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DATE: September 3, 2015 (Date of pronouncement)
DATE: October 27, 2015 (Date of publication)
AY: -
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A liaison office of a foreign co which identifies a manufacturer in India, negotiates the price, helps in choosing raw material to be used, ensures compliance with quality and gets material tested is not a ‘permanent establishment’ under Article 5 of India-USA DTAA

If the petitioner has to purchase goods for the purpose of export, an obligation is cast on the petitioner to see that the goods, which are purchased in India for export outside India is acceptable to the customer outside India. To carry on that business effectively, the aforesaid steps are to be taken by the seller i.e., the petitioner. Otherwise, the goods, which are purchased in India may not find a customer outside India and therefore, the authority was not justified in recording a finding that those acts amounts to involvement in all the activities connected with the business except the actual sale of the products outside the country. In our considered information, all those acts are necessary to be performed by the petitioner – assessee before export of goods

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DATE: October 9, 2015 (Date of pronouncement)
DATE: October 19, 2015 (Date of publication)
AY: 2011-12
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Law on applicability of Article 24 of the India-Singapore DTAA (Limitation of Benefits) to a case where the income is not remitted to, or received in Singapore, explained

The benefit of treaty protection is restricted to the amount of income which is eventually subject matter of taxation in the source country. This is all the more relevant for the reason that in a situation in which territorial method of taxation is followed by a tax jurisdiction and the taxability for income from activities carried out outside the home jurisdiction is restricted to the income repatriated to such tax jurisdiction, as in the case of Singapore, the treaty protection must remain confined to the amount which is actually subjected to tax. Any other approach could result in a situation in which an income, which is not subject matter of taxation in the residence jurisdiction, will anyway be available for treaty protection in the source country

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DATE: September 28, 2015 (Date of pronouncement)
DATE: October 9, 2015 (Date of publication)
AY: 2008-09
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S. 44BB: Service tax & Customs duty collected by assessee from clients is not includible in gross receipt while computing income u/s 44BB

The Court concurs with the decision of the High Court of Uttarakhand in DIT v. Schlumberger Asia Services Ltd (2009) 317 ITR 156 which held that the reimbursement received by the Assessee of the customs duty paid on equipment imported by it for rendering services would not form part of the gross receipts for the purposes of Section 44 BB of the Act. The Court accordingly holds that for the purposes of computing the ‘presumptive income’ of the assessee for the purposes of Section 44 BB of the Act, the service tax collected by the Assessee on the amount paid by it for rendering services is not to be included in the gross receipts in terms of Section 44 BB (2) read with Section 44 BB (1). The service tax is not an amount paid or payable, or received or deemed to be received by the Assessee for the services rendered by it. The Assessee is only collecting the service tax for passing it on to the government

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DATE: June 17, 2015 (Date of pronouncement)
DATE: July 29, 2015 (Date of publication)
AY: 1997-98
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CITATION:
S. 244A: Interest on income-tax refund received by a non-resident is not effectively connected with the PE (Permanent Establishment) either on asset test or activity test. Accordingly such interest cannot be assessed as business profits but has to be assessed as "interest" under Article 11/ 12

Interest on income tax refund is not effectively connected with the PE (Permanent Establishment) either on asset test or activity test. Therefore, taxable under the Article 11(2) of Indo Netherlands tax treaty

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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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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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DATE: July 8, 2015 (Date of pronouncement)
DATE: July 20, 2015 (Date of publication)
AY: 2006-07
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CITATION:
Entire law on taxability of "fees for technical services" under the "make available" clause of the DTAA explained

Services can be said to ‘make available’ technical knowledge etc, where such technical knowledge is transferred to the person utilizing the service (i.e. the appellant in the instant case) and such person is able to make use of the technical knowledge etc, by himself in his business or for his own benefit and without recourse to the performer of services (i.e OlofGranlund) in the future. The mere fact that provision of service may require technical knowledge by the person providing the service would not per se mean that knowledge has been made available

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DATE: July 1, 2015 (Date of pronouncement)
DATE: July 4, 2015 (Date of publication)
AY: 1985-86
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S. 44BB vs. 9(1)(vii)/44D: The "pith and substance" test has to be applied to determine the dominant purpose of each agreement. If the dominant purpose is mining, the income is assessable only u/s 44BB and not as "fees for technical services" u/s 9(1)(vii) & 44D

The pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of Section 44BB and not Section 44D of the Act

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DATE: May 29, 2015 (Date of pronouncement)
DATE: June 1, 2015 (Date of publication)
AY: 2004-05
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CITATION:
S. 9, Article 12: Meaning of expressions "consultancy services" and "independent personal services" in the context of a DTAA explained

It is evident that “consultancy services” would mean something akin to advisory services provided by the non-resident, pursuant to deliberation between parties. Ordinarily, it would not involve instances where the non-resident is acting as a link between the resident and another party, facilitating the transaction between them, or where the non-resident is directly soliciting business for the resident and generating income out of such solicitation

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DATE: May 26, 2015 (Date of pronouncement)
DATE: May 29, 2015 (Date of publication)
AY: 2010-11
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CITATION:
S. 40(a)(i): As there is no requirement in the Act to deduct TDS on purchases made from Indian residents, imposing such a condition while making payments to non-residents violates the non-discrimination provision in Article 24 of the DTAA

Article 24 provides in unequivocal terms that for the purposes of determining the taxable profits of an Indian enterprise, any disbursements made to a Japanese enterprise shall be deductible in the same manner as if it had been made to an Indian resident. When we examine the TDS provisions, it is noticed that no provision under the Chapter XVII of the Act stipulates for deduction of tax at source from payment made for the purchases made from an Indian resident. This position when contrasted with purchases made from a non-resident, imposes liability on the purchaser for deducting tax at source under section 195, subject to the fulfilment of other conditions. When we compare an Indian enterprise purchasing goods from an Indian party vis-a-vis from a Japanese party, there is possibility of an obvious discrimination in terms of disallowance of purchase consideration under section 40(a)(i) in so far as the purchases from a Japanese enterprise are concerned. It is this discrimination which is sought to be remedied by para 3 of Article 24

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DATE: May 27, 2015 (Date of pronouncement)
DATE: May 29, 2015 (Date of publication)
AY: -
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CITATION:
S. 9: Retrospective amendments seeking to tax income of non-residents does not affect the “source rule”. The amendment makes no any difference to the non-taxability of payments made to foreign companies if the income accrues abroad

While no doubt, the explanation is deemed to be clarificatory and for a good measure retrospective at that, nevertheless there is nothing in its wording which overrides the exclusion of payments made under Section 9(1)(vii)(b). The Supreme Court clarified this in GVK Industries Ltd. v. ITO 371 ITR 453 Thus, it is evident that the “source” rule, i.e the purpose of the expenditure incurred, i.e for earning the income from a source in India, is applicable

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