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TMI Blog2012 (4) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ered, which the Indian customer pays for. In the case of services rendered through X India, the arrangement between Indian customer and X India. However, at times the Indian customers desire to have services rendered outside India where X India does not have any presence but the applicants have presence. At times X India may not have the requisite capability. In such cases, X India sub-contracts a portion of the work to the applicants. The applicants provide those services and issue analysis reports either to the X India or at times directly to Indian customers. The applicants raise invoices on X India for the services provided by them or to the Indian customers of X India. 2. The applicants approached this Authority under section 245Q of the Income-tax Act, 1961 ('the Act') seeking advance ruling on the question whether they are liable to be taxed on these transactions in India and whether there was obligations on the Indian customer to withhold tax under section 195 of the IT Act and whether the applicants have an obligation to file a return of income in terms of section 139 of the Act. We may notice that a number of X affiliates, other than the Indian affiliate have filed appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant in absence of PE in India? (a) Procurement of goods/services (Refer B.4.4.1. Annexure-I) (b)Reimbursement of out of pocket expenses incurred by the applicant and on behalf of the X India during the course of provision of services (Refer B.4.1.2. of Annexure-I); and (c) Reimbursement of other expenses (Refer para B.4.1.3.) 5. Whether, on the facts and circumstances, recovery of reasonable administrative cost incurred for and on behalf of X India as outlined in Para B.4.2 of Annexure-I, be chargeable to tax in India under DTAA between India and the Country of the Applicant in absence of PE in India? 6. Whether, on the facts and circumstances of the case, in case the applicant is not taxable in India for the services provided/proposed to be provided as outlined in Annexure I, would X India/ Indian customers be required to withhold taxes under section 195 of the Act on payments made/proposed to be made to the applicant in connection with the transactions as mentioned in above questions and if yes, at what rate the taxes should be withheld? 7. Assuming that the applicant has no other income in India, whether, on the facts and circumstances of the case, the applicant will be abso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or processes, or consist of the development and transfer of a technical plan or technical design." Further, the term 'fee for technical service' is defined in Explanation 2 to section 9(1)(vii) of the Act. The Explanation reads as under: "For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration ...." Though the opening paragraphs of the two definitions are somewhat identically worded, but under the DTAA, a service would not be FTS unless technical knowledge, experience, skill, know-how or processes is made available to the person making the payment, even where other ingredients are satisfied. We have ruled in AAR 928 of 2010 that IVTC services are in the nature of "fee for technical services'. We have also ruled therein that the exception provided in section 9(1)(vii)(b) will not be available to the applicant. Now let us see whether the "technical services" are made available to X India/ Indian customers. This Authority has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould come within the purview of the definition contained in the Article dealing with FTS. In that case, the applicants would be entitled to take advantage of the restricted meaning of the term FTS. We have upheld such plea in our Rulings in AAR Nos. 953 and 967 of 2010. Again, it does not appear to be necessary to repeat the reasons for that conclusion. Suffice it to say that we adopt that part of the reasoning in the Ruling in AAR 953 of 2010 also. Thus, we are of the view that technical services rendered by the applicants do not "make available" technical knowledge, experience, skill, know-how or process while preparing these reports for their clients, X India / Indian customers. We answer the questions in AAR Nos. 886 to 904, 907 to 910, 921 of 2010 as under: Que.No.1 The payments received / receivable by the applicants in connection with IVTC Services are chargeable to tax as FTS under section 9(1)(vii) of the Act, but not under the provisions of Article on "Royalties and fees for technical services" under the respective DTAAs or when the said Article is read with the MFN clause, which has to be taken as part of the Convention. Que.No.3 The exception provided under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, we answered the question stating that FTS shall be governed by Article 22 of the Tax Treaty and not as per Article 7 of the Tax Treaty that deals with taxation of business profits. We find no reason to deviate from that view in the matter before us. We answer the questions in AAR Nos.913 to 920 of 2010 as under. Que.No.1 The payments received / receivable by the applicants in connection with IVTC Services are chargeable to tax as FTS under section 9(1)(vii) of the Act, but not under the provisions of DTAAs, in the absence of a provision on FTS in the DTAAs. Que.No.3 The exception provided under section 9(1)(vii)(b) of the Act is not available to the applicants in respect of the payments received / receivable in connection with IVTC Services. Que.No.4 The payments received / receivable by the applicants in connection with IVTC Services / receivable in connection with the cost incurred for and on behalf of X India are chargeable to tax as FTS under section 9(1)(vii) of the Act, but not under the provisions of DTAAs, in the absence of a provision on FTS in the DTAAs. Que.No.5 The recovery of reasonable administrative cost incurred for and on behalf of X India by the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he questions in A.A.R. Nos. 911, 922 to 924,927, 929 and 930 of 2010 as under: Que.No.1 The payment received / receivable by the applicant in connection with IVTC Services are taxable as FTS under section 9(1)(vii) of the Act. The exception provided under section 9(1)(vii)(b) of the Act is not available to the applicant. Que.No.2&3 The payments received / receivable in connection with the cost incurred and recovery of administrative cost for and on behalf of X India are chargeable to tax as FTS under section 9(1)(vii) of the Act. Que.No.4 As the applicant has tax presence in India, X India / Indian customers are required to withhold taxes under section 195 of the Act at the rate in force mentioned in the Finance Act for the relevant year on the payment made / proposed to be made to the applicant. Que.No.5 Since the applicants are taxable in India under section 9(1)(vii) of the Act, the applicants are bound to file returns in India under section 139 of the Act. In AAR Nos.905 and 906, the Que.No.1 is the same as in AAR No.886. While answering this question we rule that payments received / receivable by the applicants in connection with IVTC services are taxable under DTAA and und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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