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2014 (5) TMI 628 - AAR - Income TaxRequirement to deduct TDS - India-Sri Lanka DTAA - Monthly remuneration of retainer fees for services rendered Reimbursement of various expenses Held that - The services rendered are basically for promotion of sales and brand name of the applicant in Sri Lanka - they are basically sales promotion - Ms Geetha was designated as resident executive for Sri Lanka operating from Colombo - The job description fits in more with a marketing executive than anything else - Fees for technical services is defined in explanation 2 to section 9(1)(vii) of the Act - The services rendered by Ms Geetha do not fall under any of the items mentioned in the explanation namely, managerial, technical or consultancy services - The services rendered by her are not technical services as defined in the Act - the payment made to Ms Geetha is not taxable either under the Act or the India-Sri Lanka Tax Treaty - the payments falls under Article 14 of the India-Sri Lanka Tax Treaty and even on that account the same is not taxable in India - Regarding the reimbursement of expenses, they are directly linked with her services in Sri Lanka for the applicant the reimbursement of the expenses will also not be taxable in India under the provision of the Act or under India-Sri Lanka Tax Treaty Decided in favour of Assessee.
Issues:
1) Tax deduction on monthly remuneration paid to Ms. Geetha in Sri Lanka 2) Tax deduction on fixed monthly sum for reimbursement of expenses 3) Tax deduction on fixed monthly sum for local conveyance reimbursement 4) Tax deduction on fixed sum for outstation tours Dearness Allowance 5) Tax deduction on fixed sum for outstation tours conveyance reimbursement 6) Tax deduction on salary and other payments to Ms. Geetha upon regular employment Analysis: 1) The applicant, Oxford University Press, sought a ruling on tax deduction for monthly remuneration paid to Ms. Geetha in Sri Lanka. The applicant argued that as Ms. Geetha is a resident of Sri Lanka and all her activities are conducted there, her income is not taxable in India under the Income-tax Act or the India-Sri Lanka DTAA. The Revenue contended that the nature of Ms. Geetha's duties constitutes fees for professional and technical services, making the income chargeable under the Act. However, the Authority found that Ms. Geetha's services primarily involved sales promotion, not technical services, and her payments were not taxable in India under the Act or the DTAA. 2) The Authority also considered tax deduction on fixed monthly sums for reimbursement of expenses related to storage space, telephone, and internet. These expenses were deemed directly linked to Ms. Geetha's services in Sri Lanka for the applicant. Similar to the remuneration issue, the Authority concluded that these reimbursements would not be taxable in India under the Act or the India-Sri Lanka Tax Treaty. 3) Furthermore, the ruling addressed tax deduction on fixed sums for local conveyance reimbursement and outstation tours Dearness Allowance. The Authority determined that these payments, being associated with Ms. Geetha's services in Sri Lanka, were not subject to tax deduction in India under the relevant provisions. 4) The ruling also covered the tax deduction on fixed sums for outstation tours conveyance reimbursement, emphasizing that these payments were not taxable in India considering Ms. Geetha's residency and the location of her services. 5) Lastly, the question of tax deduction on salary and other payments to Ms. Geetha upon regular employment was examined. The Authority found that based on the nature of Ms. Geetha's role as a marketing executive in Sri Lanka and her non-resident status in India, the payments made to her would not be subject to tax deduction in India under the Income-tax Act or the India-Sri Lanka DTAA. In conclusion, the Authority ruled in favor of the applicant, determining that the payments to Ms. Geetha, including remuneration and reimbursements, were not liable for tax deduction in India as per the provisions of the Income-tax Act and the India-Sri Lanka Tax Treaty.
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