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TMI Blog2012 (8) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... .2.2010 to represent it in the adjudication proceedings. 3. As per the terms of the agreement, the activities to be carried on by the partnership are to be carried on in Switzerland and /or Germany. Except a site visit and an adjudication hearing in Mumbai between 21st and 24th September, 2010, no other activity is carried on in India by the partnership. The total time spent in India was 6 days between 19th September and 24th September, 2010. 4. The partnership is engaged in the practice of law in Switzerland. It does not carry out its activities in any other country. It does not render any legal service in India. It has no presence in India. 5. The partnership has raised invoices against Siemens India for the services thus far rendered to Siemens India. The applicants want to ascertain whether the fees received by the firm for legal services rendered outside India would be chargeable to tax in India. It is in that context that they approached this Authority with the present application under section 245Q of the Income-tax Act. By order dated 2.4.2012, this Authority allowed the application under section 245R(2) of the Act for giving rulings on the following questions: 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not liable to taxation in Switzerland, it cannot claim the benefit of the DTAC. The partnership has a business connection in India. As regards the partners, they had not entered into any transaction with Siemens India Limited. The transaction by Siemens was with the partnership only. The partners are only indirect beneficiaries of the payment. They, even if residents of Switzerland, cannot claim the benefit of the DTAC. It has to be income derived by the resident before benefit of DTAC can be claimed. Article 14 of the DTAC cannot be invoked by the partners. The payments are thus liable to be taxed in India and section 195 of the Act would be attracted. 8. Based on the submissions made before me, the first question to be considered is whether the partnership as distinct from the partners can claim the benefit of the DTAC between India and Switzerland. Even according to the applicants, a partnership is not a taxable entity or unit under the Swiss tax law. It is not considered to be a separate entity vis-a-vis its partners. Only the partners are taxed for the shares of income received by them from the partnership. Under the Indian law, a firm is a person under section 2(31)(iv) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DTAC provides that the Convention shall apply to persons who are residents of one or both of the States. Here, the partnership is certainly not a resident of India. Then, the question is whether it can be found to be a resident of Switzerland. Article 4 provides that for the purposes of the Convention, resident of a contracting State means any person who under the laws of that State is liable to taxation in that State by reason of his domicile, i.e. residence, place of incorporation, place of management, or any other criteria of similar nature. The partnership can be said to be domiciled in Switzerland or having its place of residence in Switzerland. The inquiry then would be whether it is a 'person' within the meaning of the Convention. A person is defined in clause (d) of Article 3 of the DTAC. It is an inclusive definition. It reads "the term person includes an individual, a company, a body of persons or any other entity which is taxable under the laws in force in either Contracting State." On a reading of this definition it seems clear that the expressions, 'body of individuals or any other entity at least is qualified by the expression "which is taxable under the laws in forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of the Convention. The following passage which is part of paragraph 8.7 of the Commentary on Article 4 is relied on. ".............. Where however, a partnership is treated as fiscally transparent in a State, the partnership is not liable to tax in that State.............. In such a case the application of the convention to the partnership as such would be refused. ...... Where the application of the convention is so refused, the partners should be entitled, with respect to their share of the income of the partnership, to the benefits provided by the Conventions." Admittedly, India not a member of the OECD countries has not agreed to this and has adopted the position that it can be so, only if provisions to that effect are included in the Convention entered into with the State where the partnership is situated. Clearly, there is no such provision in the present DTAC. The argument that the partners are residents of Switzerland and their incomes from the partnership are taxable in Switzerland is of no avail since what is involved is not the income, the partners receive from the partnership but the income derived by the firm from an Indian entity. 16. Then the question is whet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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