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2019 (6) TMI 1623 - AAR - Income TaxAdvance ruling application - Income taxability in India - taxability of payments to be made by Perfetti India for the costs to be allocated by the applicant under the service agreement - DTAA between India and the USA - Applicant had relied on the provisions of article 12(5)(b) of the DTAA to canvass that in the absence of a "make available" condition, the payments would not partake of the character of "fees for technical services" and further in the absence of any permanent establishment (PE) (in terms of article 5 of the DTAA) of the applicant, such payments would not be taxable in India - HELD THAT:- As services rendered under the service agreement when read with TTKLA, fall within the purview of article 12(5)(a) of the DTAC as such services "are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 4 of this article is received" by the applicant. Whether the services also "make available" technical knowledge, experience, skill, know-how or processes or consist of the development and transfer of a technical plan or technical design, which enables the persons acquiring services to apply the technology contained therein? - The exercise to segregate the services which "make available" the technical knowledge, experience, skill, know-how, processes etc. and enable the recipient to apply the same without reference to the service provider and the advisory services which fail to fulfil this yardstick, will only be an academic exercise. As already mentioned earlier the service charge received by the applicant is taxable under article 12(5)(a) of the DTAC between India and the Netherlands and it is not necessary that the clause of article 12(5)(b) should also be simultaneously satisfied. The exercise to identify the services which satisfy the 'make available' clause would have been relevant, if the article 12(5)(a) would not have been found to be applicable. The questions posed to us for a ruling are answered as under : Question No. 1 : The payment to be made by Perfetti India for the cost to be allocated by the applicant is taxable under article 12(5)(a) of the DTAC between India and the Netherlands. Though some of the services are also taxable article 12(5)(b) of the DTAC, such services are not segregated as they are already taxable under article 12(5)(a). Question No. 2 : As the answer to question No.1 is in affirmative, the payment made by Perfetti India would be chargeable to tax in India. Question No. 3 : Perfetti India is liable to withhold taxes under section 195 of the Act on the payments to be made towards the costs to be allocated by the applicant. Question No. 4 : As the applicant is liable to tax in India, it is required to file a tax return under the provisions of the Act and the transfer pricing provisions of sections 92 to 92F would be applicable in respect of the payment to be made by Perfetti India.
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