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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

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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’

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DATE: October 4, 2016 (Date of pronouncement)
DATE: October 18, 2016 (Date of publication)
AY: 2010-11
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CITATION:
Article 7: There is a difference between "effectively connected" with the permanent establishment and "legally connected" with it. Only those activities necessary for the functioning of the PE are "effectively connected" with the PE. Article 13: Concept of "make available" technical knowledge etc explained

In the present case certain activities are carried out by the appellant which are not even concerned with the functioning of the permanent establishment therefore in our view only the activities which are performed by the permanent establishment are effectively connected with the permanent establishment and activities which are not carried on by the permanent establishment but are carried out by the head office of the appellant are not “effectively connected” with the permanent establishment. We are also of the view that the term “effectively connected” should not be understood to mean the opposite of “legally connected” but rather something in the sense of “really connected”. Therefore the activities mentioned in the contract should be connected to the permanent establishment not only in the form but also in substance. It is also interesting to note that the permanent establishment of the assessee has been admitted by the appellant only because of the reason that some of the employees of the appellant came to India from time to time for short visit and further certain freelancers were appointed for undertaking the own ground implementation related supervision activities in India. Therefore according to us there are minimum activities performed by the PE of appellant in India. Hence just performing such minimum activities it cannot be said that whole of the revenue of Rs. 33 crores involved in the contract is “effectively connected” with the activities of the permanent establishment in India. Hence we reject the contention of the assessee that the whole of the revenue involved in the contract should be considered as effectively connected with the permanent establishment of the appellant.

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DATE: January 12, 2016 (Date of pronouncement)
DATE: January 26, 2016 (Date of publication)
AY: -
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CITATION:
Managerial services rendered by a UK Co to an Indian Co, even if technical in nature, is not assessable as “fees for technical services” under Article 13 of India-UK DTAA if it does not “make available” any skill, technical know-how etc

To fit into the terminology ‘make available’, the technical knowledge, skills etc must remain with the person receiving the services even after the particular contract comes to an end. The services offered may be the product of intense technological effort and lot of technical knowledge and experience of the service provider would have gone into it. But, that is not enough to fall within the description of services which make available the technical knowledge, etc. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in future without depending on the provider

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DATE: July 8, 2015 (Date of pronouncement)
DATE: July 27, 2015 (Date of publication)
AY: 2009-10
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CITATION:
Articles 13 & 15 of DTAA: Law on whether if a sum cannot be assessed as "fees for technical services" under the "make available" clause of Article 13, it can still be assessed as "Independent personal services" under Article 15 explained

The assessee’s contention that since the services contracted for the by the assessee with non-residents fall within the meaning of Article 13 but get excluded because of not `making available’ any technical knowledge etc., then such services cannot be once again considered under Article 15 is not acceptable. The precise question is that which of the two Articles, namely, 13 or 15, should have primacy in the facts and circumstances as are instantly prevailing?

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