TMI Blog2016 (8) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... elf to be separately notified or for the beneficial provisions in some other Convention between India and another OECD country to be separately notified to form part of the IndoFrance DTAA. The Court is, therefore, unable to agree with the conclusion of the AAR that the Clause 7 of the Protocol, which forms part of the DTAA between India and France, does not automatically become applicable and that there has to be a separate notification incorporating the beneficial provisions of the DTAA between India and UK as forming part of the India- France DTAA. What is being provided by Steria France to the Petitioner in terms of the Management Services Agreement is managerial services. It is plain that once the expression 'managerial services' is outside the ambit of ‘fee for technical services’, then the question of the Petitioner having to deduct tax at source from payment for the managerial services, would not arise. It is, therefore, not necessary for the Court to further examine the second part of the definition, viz., whether any of the services envisaged under Article 13(4) of the Indo-UK DTAA are “made available” to the Petitioner by the DTAA with France. As regards the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uary, 2009 between the Petitioner and Steria France. Under the said agreement, Steria France was to provide various management services to the Petitioner with a view to rationalise and standardise the business conducted by the Petitioner in India. Services under the broad category of General Management Services included Corporate Communication Services, Group Marketing Services, Development Services, Information System and Services, Legal Services, Human Relation Services etc. It is stated that these services are provided by Steria France through telephone, fax, e-mail etc. and no personnel of Steria France visited India for providing such services. 4. An application was filed by the Petitioner before the AAR under Section 245Q(1) of the Act seeking a ruling on the following questions: (i) On the facts and circumstances of the case whether the payment made by Steria (India) for the management services provided by Steria France will not be taxable in India in the hands of Steria France as per the provisions of the DTAA entered into between India and France? (ii) On the facts and circumstances of the case, if the consideration for management services is not subject to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government to incorporate the less restrictive provisions of the Indo-UK DTAA into the India-France DTAA. In other words, the plea of the Petitioner that Clause 7 of the Protocol did not require any separate notification and could straightway be operationalised was not accepted by the AAR. 8. Consequent on the above ruling of the AAR orders under Section 201(1) and 201(1A) were passed against the Petitioner which have been challenged by the Petitioner by amending the writ petition. 9. The submissions of Mr. S. Ganesh, learned Senior Counsel appearing for the Petitioner and Mr. Rahul Chaudhary, learned Counsel for the Revenue, have been heard. 10. At the outset, the Court would like to refer to the definition of fee for technical services occurring in the DTAA between India and France which reads as under: ARTICLE 13- Royalties and fees for technical services and payments for the use of equipment **** **** **** (4) The term fees for technical services as used in this Article means payments of any kind to any person, other than payments to an employee of the person making the payments and to any individual for independent personal services menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he undersigned have agreed on the following provisions which shall form an integral part of the Convention. ....... 7. In respect of articles 11 (Dividends), 12 (Interest) and 13 (Royalties, fees for technical services and payments for the use of equipment), if under any Convention, Agreement or Protocol signed after 1-9-1989 between India and a third State which is a member of the OECD, India limits its taxation at source on dividends, interest, royalties, fees for technical services or payments for the use of equipment to a rate lower or a scope more restricted than the rate of scope provided for in this Convention on the said items of income, the same rate or scope as provided for in that Convention Agreement or Protocol on the said items income shall also apply under this Convention, with effect from the date on which the present Convention or the relevant Indian Convention, Agreement or Protocol enters into force, whichever enters into force later. 13. What is immediately apparent on a plain reading of Clause 7 is that it applies in respect of three different kinds of payments i.e. dividend under Article 11, interest in Article 12 and Royalties, Fees for Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion the most beneficial of the provisions that may be available in another Convention between India and another OECD country. 16. The AAR appears to have failed to notice that the wording of Clause 7 of the Protocol makes it self-operational. It is not in dispute that the IndiaFrance DTAA was itself notified by the Central Government by issuing a notification under Section 90 of the Act. It is also not in dispute the separate Protocol signed between India and France simultaneously forms an integral part of the Convention itself. The preamble in the Protocol, which states the undersigned have agreed on the following provisions which shall form an integral part of the Convention , makes this position clear. Once the DTAA has itself been notified, and contains the Protocol including para 7 thereof, there is no need for the Protocol itself to be separately notified or for the beneficial provisions in some other Convention between India and another OECD country to be separately notified to form part of the IndoFrance DTAA. 17. Reliance is rightly placed by the Petitioner on the following passage at page 32 in the commentary by Klaus Vogel on Double Taxation Conventions : As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CD member country shall also apply under the Indo-French DTAA with effect from the date on which the Indo-French DTAA or such other DTAA enters into force. 21. It has been contended by Mr. Chaudhary that the question as to the exact nature of the services provided by the Petitioner under the Management Services Agreement has not yet been examined by the AAR. It is further pointed out that the contention raised regarding Steria France having a PE in India and its income being taxable under Article 7 of the DTAA has not been addressed. 22. As rightly pointed out by Mr Ganesh, the question whether Steria France has a PE would arise only if it is the case of the Revenue that Steria France earns any business income in India. That is not even the case of the Revenue. The case projected is that what has been paid by the Petitioner to Steria France partakes the character of fee for technical services . Therefore, the question whether Steria France has a PE in India and whether its business income is taxable under Article 7 of the DTAA , does not arise. 23. As regards the nature of the service being provided under the Management Services Agreement, again the Court is unable to fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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