Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding

🚨 Important Update for Our Users

We are transitioning to our new and improved portal - www.taxtmi.com - for a better experience.

⚠️ This portal will be discontinued soon

  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Income Tax Income Tax + AAR Income Tax - 2010 (3) TMI AAR This

  • Login
  • Cases Cited
  • Referred In
  • Summary

Forgot password



 

2010 (3) TMI 115 - AAR - Income Tax


Issues Involved:
1. Applicability of Double Taxation Avoidance Agreement (DTAA) between India and USA to the University of Texas (UT IC[307 ITR 418]).
2. Liability of UT IC[307 ITR 418] to pay income tax in India on payments received from FICCI.
3. Obligation of FICCI to deduct tax under Section 195 of the Income-tax Act, 1961.
4. Taxable amounts and applicable tax rates if UT IC[307 ITR 418] is liable to pay tax.

Issue-wise Detailed Analysis:

1. Applicability of DTAA between India and USA to UT IC[307 ITR 418]:
The judgment establishes that the University of Texas, being located and managed in the USA, qualifies as a resident of the USA under Article 4 of the DTAA. The University's exemption from tax under the Internal Revenue Code of the USA does not alter its residential status. The certificate provided indicates that the University is liable for tax on certain unrelated business taxable income, confirming no general immunity from taxation. Thus, there is no dispute regarding the applicability of the DTAA.

2. Liability of UT IC[307 ITR 418] to Pay Income Tax in India:
The primary issue is whether the payments made by FICCI to UT IC[307 ITR 418] qualify as 'fees for technical services' (FTS) under Article 12.4 of the India-USA DTAA. According to Article 12.4, FTS includes payments for rendering technical or consultancy services that either:
- Are ancillary and subsidiary to the application or enjoyment of the right, property, or information.
- Make available technical knowledge, experience, skill, know-how, or processes.

The judgment references previous interpretations, including the MOU to the India-USA DTAA, which clarifies that technology is 'made available' when the recipient can apply it independently in the future. The AAR concluded that the services provided by UT IC[307 ITR 418] did not 'make available' technical knowledge or skills to the participants. The entrepreneurial workshops and other activities were deemed general and educational, not imparting specific technical know-how or skills that participants could independently use later.

3. Obligation of FICCI to Deduct Tax under Section 195:
Given the conclusion that the payments do not qualify as FTS, UT IC[307 ITR 418] is not liable to pay income tax in India. Consequently, FICCI is not required to deduct tax at source under Section 195 of the Income-tax Act, 1961, for payments made to UT IC[307 ITR 418].

4. Taxable Amounts and Applicable Tax Rates:
Since the second and third questions were answered in the negative, there is no need to address the fourth question regarding taxable amounts and applicable tax rates.

Conclusion:
The Authority for Advance Rulings concluded that UT IC[307 ITR 418] is not liable to pay income tax in India on payments received from FICCI under the DTAA between India and the USA. Consequently, FICCI is not required to deduct tax at source for these payments. The ruling was pronounced on March 5, 2010.

 

 

 

 

Quick Updates:Latest Updates