Home Case Index All Cases Income Tax Income Tax + AAR Income Tax - 2005 (9) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2005 (9) TMI 639 - AAR - Income TaxSeeking advance ruling from the authority - non-resident - liaison office is to be treated as "permanent establishment or not” - income accrues/arises or is deemed to accrue/arise in India u/s 9(1)(i) of the Act - Principal company/GVB/GTE - Nature of activities to be carried on by the “liaison office” (LO) covered under “business connection”? - Benefit of the DTAA between India and UAE - HELD THAT:- The activities of the “LO” which the applicant proposes to open in India have been enumerated in annexure II to the application. As per clauses (a) to (d), these broadly consist of holding of seminars, conferences and shows to cover information about the technology being used by the “GVB” in manufacture of reflective glasses, of different kinds. To receive trade queries from the customers and to pass it on the GTE/GVB and to transmit information as received from the Dubai office/GVB. To collect feed back from customers/consumers, trade organisations, architects, and builders, etc., about the products and pass on the same to the Dubai office/GVB. From the above narration, it is clear that “LO” will be only acting as a channel of communication between the “principal company/GVB/GTE” on one side and Indian companies, traders, customers/consumers on the other side. So long as the “liaison office” does not enter into negotiations with the customers in India for import or purchase of goods by the Indian customers from the “principal company/GVB”, it cannot be said that an intimate relationship exists between the trading activity of the “principal company/ GVB/GTE” outside India and the activities of the “liaison office” within India. Therefore, the activities of the “liaison office” in India would not constitute a course of dealing or continuity of relationship and cannot be said to contribute directly or indirectly to the earning of income by the non-resident, i.e., GTE, in its business outside India. Therefore, it follows that the activities of the “liaison office” as given above would not tantamount to having a “business connection” in India. However, in case the scope of the activities of the “liaison office” is enlarged and it enters into negotiations for import/purchase of goods by the Indian customers, in any manner, it would come within the expression “business connection” as used in section 9(1)(i) of the Act. It is common ground that the issue is covered by the recent ruling of the Authority in the case of AAR in Abdul Razak A. Meman [2005 (5) TMI 12 - AUTHORITY FOR ADVANCE RULINGS]. In this decision it has been held that since there is no tax regime for individuals in UAE they are not covered by the expression “resident of a Contracting State” as contained in article 4(1) of the DTAA between India and UAE as per Notification GSR No. 710(E), dated November 18, 1983. As such the applicant is not entitled to claim the benefit of the DTAA. Thus, we rule on : Looking to the nature of activities as proposed to be carried out by the liaison office (to be set up in India), the applicant would not be earning any income through “LO” in India. Question No. (ii) : In view of the ruling in question No. 1 no ruling need be given on this question. Question No. (iii) : Gutal Trading Est. (having its principal place of activities at Dubai, UAE) cannot be said to be having any “business connection” within the meaning of section 9 of the Act in India by virtue of setting up of a “liaison office”, as specified by the applicant and no tax liability would be attracted under the Indian tax laws. Question No. (iv) : The applicant, an individual, residing in UAE is not entitled to claim the benefit of the provisions of the treaty entered into between India and UAE.
|