Home › › Page 5

Search Results For: International Tax

This section is now closed. Click here for new judgements


Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE: ,
CATCH WORDS:
COUNSEL:
DATE: February 17, 2017 (Date of pronouncement)
DATE: March 6, 2017 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
S. 9(1)(vii)/ Article 12: In order to constitute “technical services”, services catering to the special needs of the person using them must be rendered. The provision of a common facility is not “technical services”. Amount paid towards reimbursement of a common technical computer facility is not “fees for technical services”. Amount received by way of reimbursement of expenses does not have the character of income

It is clearly held that no technical services are provided by the assessee to the agents. Once these are accepted, by no stretch of imagination, payments made by the agents can be treated as fee for technical service. It is in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. It is reemphasised that neither the AO nor the CIT (A) has stated that there was any profit element embedded in the payments received by the assessee from its agents in India. Record shows that the assessee had given the calculations of the total costs and pro-rata division thereof among the agents for reimbursement. Not only that, the assessee have even submitted before the Transfer Pricing Officer that these payments were reimbursement in the hands of the assessee and the reimbursement was accepted as such at arm’s length. Once the character of the payment is found to be in the nature of reimbursement of the expenses, it cannot be income chargeable to tax

Read more ›

Posted on by editor
COURT:
CORAM: , ,
SECTION(S): ,
GENRE: ,
CATCH WORDS:
COUNSEL: , , , ,
DATE: February 13, 2017 (Date of pronouncement)
DATE: February 22, 2017 (Date of publication)
AY: 2011-12
FILE: Click here to view full post with file download link
CITATION:
S. 206AA does not have an overriding effect over the other provisions of the Act. By virtue of s. 90(2), the provisions of the Treaty override s. 206AA to the extent they are beneficial to the assessee. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN

In view of the above discussion, we are of the view that the provisions of section 206AA of the Act will not have a overriding effect for all other provisions of the Act and the provisions of the Treaty to the extent they are beneficial to the assessee will override sect ion 206AA by virtue of section 90(2). In our opinion, the assessee therefore cannot be held liable to deduct tax at higher of the rates prescribed in section 206AA in case of payments made to non-resident persons having taxable income in India in spite of their failure to furnish the Permanent Account Numbers

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): , , ,
GENRE:
CATCH WORDS: , , ,
COUNSEL:
DATE: February 8, 2017 (Date of pronouncement)
DATE: February 20, 2017 (Date of publication)
AY: 2010-11
FILE: Click here to view full post with file download link
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

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: , ,
COUNSEL: ,
DATE: January 27, 2017 (Date of pronouncement)
DATE: January 31, 2017 (Date of publication)
AY: 2001-02
FILE: Click here to view full post with file download link
CITATION:
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

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): , , ,
GENRE: ,
CATCH WORDS: , , ,
COUNSEL: ,
DATE: January 17, 2017 (Date of pronouncement)
DATE: January 30, 2017 (Date of publication)
AY: 2002-03, 2003-04
FILE: Click here to view full post with file download link
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

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): , , ,
GENRE: ,
CATCH WORDS: , ,
COUNSEL:
DATE: January 3, 2017 (Date of pronouncement)
DATE: January 18, 2017 (Date of publication)
AY: 2010-11
FILE: Click here to view full post with file download link
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

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): , ,
GENRE:
CATCH WORDS: , ,
COUNSEL: ,
DATE: January 3, 2017 (Date of pronouncement)
DATE: January 16, 2017 (Date of publication)
AY: 2013-14
FILE: Click here to view full post with file download link
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’

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE: ,
CATCH WORDS: ,
COUNSEL:
DATE: January 4, 2017 (Date of pronouncement)
DATE: January 14, 2017 (Date of publication)
AY: 2012-13
FILE: Click here to view full post with file download link
CITATION:
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

Read more ›

Posted on by editor
COURT:
CORAM:
SECTION(S): , ,
GENRE: ,
CATCH WORDS: ,
COUNSEL:
DATE: December 15, 2017 (Date of pronouncement)
DATE: January 4, 2017 (Date of publication)
AY: 2011-12
FILE: Click here to view full post with file download link
CITATION:
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

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE: ,
CATCH WORDS: ,
COUNSEL: ,
DATE: January 21, 2017 (Date of pronouncement)
DATE: January 4, 2017 (Date of publication)
AY: 1998-99, 1999-00
FILE: Click here to view full post with file download link
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

Read more ›