Search Results For: International Tax


HITT Holland Institute of Traffic Technology B.V. vs. DDIT (ITAT Kolkata)

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DATE: February 8, 2017 (Date of pronouncement)
DATE: February 20, 2017 (Date of publication)
AY: 2010-11
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CITATION:
Entire law on Permanent Establishment, Force of Attraction principle, taxability of software embedded in hardware as royalty, make available of technical services etc explained (all important judgements referred)

Some provide for taxing profits/income from all transactions whether they are attributable to PE or not or whether they are of the same kind of transactions carried on by the PE or not, which is referred to as “Full Force of Attraction” principle. As to which principle is applicable in a given case depends on the clauses of the convention between two countries. Article 7(1) of the DTAA between India and Netherlands provides for taxing profits of the enterprise in the other state only to the extent they are attributable to the PE in the other state, adopting “No Force of Attraction” principle

Posted in All Judgements, Tribunal

GE Energy Parts Inc vs. ADIT (ITAT Delhi)

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DATE: January 27, 2017 (Date of pronouncement)
DATE: January 31, 2017 (Date of publication)
AY: 2001-02
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Permanent Establishment: Entire law explained on whether the deputation of personnel by a foreign company to assist the Indian subsidiaries in negotiations, marketing etc leads to a “fixed place PE” or a “Dependant Agent PE” under Article 5 of the DTAA and if so, the manner in which the profits of the foreign company are attributable to operations in India

The expats of GEII and employees of GEIIPL were appointed to act as agent of multiple GE overseas enterprises. It is nobody’s case that they were otherwise acting as agents of independent status working for other third parties in India. This proves that expats and employees of GEEIPL acted as agents of dependent status in the first place itself. Although, the number of GE overseas entities looked after by each of them is more than one, but the fact that such entities were in one of the three broader ITA No.671/Del/2011 160 lines of businesses of GE group, makes them agents of dependent status per se

Posted in All Judgements, Tribunal

Geo Connect Ltd vs. DCIT (ITAT Delhi)

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DATE: January 17, 2017 (Date of pronouncement)
DATE: January 30, 2017 (Date of publication)
AY: 2002-03, 2003-04
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CITATION:
S. 9(1)(i)/ 9(1)(vi)/ 9(1)(vii)/ 40(a)(i): Law on whether payment by the assessee to non-resident parties for “call transmission services through dedicated bandwidth” is assessable as income accruing in India, royalty or fees for technical services and whether a disallowance can be made for failure to deduct TDS explained

In the instant case also, the undersea cable for providing dedicated bandwidth to the assessee was installed beyond the territory of India and no operations were carried out by the non-resident party M/s Kick Communication in India. It was responsible for restoring connectivity and Managing faults in connectivity etc in respect of data transmitted through undersea cable only. Similarly, the operations carried out by M/s. IGTL Solutions are also in USA and not in India. Since operations by both the non-resident parties are carried out beyond the territory of India, we thus hold that section 9(1)(i) is of the Act is not attracted in case of above two non-resident parties

Posted in All Judgements, Tribunal

DCIT vs. Welspun Corporation Limited (ITAT Ahmedabad)

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DATE: January 3, 2017 (Date of pronouncement)
DATE: January 18, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 9(1): Important law explained as to the taxability of export sale commission payments received by non-resident agents and the obligation of the assessee to deduct TDS thereon in the context of s. 9(1)(i)/ 9(1)(vii) of the Act and relevant provisions of the DTAA

In the light of the above legal position, what we need to decide at the outset is whether the amounts paid by the assessee to the non-resident agents could be termed as “consideration for the rendering of any managerial, technical and consultancy services”. As we do so, it is useful to bear in mind the fact that even going by the stand of the Assessing Officer, at best services rendered by the nonresident to the agent included technical services but it is for this reason that the amounts paid to these agents, on account of commission on exports, should be treated as fees for technical services. Even proceeding on the assumption that these non-resident agents did render the technical services, which, as we will see a little later, an incorrect assumption anyway, what is important to appreciate is that the amounts paid by the assessee to these agents constituted consideration for the orders secured by the agents and not the services alleged rendered by the agents. The event triggering crystallization of liability of the assessee, under the commission agency agreement, is the event of securing orders and not the rendition of alleged technical services. In a situation in which the agent does not render any of the services but secures the business anyway, the agent is entitled to his commission which is computed in terms of a percentage of the value of the order

Posted in All Judgements, Tribunal

DCIT vs. Bombardier Transportation India Pvt. Ltd (ITAT Ahmedabad)

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DATE: January 3, 2017 (Date of pronouncement)
DATE: January 16, 2017 (Date of publication)
AY: 2013-14
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CITATION:
S. 9(1)(vi)/ 9(1)(vii): Important law explained on whether payment for use of equipment can be assessed as "royalty" and whether payment for rendering of services can be assessed as "fees for technical services" in the context of s. 9(1)(vi) and 9(1)(vii) and Article 12 of the India-Canada DTAA

Article 12(4) provides that, “The term “fees for technical included services” as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein”. In order to invoke article 12(4)(a) it is necessary that such services should “make available” technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or technical design The services provided by BT Canada were simply management support or consultancy services which did not involve any transfer of technology. It is not even the case of the Assessing Officer that the services were such that the recipient of service was enabled to perform these services on its own without any further recourse to the service provider. It is in this context that we have to examine the scope of expression ‘make available’

Posted in All Judgements, Tribunal

ITO vs. Emami Paper Mills Ltd (ITAT Kolkata)

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DATE: January 4, 2017 (Date of pronouncement)
DATE: January 14, 2017 (Date of publication)
AY: 2012-13
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S. 9(1)(vii)/ Article 12: There is a difference between a 'contract of work' and a ‘contract of service’. In a 'contract of work', the activity is predominantly physical while in a 'contract of service', the dominant feature of the activity is intellectual. Fees paid with respect to a ‘contract of work’ does not constitute "fees for technical services" and consequently the assessee is not liable to deduct TDS u/s 195

There is a difference between ‘Contract of work and ‘Contract of service’. The two words convey different ideas. In the ‘Contract of work’ the activity is predominantly physical; it is tangible. In the activity referred as ‘Contract of service’, the dominant feature of the activity is intellectual, or at least, mental. Certainly, ‘Contract of work’ also involves intellectual exercise to some extent. Even a gardener has to bestow sufficient care in doing his job; so is the case with a mason, carpenter or a builder. But the physical (tangible) aspect is more dominant than the intellectual aspect. In contrast, in the case of rendering any kind of ‘service’, intellectual aspect plays the dominant role. In the case under consideration, the scope of work mentioned in the agreement clearly explains that it is ‘contract of work’ to dismantle the machinery, therefore, it is not a ‘contract of service’ hence payment by the assessee is not for technical services, therefore, the assessee company is not liable to deduct TDS

Posted in All Judgements, Tribunal

Utanka Roy vs. DIT (Calcutta High Court)

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DATE: December 15, 2017 (Date of pronouncement)
DATE: January 4, 2017 (Date of publication)
AY: 2011-12
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S. 5/ 9: Salary received by a non-resident for services rendered abroad accrues outside India and is not chargeable to tax in India. The source of the receipt is not relevant. The CIT has wide powers u/s 264 and has to exercise them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11.04.1955

The relevant test to be applied to decide whether the income accrued to a non-resident in India or outside is concerned, is to find the place where the services were rendered, in order to consider where the income accrued. The source of the income was not relevant for the purposes of ascertaining whether the income had accrued in India or outside India. The question whether the petitioner has rendered services in India or not is a question of fact

Posted in All Judgements, High Court

Qad Europe B.V. vs. DDIT (ITAT Mumbai)

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DATE: January 21, 2017 (Date of pronouncement)
DATE: January 4, 2017 (Date of publication)
AY: 1998-99, 1999-00
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CITATION:
S. 9(1)(vi)/ Article 12: Law on whether consideration received for licensing of software programmes can be assessed as "royalty" u/s 9(1)(vi) and Article 12 of the DTAA explained

If we analyse and compare various provisions of the Copyright Act with the relevant clauses of the master agreement, it is noted that the said agreement does not permit HLL to carry out any alteration or conversion of any nature, so as to fall within the definition of ‘adaptation’ as defined in Copyright Act, 1957. The right given to the customer for reproduction was only for the limited purpose so as to make it usable for all the offices of HLL in India and no right was given to HLL for commercial exploitation of the same. It is also noted that the terms of the agreement do not allow or authorise HLL to do any of the acts covered by the definition of ‘copyright’. Under these circumstances, the payment made by HLL cannot be construed as payment made towards ‘use’ of copyright particularly when the provisions of Indian Income-tax Act and DTAA are read together with the provisions of the Copyright Act, 1957

Posted in All Judgements, Tribunal

Reliance Communications Ltd vs. DDIT (ITAT Mumbai)

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DATE: November 18, 2016 (Date of pronouncement)
DATE: November 26, 2016 (Date of publication)
AY: -
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CITATION:
Taxability of software license fees as royalty: Non-consideration of the verdict of the Tribunal in Solid Works Corporation (51 SOT 34) and misreading of the Delhi High Court's verdict in Ericsson AB constitutes a mistake apparent from the record u/s 254(2) and the orders have to be recalled

In the instant appeals, the Tribunal admittedly did not consider the decision rendered by co-ordinate bench in the case of Solid Works Corporation (supra), even though it was relied upon by the assessees herein. The assessees have contended that the non-consideration of the decision of co-ordinate bench, when it was specifically relied upon by the assessee would result in a mistake apparent from record and would warrant recall of the order. In support of this contention, the assessees have placed their reliance on the decision rendered by Hon’ble Supreme Court in the case of Honda Siel Power Products Ltd (supra), wherein the Hon’ble Apex Court has held that the Tribunal was justified in exercising its power u/s 254(2) when it was pointed out to the Tribunal that the judgement of co-ordinate bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record

Posted in All Judgements, Tribunal

Carpi Tech SA vs. ADIT (ITAT Chennai)

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DATE: August 24, 2016 (Date of pronouncement)
DATE: November 8, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Article 5 DTAA: Law explained as to when a "power of attorney" holder of a non-resident can constitute a "dependent agent", "fixed place of business" and a "permanent establishment" under Article 5 of the DTAA. The fact that the physical presence of the non-resident in India is nominal is irrelevant

While business constitutes continuous activity in organized manner it is often a question of fact & law. “Place of business” usually means a premises of the enterprise used for carrying on the business, whether or not exclusively used for business. The residence of the country Manager was held to be a fixed place of business as the same was used as an office address in Sutron Corporation In re 268 ITR 156 AAR. Similarly an office space of 3 x 6 metres in Motorola Inc & Ors 95 ITD 269 (Del). To constitute a PE, the business must be located at a single place for a reasonable length of time. The activity need not be permanent, endless or without interruptions. It may not be out of place to mention that functions performed by Sri V. Subramanian or the Indian subsidiary could not be classified as preparatory or auxiliary in character. The facts strongly indicate towards Sri V. Subramanian constituting a dependent agent / PE for reasons brought on record by the AO and as discussed in foregoing paragraphs. There were no presence of a number of principals who exercised legal and or economic control over the agent Sri V. Subramanian. The principal i.e. the assessee has failed to demonstrate this aspect when confronted by the AO. The principal i.e. the assessee was relying on the special skills and knowledge of the agent Sri V. Subramanian the Managing Director of the Indian entity by the same name and rendering similar functions. Sri V. Subramanian was acting exclusively or almost exclusively for and on behalf of the assessee during the currency of the contracts in question. To that extent it was not in furtherance of his ordinary course of business. Finally the refuge taken of Article 5(2)(j) on the short period of contracts and the interregnum does not offer any solace to the assessee either. The assessee has not demonstrated it was a mere passing, transient or casual presence for its activity in India

Posted in All Judgements, Tribunal