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TMI Blog2012 (8) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... n Australia. Since the applicant felt that it would be more profitable to have a local presence in Australia, the applicant acquired 100% equity of an Australian company. The Expert Information Services Pty. Ltd. The transaction was completed effective from 2.1.2004. That acquired company was re-named Infosys Technologies (Australia) Pty. Ltd. That overseas subsidiary of the applicant is now engaged in the business of development of computer software and related services. 3. The applicant undertakes work in Australia. It then subcontracts a part of the work to its subsidiary, Infosys Australia. Infosys Australia performs the work wholly in Australia. The applicant makes payment to Infosys Australia for such work. The applicant wanted a rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design? 5. If for any reason the payment is held to constitute fees for technical services, whether on the facts and in the circumstances of the case and law applicable, payments to overseas subsidiary being in respect of services utilized in a business carried on by the applicant outside India or for the purposes of making or earning any income from any source outside India under section 9(1)(vii) of the Act, the same is not deemed to accrue or arise in India? 6. Whether on the facts and in the circumstances of the case and law applicable, payments to overseas subsidiary towards sub con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant, is situated, even then, by virtue of the Explanation to section 9(1)(i)(a) of the Act only such part of the income that could be attributed to the activities in India can be taxed. According to the Revenue, it is not clear why the advance ruling is sought at this stage. Infosys Australia became 100% subsidiary of the applicant in the year 2004 and the activities have been going on ever since, in the same manner. The agreement with Infosys Australia now put forward does not confine the working to Australia but the questions in the application are confined to the work done in Australia. The question was pending regarding an identical transaction of the same nature before the Income-tax authorities. 7. It is the applicant that takes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustralia, a non-resident, for the work done by it, cannot be taxed in India. The work in Australia is no doubt secured by the applicant and the income from it is its income. But, what the applicant pays to Infosys Australia for getting the work done in Australia, can only be deemed as its expenditure, as pointed out by the representative of the Revenue. But that does not make that payment taxable at the hands of Infosys Australia by the authorities under the Act. As far as Infosys Australia is concerned, the income is earned by it for the work done in Australia, no doubt, based on a contract given to it by the applicant for a work the applicant has undertaken to perform in Australia, but that does by itself lead us to the conclusion that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the applicant to Infosys Australia would be 'Royalty' by virtue of clause (g) thereof. The question then would be whether any technical knowledge, experience, skill, know-how or process is made available to the applicant. It is really a case of the applicant issuing directions to Infosys Australia about the fulfilment of its contractual obligations to a customer in Australia and getting those obligations performed through its Australian subsidiary. The applicant passes on the risk to the Australian subsidiary. It also gives the subsidiary appropriate directions. But, even then the obligation of the applicant to the customers in Australia will survive. 11. It is not disputed that under the Act, the payment made will be fee for technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The work done by Infosys Australia is only part of the work of the project. As far as Infosys Australia is concerned, its source of income is the agreement with the applicant. The responsibility to the customer ultimately is that of the applicant. If what is paid is fees for technical services, then in terms of paragraph 8 of Article 12 of the DTAC no business connection is needed. 13. In reply, it is submitted that in law in the absence of physical presence, Infosys Australia must have a fixed place of business in India before its income could be taxed in India. Infosys Australia had performed services only in Australia. 14. On a consideration of the relevant aspects, it is seen that the source of income of Infosys Australia has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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