Home Case Index All Cases Income Tax Income Tax + AAR Income Tax - 2014 (2) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (2) TMI 802 - AAR - Income TaxPermanent Establishment – Chargeability of payments received u/s 9(1)(vii) r.w section 115A and 44DA of the Act - Whether the payments received/receivable in connection with the provision of services of technical/professional personnel to Booz India is chargeable to tax in India as FTS under section 9(1)(vii) read with section 115A as well as Section 44DA of the Act in the absence of fixed place PE in India - Held that:- The OECD does not expressly define what constitutes the place to be ‘at the disposal’ of the taxpayer and instead gives examples wherein it may or may not tantamount to ‘right of disposal’ - Conducting trading operations of the taxpayer which is called the “disposal test”- Relying upon Rolls Royce Plc v. DIT [2011 (8) TMI 313 - DELHI HIGH COURT] - The taxpayer had a fixed place PE in India because RRIL’s premises were ‘available’ to all of employees and assessee paid all the expenses in maintaining its premises - An employee of MSCo when deputed to MSAS does not become an employee of MSAS - A deputationist has a lien on his employment with MSCo. As long as the lien remains with the MSCo the said company retains control over the deputationist's terms and employment - on request/requisition from MSAS the applicant deputes its staff - The request comes from MSAS depending upon its requirement - On completion of his tenure he is repatriated to his parent job - He lends his experience to MSAS in India as an employee of MSCo as he retains his lien and in that sense there is a service PE (MSAS) under Article 5(2)(l) – there was no infirmity in the ruling of the ARR on this aspect - MSCo is rendering services through its employees to MSAS - the AAR was right in ruling that MSAS would be a Service PE in India under Article 5(2)(l), though only on account of the services to be performed by the deputationists deployed by MSCo and not on account of stewardship activities. Income attributable to the Permanent Establishment – Held that:- The Transactional Net Margin Method was the appropriate method for determination of the arm's length price in respect of transaction between MSCo and MSAS - the ruling of AAR is correct in principle provided that an associated enterprise (that also constitutes a PE) is remunerated on arm's length basis taking into account all the risk-taking functions of the multinational enterprise - The decision in Aramex International Logistics Versus Director of Income-tax [2012 (6) TMI 187 - AUTHORITY FOR ADVANCE RULINGS] followed - When a business cannot be carried on exclusively in so far as it relates to customers in India without intervention of another entity, a subsidiary, normally that entity must be deemed to be the establishment of the group in that particular country – the Indian subsidiary must be taken to be a permanent establishment of the group in India - the subsidiary must be considered to be a permanent establishment of the group in the concerned country, here, India. Nature of payments received – Scope of Article 12 of DTAA – Chargeability to tax as FTS u/s. 115A read with section 9(1)(vii) as well as section 44DA of the Act - Held that:- The applicants have Permanent Establishment in India, the incomes received by them from the Indian Company are taxable as business profit under Article 7 of the Tax Agreement of India and the respective countries (except M/s.Booz & Co.(ME) Ltd. Cayman Islands) with which there is no tax treaty by India, and M/s.Booz & Co.(Italia)S.R.L., Italy ), whose income will be taxed as per provisions of the Act) – thus, the applicants have Permanent Establishment in India and their incomes are taxable as business profits – Also, the income being taxable as business profits, the payments by the Indian company to the applicants will be subjected to withholding of tax under section 195 of the Act - Decided against Assessee.
|