1. S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Intention of parties that property in goods would pass only when installation and erection of entire works completed – Entire amount received from contractor taxable in India – DTAA – India-Singapore [Art.7]

    Authority held that; nowhere in the agreement was contractual bifurcation available. There was no mention of two transactions. The clause in the agreement dealing with the scope of work was not divisible in two parts. The payment schedule depended upon the stages of completion of the project and not on shipment of goods or completion of services. Intention of parties that property in goods would pass only when installation and erection of entire works completed – Entire amount received from contractor taxable in India.

    MERO Asia Pacific Pte Ltd., In re (2016) 387 ITR 274/ 243 Taxman 322/ 289 CTR 1 /140 DTR 394 (AAR)

  2. S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Lease of cranes in mineral oil project – Section 44BB applicable – Business profits taxable at 40 per cent – DTAA – India-Singapore [S.44BB, Art. 5(3), 7]

    The applicant was a tax resident of Singapore engaged in the business of renting/leasing of heavy lifting cranes for use and providing erection and installation of heavy equipment such as furnaces, boilers, coke drums, fractionators, chimneys, turbines and generators in many countries in Asia. It rented out a crane having a capacity to lift 1600 metric tons in terms of a work order for a period of 7 months from February 17, 2015 to GR for use at the refinery of Bharat Petroleum at its integrated refinery expansion project site at its Kochi refinery, which was engaged in refining of mineral oils. The total consideration was
    &#8377 19.45 crores. It sought an advance ruling on the questions whether it could be held to have earned any income taxable in India from its activities renting out of its cranes for use in India, under the provisions of the Income-tax Act, 1961 and if so, how the total income of the applicant should be computed in terms of the provisions of the Act. The Department contended that the installation of project was carried out by the applicant commencing on February 16, 2015 and expected it to end on January 31, 2016 and this constituted a permanent establishment of the applicant in India in terms of Article 5(3) of the Double Tax Avoidance Agreement between India and Singapore (DTAA) and hence, the business profits attributable to the permanent establishment were the applicant’s income arising in India under section 9(1)(i) of the Act and assessable as such in India in terms of Article 7 of the DTAA for assessment years 2015-16 and 2016-17, which were the years where the applicant had not exceeded 183 days and that for the purpose of computing the business profits, section 44BB of the Act being applicable to the case of the applicant, such business profits were taxable at the rate of 40 per cent. The applicant not having raised any dispute with the inferences drawn by the Department, the Authority, on the stated facts, disposed of the application in terms of the conclusions drawn by the Department in its response. (AY. 2015-16, 2016-17)

    Tiong Woon Contracting Pte Ltd., In re (2016) 387 ITR 350/ 243 Taxman 58/ 289 CTR 353 (AAR)

  3. S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Programme fee received by applicant from Northwest is neither taxable as royalty nor as business profits – DTAA – India-USA [Art. 5, 7]

    Programme fee received by applicant from Northwest is not taxable in India either as royalty or as business profits

    Regents of the University of California UCLA Anderson School of Management Executive Education, USA, In re (2016) 243 Taxman 122 (AAR)

  4. S.9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – Product promotion service agreement between Indian company and its Russian subsidiary to promote sales in Russia – Not taxable in India – DTAA – India-Russia [Art., 712]

    Product promotion service agreement between Indian company and its Russian subsidiary to promote sales in Russia is not taxable in India. The product promotion agreement could not be related with the distribution agreement signed two years earlier, under which exports were made. Therefore it could not be said that service fees under the product promotion agreement were paid in order to promote its products for enhancing export in the Russian market.

    Dr. Reddy Laboratories Ltd., In re (2016) 387 ITR 337/ 243 Taxman 127/ 289 DTR 24 (AAR)

  5. S.9(1)(vii) : Income deemed to accrue or arise in India – While carrying out management programmes, applicant makes available programs of Harvard Publishing University which are publishing material for all over world, amount received by it for providing said material is not liable to tax in India as ‘royalty’- DTAA – India-USA [Art. 12]

    Programme fee received by the applicant in terms of the agreement is not chargeable to tax in India as ‘fees for included services’ within the meaning of the said term under Article 12 of the India-US DTAA and/or the provisions of section 9(1)(vii). Further, the activities undertaken by the applicant in India, viz., teaching for 7 days, would not constitute a permanent establishment (‘PE’) of the applicant in India in terms of Article 5 of the India-US DTAA.

    Regents of the University of California UCLA Anderson School of Management Executive Education, USA, In re (2016) 243 Taxman 122 (AAR)

  6. S.9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – Activities of providing education not business activity – No permanent establishment – Programme fee not chargeable to tax in India as “fees for included services” – Not subject to withholding tax – DTAA-India-USA [S.195, Art. 5, 12]

    That the activity of the applicant could not be said to be a business activity particularly because the applicant was registered in the United States as a non-profit public benefit corporation formed for the purpose of providing education. Its activities of providing education could not be said to be business activity of the applicant. Article 7 of the DTAA specifically deals with business income. There was no permanent establishment of the applicant in India as defined in Article 5. Every time a programme was undertaken in India, it was N which arranged for the place for conducting the programmes. N need not every time arrange for the same place and arrange different locations for conducting the programme. There could not be any fixed place of business on the part of the applicant. What the applicant did was to make available the programmes of Harvard Publishing University which published material for all over the world. Therefore, it could not be covered in royalty also. Therefore, the programme fee received by the applicant in terms of the agreement was not chargeable to tax in India as “fees for included services” within the meaning of the term under Article 12 of the DTAA or the provisions of section 9(1)(vii) of the Act, 1961 and, therefore, was not subject to withholding tax under section 195 of the Income-tax Act, 1961.

    The Regents of the University of California UCLA Anderson School of Management Executive Education, USA, In re (2016) 387 ITR 398 / 243 Taxman 122/ 290 CTR 10 (AAR)

  7. S.9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – Conducting courses of short duration in India for senior corporate executives is educational institution, as there is no permanent establishment in India, Programme fee not chargeable to tax in India as “fees for included services” – DTAA-India- USA [Ss.9(1)(i), 195, Art. 5, 12(5)]

    Authority held that the objections raised by the Department that the applicant was not an educational institution and that it was merely a facilitating institution were not tenable. The certificate of its incorporation showed that it was an educational institution for carrying on charitable and educational activities allowed by law. The certificate issued by the Department of the Treasury Internal Revenue Service, Philadelphia, showed that the applicant was an exempt organisation under the United States Internal Revenue Code. The objection that all the faculties provided for educating were provided by Berkeley University and not by the applicant was also not tenable. The fact that the professors who came for a short period were well accommodated by N did not create a permanent establishment of the applicant in India. The programme fee received by the applicant from N would be governed by Article 12 of the DTAA and would be free from tax. There would, therefore, be no necessity to withhold the tax under section 195 of the Income-tax Act, 1961. There would be no permanent establishment in India.

    UC Berkeley Center for Executive Education, USA, In re (2016) 387 ITR 385 (AAR)

  8. S.37(1) : Business expenditure – Fees for technical services – Payment to group company –Administrative support – Held to be allowable – Obligation to price reduction is not penalty allowable as deduction – Non-resident – India-United Kingdom [S. 9(1)(vii), Art. 13(4)]

    AAR has held that ; Contract for construction support and supervision, procurement and engineering design in Paradip refinery. Payments to group company for time charge of staff working on bid, travel expenses and printing cost pertaining to applicant’s contract charged to applicant under agreement. Incurred for business purposes and to be allowed in year in which incurred. Services rendered by third parties and group companies in connection with expatriate movement to India in relation to project office. Payments not technical services but administrative support services. Allowable in year in which incurred. Provision made in books year-to-year for obligation for price reduction for not meeting project schedule. Price reduction incurred in terms of agreement is not a penalty, to be allowed in year in which such invoices actually raised.

    Foster Wheeler G.B. Ltd, In re (2016) 389 ITR 509/ 290 CTR 1 ( 2017) 77 taxmann.com 205 (AAR)

  9. S.44BB : Mineral oils – Consideration receivable by applicant is taxable in accordance with section 44BB

    Applicant, UK based company, has entered into a contract with ONGC for hiring of services for acquisition, processing & integration of long offset of 2D Seismic, gravity, magnetic sea bed based reflection-refraction survey in block Offshore India, consideration receivable by applicant is taxable in accordance with section 44BB

    Marine Geology Services LLP U. K., In re (2016) 242 Taxman 491 (AAR)

  10. S.45 : Capital gains – Not liable to tax in India – No liability to withhold tax – No need to file return of income – Section 115JB not applicable to foreign companies – DTAA – India-Mauritius [S. 115JB, 195, Art. 13(4)]

    Assessee, an investment company incorporated in Mauritius and holding tax residency certificate . Shares subscribed by it in its own name in Indian asset company and Indian trustee company and bank statements showing it had paid for such shares. Share purchase agreement for sale of shares held in Indian asset company and Indian trustee company to non-resident company. Bank party to agreement only in its capacity as sponsor and in order to comply with mutual funds regulation . AAR held that the assessee was not liable to tax in India. No liability to withhold tax. No need to file return of income. Section 115JB is not applicable to foreign companies.

    Shinsei Investment I Ltd, In re (2016) 389 ITR 11/ 242 Taxman 293/290 CTR 490 (AAR)

  11. S.45 : Capital Gains – Non-resident – Transfer of shares in Indian company by company in Mauritius to U.S. company, was held to be not taxable in India as control and management was not wholly in India – Position prior to 1-4-2017 – DTAA – India-Mauritius. [S.112(1), Art. 13(4)]

    AAR has held that, transfer of shares in Indian company by company in Mauritius to U. S. company, was held to be not taxable in India as control and management was not wholly in India . Effective control and management of affairs of applicant not wholly in India. Position prior to
    1-4-2017 .

    Mahindra-BT Investment Company (Mauritius) Ltd, In re (2016) 389 ITR 19/289 CTR 614/ 73 taxmann.com 74 (AAR)

  12. S.45 : Capital gains – To be calculated on real gains and not on basis of notional values – No tax chargeable where no consideration accrues. – Transfer of share or interest which derives, directly or indirectly, its value substantially from assets located in India – “Substantial” – Means at least 50 per cent – Transfer pricing – Provisions not attracted where there is no charge – DTAA – India-Italy [Ss. 2(47), 9(1)(1), 47(vi), 55(2), 92 to 92F 195, Art. 14, 25]

    Amalgamation of Italian company having branch in India with Italian group company holding 15 per cent shareholding in it. Shareholders of transferor company (excluding transferee) allotted additional shares in transferee company. No consideration received by transferor company before amalgamation. Notional market value of Indian branch could not be treated as consideration. Transferor company not liable to tax in India. Exemption under section 47(vi) available to transferor company. No consideration accrued to transferee company and no capital gains chargeable to tax in its hands in India. Shareholders of transferor company parting with their shares in it and not movable property of Indian branch, hence not chargeable to tax in India. Transfer of share or interest which derives, directly or indirectly, its value substantially from assets located in India.-“Substantial”. Means at least 50 per cent. Transfer pricing provisions is not attracted where there is no charge.

    Banca Sella S.P.A. In re (2016) 387 ITR 358/ 242 Taxman 475 /288 CTR 661 (AAR)

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