in crores) 100 60 Intangible assets (₹ in crores) 50 100 Other assets (value as per books of account) (₹ in crores) 40 120 Income from trading operations (₹ in crores) 50 75 The above figure includes: (i) Income from transactions, where purchases are from associated enterprises and sales are to unrelated parties 2 4 (ii) Income from transactions, where sales are to associated enterprises and purchases are from unrelated parties 3 5 (iii) Income from transactions, where both purchases and sales are from/to associated enterprises 5 10 Interest and dividend from investments (₹ in crores) 30 20 Number of employees (Residents in respective countries) 60 90 Payroll expenses on employees (₹ in crores) 10 15 During F.Y.2023-24, eight board meetings of Raj Pharma AG were held – 3 in India and 5 in Germany. Raj Pharma AG's Indian counterpart – Simraj (P) Ltd. required a high tech machinery "Medifix” to be purchased from Cambridge, UK. For importing such machinery, Raj contacted one of his friends in Cambridge, who runs a company by the name of "Medico Inc.”, a London based company, having several business units all over the world. It has a unit for manufacturing pharma machineries with its Headquarters in New Delhi. It has a branch in Dubai which is controlled by the Headquarters in New Delhi. However, “Medifix”, being not available with ‘Medico Inc.', Raj's friend in Cambridge helped him to procure the machinery from another company in Frankfurt, Germany known to him. This foreign currency asset amounting to Euro 100,000 is recorded by Simraj (P) Ltd. as a non-monetary item at the date of purchase when the exchange rate was 52at 52 lakhs. The recoverable amount of the asset on the reporting date is calculated as Euro 90,000. The exchange rate on the date of valuation was 60to a Euro and the carrying amount of Medifix recorded accordingly, as per the relevant Ind-AS, in the books of Simraj (P) Ltd. is 54 lakhs. Raj and Simran, both made several trips to India during the previous year and they are quite skeptical about the taxation of their income in both the countries Germany & India. One day, over dinner table, they discussed all these aspects. Raj, having an experience in International tax matters and having discussed the same with CA Parminder tells Simran that in the case of income arising to an assessee in countries with which India does not have any double taxation agreement, relief would be granted under the Indian Income tax law subject to fulfilment of certain conditions. Simran tells him that one of her friends told her in a Kitty party that the double taxation avoidance treaties entered into by the Government of India with other countries can never ever override the domestic law of India. Further, Simran is curious to tell Raj about her father's business in the same segment and how her father is doing so good with the finances of the business that inspires her as well. She tells Raj that one of her father's business set-ups in India by the name of Entity “P” whose functional currency is ‘₹’, has a foreign operation, Entity “Q” with Euro as its functional currency. Entity Q issued to Entity P, a perpetual debt denominated in Euros with an annual interest rate of 6%. The perpetual debt has no issuer call option or holder put option. Thus, contractually it is just an infinite stream of interest payments in Euros. Further, being highly impressed with CA Parminder's work and quality of her performance, they both decided to offer her the role of CFO in their German Group “SIMRAJ” and wanted her to get migrated to Germany to which CA Parminder agreed. As per the offer letter, Parminder should join the company at any time between 1st September, 2023 and 31st October, 2023. She has maintained a joint account with her father in UCO Bank, Jalandhar, in India.