Home Case Index All Cases Income Tax Income Tax + AAR Income Tax - 2014 (4) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (4) TMI 249 - AAR - Income TaxNature of Expenses – Fees for technical services or not – Article 12 of DTAA between India and Netherlands - Whether the payments made by the applicant to Endemol Holding for availing routing administrative services under the terms of the Consultancy Agreement would be in the nature of Fees for Technical Services (FTS) – Held that:- Nature of the services listed in Schedule 1 to the Management Consultancy Agreement require technical knowledge, experience, skill, know-how or processes - They cannot be termed as merely administrative and support services as tried to be made out by the applicant - several attempts were made in the past to interpret the meaning of “technical services” and also the ‘make available’ clause in Tax Treaties – thus, the services rendered are technical services both under the provision of the Income-tax Act and under the India-Netherlands Tax Treaty subject to fulfillment of requirements of the “make available” clause in the treaty. The broad consensus of the interpretation of the clause seems to be that requirements of “make available” in the tax treaty is met if the technology, knowledge or expertise can be applied independently by the person who obtained the services - the applicant merely took assistance of the Holding company in its business activities outside India and there is no material to suggest that the technical know-how, skill, knowledge and expertise are transferred to the applicant so as to enable the applicant to apply this technical know-how etc. independently – thus, the requirement of the ‘make available’ clause in the Article 12(5) of the India-Netherlands Tax Treaty is not satisfied and hence the payment for the services rendered by Endemol BV will not come under ‘fees for technical services’ under the ‘Tax Treaty’. The payments made by the applicant to Endemol Holding for availing the services under the terms of the Consultancy Agreement is not in the nature of Fees for Technical Services (FTS) under Article 12 of the India-Netherlands Tax Treaty because the services rendered by the non-resident company do not meet the requirements of ‘make available’ under the treaty – thus, the payment will not be treated as business income taxable in India in terms of the India-Netherlands Tax Treaty because Endemol Holding does not have a Permanent Establishment in India. - Decided in favour of Assessee. Nature of Payments made - Whether the payments made by the applicant to Endemol Holding BV can be treated as business income and taxable in India – Held that:- The applicant is an Indian enterprise and for its business activities outside India, the services on Endemol Holding were utilized - There is no material to show that Endemol Holding has any presence in India - Payments for the services were received by Endemol Holding outside India - profits arising out of the transaction for the services rendered by Endemol Holding BV are not taxable in India as Endemol Holding BV does not have PE in India. - Decided in favour of Assessee. Whether the transaction is an arrangement for the purpose of avoidance of tax – Held that:- Relying upon Transmission Corporation of AP Ltd. and others vs. CIT [1999 (8) TMI 2 - SUPREME Court] - The transaction is for genuine business purpose for the benefit of both the parties – there was no sufficient materials on facts and circumstances made available which suggest that the transaction is an arrangement solely for the purpose of avoidance of tax – the payment will not be subjected to withholding of tax u/s 195 of the Act - Decided in favour of Assessee.
|