Home Case Index All Cases Income Tax Income Tax + AAR Income Tax - 2018 (6) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 37 - AAR - Income TaxTDS liability u/s 195 - Income accrued in India - fees for technical services - whether payments made on account of resell agreement are fees for technical services or royalty under India-US Treaty - DTAA - human intervention in providing technical services - withholding of tax - Held that:- On the issue of human intervention in providing technical services, we agree with the principle held in Bharti Cellular Limited [2008 (10) TMI 321 - DELHI HIGH COURT] as also upheld by the Apex Court [2010 (8) TMI 332 - SUPREME COURT OF INDIA] that a human element is a pre-requisite for characterizing a service as a technical service and consequently treating payments for the same as fees for technical services. The Solutions provided by the Applicant without human intervention cannot be treated as provision of technical services. What is important to consider is whether there is any human intervention while rendering of ‘Solutions’ and not in providing customer support or training. The Solutions are independently provided by the use of technology and that too, sophisticated technology which operates on an automatic and continuous basis. That does not mean that the Applicant, which operates on such facilities, is rendering any technical services as contemplated in the definition of the term FTS. - thus Solutions provided by the Applicant without human intervention cannot be treated as provision of technical services. In view of the above, the payments received by the Applicant from Akamai India for content delivery solutions are held to be outside the scope of ‘fees for technical services’ within the meaning Explanation 2 to clause (vii) of section 9(1) of the Act. Taxability under the India-USA DTAA - Held that:- Solutions provided by the Applicant to the customers only enable faster content delivery of the customer’s website, etc. to the end users - thus consideration received by the Applicant from Akamai India cannot be considered to be in the nature of fees for technical services as referred to in Article 12 of the India-US DTAA. Whether the payments made are royalty in nature? - Held that:- Since the equipment is used by the Applicant itself or to provide Solutions to Akamai India which are re-sold to the India customers, and Akamai India / Indian customers are not granted any right to use any equipment, the transaction is not covered under the definition of royalty - thus when payments under Reseller Agreement are not towards any IPR/Trademarks, it cannot be covered within the definition of royalty for the purpose of taxability. Whether the applicant have PE in India - Held that:- Reseller Agreement does not create a principal-agent relationship between the Applicant and the Reseller - their relationship is on a principal-to-principal basis. Hence none of the conditions enumerated in Article 5(4) are satisfied - applicant does not create a Permanent Establishment in India. Since no income arises in the hands of the Applicant in India, there is no requirement to withhold tax u/s 195 of the Act - Decided in favor of assessee.
|