Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (3) TMI 370 - ITAT DELHI

2016 (3) TMI 370 - ITAT DELHI - TMI - Business connection in India - Existence of Fixed PE In India and service PE In India - Whether assessee has a dependent agent PE is India? - Held that:- In this case assessee company secures orders on behalf of the Indian company and outsources the job to Indian company. There is a continuous relationship between the assessee company and its affiliates and subsidiary company in India. The contract entered by the assessee company and its affiliates outside I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nside India. In view of this we are of the view that the assesse has a business connection in India u/s 9 (1) (i) of the Act.On this score we confirm the order of CIT (A).

In view of the decision of Honourable supreme court in case of DIT V Morgan Stanely inc CO (2007 (7) TMI 201 - SUPREME Court ) we do not have any difficulty in holding that there is no Fixed Place PE in India of the assessee.

In view of this even if assumed that there is a PE in India of the assessee no p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a PE in India of the assessee, when PE is remunerated at arm‟s length no further attribution of profit can be made.

Reimbursement of Royalty as per Indo UK DTAA - whether chargeable to tax despite there being no income element? - Held that:- As on the basis of assets employed and salary and wages paid, the service fee payable to the Indian company comes out to be 78151587- and service fee actually paid was 7170443/-. Therefore if the reimbursement of expenses is reduced from th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

axable as business profit. Therefore the profit margin of assessee company and its affiliate for Indian operations will further enhance by reimbursement of expenses and royalty and FTS paid by Indian co. The payment in respect of access circuit , networks, bandwidth and call charges amounting to ₹ 24511059/- is taxable as royalty as per Article 13.3(b) of the Indo UK DTAA. - ITA No. 3759/Del/2013, ITA No. 3368/Del/2013 - Dated:- 4-3-2016 - SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sales for its clients in finance, utility and public sector. The main service provided by the appellant is customer management outsourcing business, service outsourcing and transfer of technology. Vertex Customer Service India Pvt. Ltd is an Indian entity in the group which is also carrying on outsourced work from the assessee. This outsource work is in relation to contracts of the assesse with PowerGen Retial Ltd. and Last Minute Networks Ltd. The total revenue earned by Vertex India to the as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Vertex India for right to use equipment outside India as royalty in accordance with Article 13.3 (b) of Indo UK DTAA. Regarding the reimbursement it was claimed that same is non-taxable as it was on cost to cost basis. The ld AO held that the assessee has PE in India and according to DTAA and business connection according to India Income Tax Act and hence computed the profit of ₹ 30626180/- attributable to such PE. Regarding reimbursement of ₹ 52452014/- as it has effect of reducing .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ent PE in India as per DTAA. iv. Appellant does not have a sales outlet under Article 5(2)(f) of DTAA. v. Assessee has a business connection within the meaning of section 9(1)(i) of the Income Tax Act. vi. No further profits cannot be attributed to the appellant PE in India and hence profits attributable to such PE are NIL. vii. Royalty income already declared by the appellant in its return of income cannot be taxed as business income. viii. Regarding reimbursement of expenses on account of 3rd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be charged. 4. Against the above finding revenue is in appeal raising three effective grounds:- 1) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that though the assessee is having a P.E, in India but is not having any Service PE and dependant Agent PE in the form of M/s Vertex India thereby ignoring the findings of the A.O in the case that there is continuous relationship between the assessee and M/s Vertex Customers is concluded in India, 2) On the fact .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee (nonresident) and Indian Parties as well as Associated Enterprises in India. 5. The assesse is also in appeal raising three effective grounds:- 1. That on the facts and circumstance of the case and in law, the Commissioner of Income Tax (Appeals) - XXIX, New Delhi ['Ld. CIT(A)'] erred in upholding the order of the assessing officer ('Ld. AO') that the Appellant has a business connection in India under section 9(1) (i) of the Act. 2. That on the facts and circumstance of the ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

76) is taxable as Royalty under Article 13-3(b) of the India UK DTAA. 3.1 Without prejudice to the above, that on facts and circumstances of the case and in law, the CIT(A) erred in holding that the reimbursement of expenses aggregating to ₹ 2,45,11,059 (GBP 306,076) was taxable in India despite there was no income element. 6. Before us the LD AR of the appellant submitted as under :- a) It was submitted that vide service agreement dated 7 C holdings Limited UK and Seven C Customers Servic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ited. Vertex India Limited is a joint venture between vertex UK and GE capital Equity. Therefore there is an agreement in place of the work to be carried out in India. Hence allegation that the work was performed without there being an agreement is incorrect. He submitted that at page no 24 and 25 of the paper book which are the agreement with Power gen Limited with 7 C customer services Limited India. He also drawn the attention at page no 36 of the paper book of the agreement where in the cont .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

here was an agreement in place, and the Indian entity is independent entity and therefore cannot be a permanent Establishment of the assessee. He also referred to the clause of Novataion at page no 195 of the agreement. Therefore it was submitted that there is no Service PE and there in Dependent Agent PE of the assessee in India. On fixed PE he relied on the decision of Honorable supreme court of India in case of Morgan Stanley and honourable Delhi high court in case of E Funds. He referred to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lied on the decision of 14 SOT 20 ( Del) and submitted that there is no element in reimbursement of expenses and hence it cannot be charged to tax. d) Regarding reimbursements he submitted that it is actual cost which has been reimbursed based on cost recovery charges mechanism and company has not added mark up to these and therefore this just like a pass through cost and therefore there is no income in that. Regarding call charges it was submitted that there are the call charges incurred by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the orders of AO and CIT (A) . Regarding business connection he submitted that Para no 8 of CIT (A) and the decision of Honorable Jurisdictional high court in case of UAE exchange center has been relied and therefore there is a business connection in India of the assessee. 8. In rejoinder LD AR submitted that regarding service PE LD AO himself has accepted in Remand report. Regarding DAPE he submitted that power and control test is not satisfied therefore there is no DAPE. Regarding attribution .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ival contentions and also the decisions of Honorable courts placed before us. Brief facts have already been enunciated. Now following questions arise in this appeal for our determination which takes care of all the grounds of both the appeals. a) Whether assesse has a business connection in India? b) Whether assesse has a Fixed PE In India? c) Whether assesse has a service PE In India/ d) Whether assesse has a dependent agent PE is India? e) Whether any further profit can be attributed to PE aft .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wever the term "Business Connection has not been defined in the Income tax Act.Thus rightly so, the Bombay High Court in Blue Star Engg. Co. (Bom) (P) Ltd v CIT [1969] 73 ITR 283 (Bom) following the principle laid down by honorable Supreme court in CIT v R D Aggarwal & Co. [1965] 56 ITR 20, 24 (SC) has stated that since the term Business Connection admits of no precise definition, the solution of the question must depend upon the particular facts of each case. Further, various honorable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

case of CIT v R D Aggarwal & Co [1965] 56 ITR 20 that "a business connection may take several forms:- it may include carrying on a part of the main business or activity incidental to the main business of the non-resident through an agent, or it may merely be a relation between the business of the non-resident and the activity in India, which facilitates or assists the carrying on of that business. Honorable Bombay High Court in CIT v National Mutual Life Association of Australia [1933] .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h High Court In G V K Industries Ltd v ITO [1997] 228 ITR 564 compiles the ratios of various other judgments and lays down the following principles of Business connection :- i. Whether there is a Business connection between an Indian person and a non-resident is a mixed question of fact and law which has to be determined on the facts and circumstances of each case; ii. The expression 'Business connection is too wide to admit of any precise definition; however it has some well known attribute .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

resident with the Indian party and a stray or isolated transaction is not enough to establish a Business Connection. On reading of various decisions it requires to test the Business connection Principle with respect to Continuity, real and intimate connection, Attribution of income and Common Control and professional connection. The connection of the assesse with the Indian entity is continuous in order to have a business connection; there must be a real and intimate connection between the activ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s real and intimate connection. The commonness of interest may be by way of management control or financial control or by way of sharing of profits. It may come into existence in some other manner but there must be something more than mere transaction of purchase and sale between principal to principal‟ in orders to bring the transaction within the purview of business connection. Further Where the Indian entity and the non-resident entity are both held by the same person, or have common co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cluded in India. The responsibility of the assessee company cannot be segregated and will not complete unless the Indian company provides services to the customers. Based on these facts Ld CIT (A) has held that appellant has continuous revenue generating business activities with Vertex India and there is real and intimate relationship between activities of non-resident outside India and those inside India. In view of this we are of the view that the assesse has a business connection in India u/s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

easoning is summarized here: • The contracts between Vertex India and the Appellant were entered retrospectively; • One of the contracts entered between the Appellant and its customer Powergen in UK in May 2001 specifically mentioned that the services will be provided from India; whereas the actual sub-contracting agreement between Appellant and the Indian Company (Vertex India) was entered in June 2002, which is subsequent to the contract entered with Powergen. 8.2.2 The provisions co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t. It will be suffice if the fixed place is at disposal of the non-resident for carrying out its business wholly or partly through it. In present case, the appellant had entered into service contract with Powergen and Lastminute, its overseas customers. As per clause 20.2 of contract dated 10.05.2002 with Powergen, the appellant could sub-contract whole or part of the services only to its subsidiary in India. Accordingly, these contracts were sub-contracted to a subsidiary namely Vertex India. I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e appellant is practically not doing anything with reference to its contracts with its overseas customers except that according to clause 20.2(ii) of the agreement dated 10.05.2002, it shall be responsible for acts, omissions, defaults or negligence of its sub-contractor. It means that the appellant assumes all the major risks whereas Vertex India is virtually a risk free enterprise. Therefore, in substance, the subsidiary Vertex India is operating as if it were a branch of the nonresident appel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

evant DTAA. We have carefully considered this issue of Fixed Place PE of the assessee in India. For establishing the Fixed Place PE test the following conditions should be satisfied cumulatively:- a) There is a place of business ( Place of Business Test) b) Such Place of business is at the disposal of the assessee. ( Disposal Test) c) Such place of business is fixed ( permanence Test) d) The business of the entity is carried on wholly or partly through such fixed place of business. ( Activity Te .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

his case it is not established that premises are made available to a foreign enterprise for the purposes of carrying out particular work on behalf of the owner of the premises; in that situation, the space provided is not at the disposal of the enterprise since it has no right to occupy the premises but is merely given access for the purposes of the work and hence disposal test is not satisfied in this case. Further nature of services provided by the assessee is BPO services and back office oper .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ise, which is a multi-national enterprise (MNE), is wholly or partly carried on. In the present case MSCo is a multi-national entity. As stated above it has outsourced some of its activities to MSAS in India. A general definition of the P.E. in the first part of article 5(1) postulates the existence of a fixed place of business whereas the second part of article 5(1) postulates that the business of the MNE is carried out in India through such fixed place. One of the questions which we are called .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ixed place of business through which the business of an enterprise is wholly or partly carried on. 2. The term ' permanent establishment' includes especially : (a) a place of management ; (b) a branch ; (c) an office ; (d) a factory ; (e) a workshop ; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources ; (g) a warehouse, in relation to a person providing storage facilities for others ; (h) a farm, plantation or other place where agriculture, for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s, if any) continue for a period of more than 120 days in any twelve month period ; (l) the furnishing of services, other than included services as defined in article 12 (royalties and fees for included services), within Contracting State by an enterprise through employees or other personnel, but only if ; (i) activities of that nature continue within that State for a period or periods aggregating more than 90 days within any twelve month period ; or (ii) the services are performed within that S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rise solely for the purpose of storage, display, or occasional delivery ; (c) the maintenance of a stock of goods, or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise ; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise ; Page No : 0423 (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in that first-mentioned State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to those mentioned in paragraph 3 which, if exercised through a fixed place of business, would not make that fixed place of business a permanent establishment under the provisions of that paragraph ; (b) he has no such authority but habitually maintains in the first mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gent, or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise and the transactions between the agent and the enterprise are not made under arm' s length conditions, he shall not be considered an agent of independent status within the meaning of this paragraph. 6. The fact that a company which is a resident of a Con .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ugh a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to (a) that permanent establishment ; (b) sales in the other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment ; or (c) other business activities carried on in the other State of the same or similar kind as those effected through that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

' s length with the enterprise of which it is a permanent establishment and other enterprises controlling, controlled by or subject to the same common control as that enterprise, in any case where the correct amount of profits attributable to a permanent establishment is incapable of determination or the determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis. The estimate adopted shall, however, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the part thereof which includes the permanent establishment), whether incurred in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the taxation laws of that State. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ermanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, know-how or other rights, or by way of commission or other charges for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices. 4. No profits shall be attributed to a permanent establishm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tems of income which are dealt with separately in other articles of the Convention, then the provisions of those articles shall not be affected by the provisions of this article. 7. For the purposes of the Convention, the term ' business profits' means income derived from any trade or business including income from the furnishing of services other than included services as defined in article 12 (royalties and fees for included services) and including income from the rental of tangible pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ront office functions of MSCo in fixed income and equity research and in providing IT enabled services such as data processing support centre and technical services as also reconciliation of accounts. In order to decide whether a P.E. stood constituted one has to undertake what is called a functional and factual analysis of each of the activities to be undertaken by an establishment. It is from that point of view, we are in agreement with the ruling of the AAR that in the present case article 5( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e has a service PE in India? Ld CIT (A) has given its finding holding that the assessee does not have a service PE In India as under 8.3 Service PE The Ld. AO has held that the expatriate employees of the Appellant were providing services other than fees for technical services in India and therefore, the Appellant was held to be Service PE in India in terms of Article 5(2)(k) of the India-UK DTAA. However, the Ld. AO has not furnished any material on record to prove the same. On the contrary, th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ence of the employees of the assesse visited India for the work then there cannot be service PE In India. In the remand proceedings also no evidences were produced to this effect by ld. AO. Further in appeal before us only issue of continuous relationship is taken up. We are afraid that cannot be a ground of holding that there is a service PE‟ of the assesse company. In view of this we confirm the finding of CIT (A) on this issue. 13. Whether assesse has a dependent agent PE (DAPE) in Indi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

other contracting State - other than an agent of an independent status to whom paragraph (5) of this Article applies, shall be deemed to be a permanent establishment of that enterprise in the first mentioned State if: (a) he has, and habitually exercises in that Stale, an authority to negotiate and enter into contracts for or on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (b) he habitually maintains in the first-menti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. However, if the activities of such an agent are carried out wholly or almost wholly for the enterprise (or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it or are subject to same common control) he shall not be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

The AAR in the case of TVM Ltd. (237 ITR 230) has held that merely because the agent is not independent would not automatically create an agency PE. The agent should be able to exercise the authority to conclude contracts. 8.4.3 The AO has held that the Appellant constitutes a dependent agent PE as per Article 5(4)(a) and 5(4)(c) of the DTAA. In this regard, he has alleged that the Indian and UK employees co-ordinate with each other for business development as well as marketing. They also secur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he business model of the Appellant and in the absence of material to suggest that the conditions mentioned in Article 5(4) are satisfied, I am of the view that Vertex India did not constitute a dependent agent PE of the Appellant in India. We have carefully considered the issue of DAPE in case of the assessee. Paragraphs 4 and 5 of Article 5 of DTAA relate to creation of agency PE in the second contracting country. Agency replaces fixed place with personal connection. Transactions between a fore .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

agent if his activities are wholly or mostly wholly on behalf of foreign enterprise and the transactions between the two are not made under arm's length conditions. The twin conditions have to be satisfied to deny an agent character of an independent agent. In case the transactions between an agent and the foreign principal are under arm's length conditions the second stipulation in paragraph 5 of Article 5 would not be satisfied, even if the said agent is devoted wholly or almost wholl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

able to tax in India. Despite the above we concur with the views of Ld CIT (A) who has decided this issue as under :- 11.1 After having held that the appellant has PE in India, the AO has computed profit attributable to PE by resorting to Rule 10. During appellate proceeding, the appellant filed a copy of TP study in respect of alleged PE in support of its contention that such PE has already been compensated at arm's length price and therefore nothing more should be attributed to it. Since t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed the AO that in case he was of the view that the Appellant has a PE in India and wanted to attribute further profits to the PE, then, the Appellant should be provided with an opportunity to explain his case. However, no such opportunity was granted by the AO or any show cause notice issued under section 92C(3) of the Act. Therefore, as far as TP study report is concerned, the appellant was prevented by sufficient cause for not producing it before AO during assessment stage. Given this, I admit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tured in the transfer pricing analysis of the Indian associated enterprise, i.e. Vertex India, no further profit can be attributed to such functions, assets and risks in the hands of the Appellant's PE. The Appellant's PE can be taxed only in respect of functions, assets and risks which have not already been captured in the hands of Vertex India. In the facts of Appellant's case, the AO has alleged Vertex India or activities undertaken by Vertex India to be the PE of Appellant in Ind .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ourt in the case of Morgan Stanley. It is pertinent to mention that in the Appellant's own case in AY 2006-07, on the basis of TP study of PE, the TPO has held that no further attribution is required in Appellant's hands. 11.3 It is also pertinent to mention that in connection with the work outsourced to Vertex India by the Appellant, the entire amount of revenue was passed on to Vertex India by the Appellant, other than £ 60,5 1 8 which was towards pass through telephony costs inc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, the computation results into a loss and therefore nothing is left to be attributed. 1 1.5 In view of the totality of facts of the present case, I hold that no further profits can be attributed to the Appellant's PE in India i.e. profits attributable to PE are Nil. The ground of appeal is decided in favour of the appellant. In view of this even if assumed that there is a PE in India of the assessee no profit can be attributed to it as FAR (Functions performed, Assets deployed and Risk Assum .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er attribution of profit can be made. 15. Whether the reimbursement of Rs ₹ 2,45,11,059 (GBP 306,076) is Royalty as per Indo UK DTAA and is chargeable to tax despite there being no income element. Facts of the case is that assessee has claimed reimbursement of expenses from the Indian company of ₹ 5,24,52,0147- in the return of income the same was claimed as exempt from taxation on the ground that the reimbursement of expenses is not subject to tax in India in accordance with the pro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on the behalf of the assessee company therefore the disbursement of above expenses on behalf of Indian Co. does not arise. According to him even otherwise this is taxable as business income pertaining to Indian operation as the reimbursement of expenses has an effect of reducing the service fee payable to the Indian company. As on the basis of assets employed and salary and wages paid, the service fee payable to the Indian company comes out to be 78151587- and service fee actually paid was 71704 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e, the receipt as royalty and fee for technical services, the same is taxable as business profit. Therefore the profit margin of assessee company and its affiliate for Indian operations will further enhance by reimbursement of expenses and royalty and FTS paid by Indian co.. On appeal before CIT (A) he held that:- 17.1 I have considered the observations of the Ld. AO contained in the assessment order and the submissions of the appellant. The appellant has put forward three contentions 1) that th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

allocated to Vertex India, In this regard, the appellant has submitted a declaration along with copy of documentary evidence in the form of invoices. The argument of the appellant that there was no element of income in the entire amount of reimbursements cannot be accepted as it cannot be said with certainty that whether the amount of £ 306,076 allocated by the Appellant was on cost to cost basis or not. However, for the third party costs of £ 348,906 directly relatable to Vertex In .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt case. Hence, the only question remains whether the said amount is Royalty or FTS in nature. 17.4 The amount off 306,076 (Rs. 24,511,059) pertains to access circuits, network bandwidth etc. I am of the view that these are similar to the amount shown as Royalty in the return by the appellant himself. These amounts also pertain to use of equipment outside India and constitute Royalty as defined under Article 13.3(b) of India- UK DTAA. The appellant has not put forward any cogent objections to th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version