October 2010
A Singapore resident company had a PE in India, which provided information available in public domain to subscribers. The AO held that the income was FTS under the Income-tax Act and taxable on gross basis and not on net basis as claimed by the taxpayer u
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Part C : Tribunal & AAR International Tax Decisions
1 2010 TII 72 ITAT-Mum.-Intl.
JCIT v. Telerate
Article 7(3), 12 of India-Singapore DTAA;
S. 9(1)(vii) of Income-tax Act
A.Y. : 1997-98. Dated : 18-2-2010
A Singapore resident company had a PE in India, which
provided information available in public domain to subscribers. The AO held that
the income was FTS under the Income-tax Act and taxable on gross basis and not
on net basis as claimed by the taxpayer under DTAA. The Tribunal held that the
assessee can choose between DTAA and the Income-tax Act and tax authority cannot
thrust provisions of the Income-tax Act unless they are more beneficial.
Facts :
The taxpayer was a company resident in Singapore (‘SingCo’).
SingCo had established a branch in India which was a PE in terms of Article
5(2)(b) of India-Singapore DTAA. SingCo was engaged in collecting and
disseminating information on financial, derivatives and commodities market,
which was available in public domain. The information was transmitted to
subscribers of Indian branch office on continuous basis through telephone lines
or V-Sat.
The AO held that SingCo was rendering technical services and
therefore, its income was ‘fees for technical services’ u/s.9(1)(vii) of the
Income-tax Act. The AO further held that notwithstanding provisions of Article
12(6) of DTAA, which envisages taxing FIS of PE as business profits under
Article 7(3), income should be computed in terms of S. 44D of the Income-tax Act
and consequently, income should be taxed on gross basis @ 24% in terms of S.
115A of the Income-tax Act.
Held :
The Tribunal observed that the facts were similar to those in
DCIT v. Boston Consulting Group Pte. Ltd., (2005) 94 ITD 31 (Mum.) and relying
on that decision held that :
? If the assessee chooses to be covered by provisions of DTAA, the Revenue
cannot thrust provisions of the Income-tax Act on him;
? Provisions of the Income-tax Act cannot come in to play unless they are
more beneficial;
? Article 12(4)(b) of DTAA does not cover non-technical ‘consultancy
services’.
