|CORAM:||Rajendra (AM), Ram Lal Negi (JM)|
|SECTION(S):||201(1), 9(1)(vii), Article 12, Article 5|
|CATCH WORDS:||Fees for technical services, Permanent Establishment|
|COUNSEL:||Sunil Moti Lala|
|DATE:||March 23, 2016 (Date of pronouncement)|
|DATE:||May 26, 2016 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|Installation services provided by a foreign enterprise which are inextricably connected to the sale of goods are not assessable as "fees for technical services" or as "business profits" under the DTAA|
The Tribunal held that review of design does not amount to transfer of design and hence fees for the same cannot be taxed as FTS / FIS under the India US treaty.
Though service of installation is covered by the FTS clause as well as Installation PE clause of the India China treaty and though the installation contract (including period of after sales service) exceeded 183 days, the income from installation activity was neither taxable as FTS nor as business income since
• the service of installation was inextricably connected to sale of goods, the same could not be treated as FIS or FTS
• specific installation PE clause in India China Treaty will override General FTS clause
• the aforesaid threshold limit of 183 days would have to be applied to the actual period of installation (which was less than 183 days) and not the contractual period.