Search Results For: 9(1)(vii)


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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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

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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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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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

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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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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

DIT vs. Citibank N. A. (Bombay High Court)

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DATE: March 11, 2015 (Date of pronouncement)
DATE: July 8, 2016 (Date of publication)
AY: 1999-00
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Law laid down by the Tribunal in (i) Central Bank of India v/s. DCIT 42 SOT 450 that under Art 26(3) of India-USA DTAA payments to Non-Residents are equated with payments to Residents & so s. 40(a)(i) disallowance is not valid and (ii) in DCIT v/s. Bank of Baharain & Kuwait 132 TTJ (Mum) 505 that loss arising from unmatured foreign exchange contracts is not a notional loss but is allowable as a definite liability is final as Dept has not challenged these verdicts and the issue cannot be raised in case of other assessees

The Assessee during subject Assessment Year made payment through Master Card International and Visa Card International being assessment and equipment fees. The payments were made by the Assessee without deducting tax at source. In view of the above, the Assessing Officer & CIT(A) disallowed the entire amount of fees remitted, aggregating to Rs.82.33 lakhs in terms of Section 40(a)(i) of the Act. The Tribunal allowed the Appeal of the Assessee by followed its decision in the case of Central Bank of India v/s. DCIT 42 SOT 450 – wherein on similar facts, it was held that even if no TDS is deducted, the payments made to Visa Card International and Master Card International on account of fees could not be disallowed in view of Article 26(3) of Indo-US Double Taxation Avoidance Agreement (DTAA)

Posted in All Judgements, High Court

Technip Singapore Pte Ltd vs. DIT (Delhi High Court)

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DATE: June 2, 2016 (Date of pronouncement)
DATE: June 4, 2016 (Date of publication)
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Law on whether "installation or construction activity" constitutes a PE under Article 5 and whether "mobilisation/ demobilisation charges" can be treated as "royalty" u/s 9 (1) (vi) & Article 12 (3) (b) of the DTAA and whether "installation charges" could be treated as "Fees for Technical Services" under Explanation 2 below s. 9 (1) (vii) read with Article 12 (4) (a) of the India-Singapore DTAA explained

Therefore, on two counts the finding of the AAR on FTS cannot be sustained. The first being that the installation services are not incidental to the mobilisation/demobilisation service. The contract was in fact for installation, erection of equipment. Mobilisation/demobilisation constituted an integral part of the contract. Secondly, the AAR has proceeded on a factual misconception that the dominion and control of the equipment was with IOCL. It was erroneously concluded that the payment for such mobilisation/demobilisation constitutes royalty. In that view of the matter, the consideration for installation cannot not be characterized as FTS and brought within the ambit of Article 12.4(a) of the DTAA. The resultant position is that no part of the income earned by the Petitioner from the contract with IOCL can be taxed in India

Posted in All Judgements, High Court

Gujarat Pipavav Port Limited vs. ITO (ITAT Mumbai)

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DATE: March 23, 2016 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2008-09
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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

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 (i) the service of installation was inextricably connected to sale of goods, the same could not be treated as FIS or FTS (ii) specific installation PE clause in India China Treaty will override General FTS clause (iii) 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

Posted in All Judgements, Tribunal

ACIT vs. M/s. BSR & Co (ITAT Mumbai)

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DATE: May 6, 2016 (Date of pronouncement)
DATE: May 20, 2016 (Date of publication)
AY: 2009-10
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S. 40(a)(ia): Payments by a CA firm to foreign professional entities for services rendered abroad is not taxable under Articles 12 and 15 of the India-USA DTAA. The retrospective amendment to s. 9(1)(vii) to tax services rendered outside India does not apply in the context of a disallowance u/s 40(a)(ia) in the hands of the payer

Ostensibly, the requirement of rendering services in India in order to attract section 9(1)(vii) of the Act was removed by insertion of Explanation by the Finance Act, 2010 with retrospective effect from 1/4/1976. This has been understood by the Revenue to say that inspite of the services having been rendered by the recipients outside India, the same is taxable in India by applying the aforesaid amendment. In our view, such retrospective amendment would be determinative of the tax liability in the hands of the recipients of income. So however, in the present case, what is held against the assessee is the failure to deduct tax at source at the time of payment of such income. Ostensibly, dehors the aforesaid amendment, the impugned income was not subject to tax deduction at source in India as per the prevailing legal position. Taxability of a sum in the hands of recipient, on account of a subsequent retrospective amendment would not expose the assessee-payer to an impossible situation of requiring deduction of tax at source on the date of payment. Therefore, on this count also the assessee cannot be held to be in default in not deducting tax at source so as to trigger the disallowance under section 40(a)(i) of the Act

Posted in All Judgements, Tribunal

CIT vs. Farida Leather Company (Madras High Court)

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DATE: January 20, 2016 (Date of pronouncement)
DATE: April 28, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 195/ 40(a)(ia): Commission paid to a non-resident for services rendered outside India is not chargeable to tax in India and is not liable for TDS. Insertion of Explanation 4 to s. 9(1)(i) and Explanation 2 to s. 195(1) by FA 2012 w.r.e.f. 01.04.1962 and insertion of Explanation below s. 9 (2) by FA 2010, w.r.e.f. 01.06.1976 makes no difference to the law

The commission payments to the non-resident agents are not taxable in India, as the agents are remaining outside, services are rendered abroad and payments are also made abroad. The contention of the Revenue that the Tribunal ought not to have relied upon G.E.India Technology’s case, cited supra, in view of insertion of Explanation 4 to Section 9 (1) (i) of the Act with corresponding introduction of Explanation 2 to Section 195 (1) of the Act, both by the Finance Act, 2012, with retrospective effect from 01.04.1962 is not correct. When the transaction does not attract the provisions of Section 9 of the Act, then there is no question of applying Explanation 4 to Section 9 of the Act

Posted in All Judgements, High Court