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2016 (9) TMI 650

Head Note / Extract:
TDS u/s 195 - Chargeability to tax in India as fees for included services - Taxability of the consideration paid by Northwest in favour of the applicant for the services which it provides or as agree to provide - India-US DTAA - exemption from taxation - P.E. in India

Held that:- The applicant has provided all certificates including the certificate of its incorporation and has filed them as Exhibit-1 before us. From the certificate, it is clear that it is an educational institution for carrying on charitable and educational activities allowed by law. These Articles of incorporation were in respect of Newco Executive Education institution which ultimately transformed into UC Berkeley Centre for Executive Education. We, therefore, do not have any doubt that the applicant is an educational institution. Shri Sachit Jolly the learned counsel appearing for the applicant also invited our attention to page No. 5, which has been issued by the Department of the Treasury Internal Revenue Service, Philadelphia PA-19255 which is the certificate issued showing that the applicant is an exempt organization under Section 501(C)(3) of US Internal Revenue Code, or a religious or apostolic organization under Section 501(d). The learned counsel points out that this will be clear to support his contention that the applicant is an educational cum charitable institution. These certificates are countered by the Revenue.

The other objection of the Revenue was that all the faculties provided for educating is provided by Berkeley University and not by the applicant. The learned counsel points out that in fact the applicant is a child of Berkeley University and is created and owes its existence to that University but for which the faculty of the Berkeley University would not be available in India on its behalf. We are quite convinced by this argument and we would choose to reject the objections by the Revenue. The other insignificant objection by the Revenue was that these professors who come for a short period are well accommodated by Northwest India which creates a Permanent Establishment of the applicant in India. We have mentioned this objection only for being rejected. The Authority in its Ruling in Eruditus had also held that there not be a Permanent Establishment even if the Faculty is provided by the non-tax resident INSEAD. We would choose to go by that finding.

Thus the programme fee received by the applicant from Northwest would be governed by Article 12 of the India-US Double Taxation Avoidance Agreement (DTAA) and would be free from the taxability. There would, therefore, be no necessity to withhold the tax under Section 195 of the Income Tax Act, 1961. Also there would be no Permanent Establishment in India.


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