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2013 (10) TMI 20 - AAR - Income TaxFee for Technical services - DTAA with Singapore - Section 9(1)(vii) of the Income tax - fee paid for training, in-class teaching and on-line teaching - Whether the payments made by the applicant to INSEAD for various services under the terms of the programme partnership agreement is in the nature of Fees for Technical Services within the meaning of the term in Article 12 of the Convention between the Govt. of Republic of India and the Govt. of Republic of Singapore for the Avoidance of Double Taxation and the Convention of fiscal evasion with respect to taxes on income ( the India-Singapore Tax Treaty ) and/or under the provisions of Section 9(1)(vii) of the Income tax Act, 1961 Held that - payments made by the applicant to INSEAD for services rendered under the terms of Agreement are not in the nature of Fees for Technical Services as it falls under the exclusive clause of Article 12.5(c) of the Treaty though the payment for the service may be fees for technical services under the provision of Section 9(1)(vii) of the Indian Income Tax Act, 1961. Withholding of TDS u/s 195 of the Income Tax Act Held that - Payments are held to be not taxable in India there is no case for withholding tax under Section 195 of the Income-tax Act, 1961 - Decided in favor of assessee.
Issues:
1. Whether payments made by the applicant to a non-resident company for services under an agreement constitute "Fees for Technical Services" under the India-Singapore Tax Treaty or Section 9(1)(vii) of the Income Tax Act, 1961? 2. Whether the non-resident company has a Permanent Establishment in India for conducting teaching activities? 3. Whether the payments received by the non-resident company are taxable in India based on the previous answers? 4. Whether withholding tax under Section 195 of the Income Tax Act applies to the receipts by the non-resident company? Analysis: 1. The applicant sought a ruling on whether payments to the non-resident company constitute "Fees for Technical Services." The Revenue argued that the services fell under this category, while the applicant contended they did not. The Authority found that the services did qualify as technical services but fell under the exclusion clause of the India-Singapore Tax Treaty related to teaching in educational institutions, hence not taxable in India. 2. The question of whether the non-resident company had a Permanent Establishment in India was raised. Both the applicant and the Revenue agreed that there was no Permanent Establishment in India under the India-Singapore Tax Treaty. 3. Regarding the taxability of payments received by the non-resident company, the Authority determined that the payments for the services provided were not taxable in India based on the Treaty's provisions and the absence of a Permanent Establishment. 4. Lastly, the issue of withholding tax under Section 195 of the Income Tax Act was addressed. Since the payments were deemed not taxable in India, there was no requirement for withholding tax under Section 195. In conclusion, the Authority ruled in favor of the applicant, stating that the payments made did not constitute "Fees for Technical Services" under the India-Singapore Tax Treaty and were not taxable in India. They also confirmed the absence of a Permanent Establishment and the non-applicability of withholding tax.
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