By Geeta Jani, Dhishat B. Mehta Chartered Accountants
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Article 3, 17 of India – Greece DTAA – Where DTAA does not have a specific article on FTS the services would be taxable as business profits and not as other income under the DTAA.
Facts:
The Taxpayer, a company incorporated in Greece entered into a transaction of providing certain services to an Indian branch of one of its associate entity. The Taxpayer did not offer to tax income received in respect of such services in India. The Taxpayer was of the view that income for services would fall under business income article of the DTAA . In absence of a PE in India, such business profits would not be liable to tax in India.
However, the Tax Authority contended that the services were in the nature of FTS under S. 9(1)(vi) of the Act as well as the DTAA .
On appeal before the dispute resolution panel (DRP), it was held that if DTAA is silent on certain source of income the same should be taxable as per the provisions of the Act. Aggrieved the taxpayer appealed before the Tribunal.
Held:
A bare reading of Article 17 (other income article) of India- Greece DTAA indicates that it deals with residual items of income which are not covered by any of the articles of the DTAA .
However, in this case the assessee has earned income by rendering the services in the course of its business and therefore, it is nothing but business profit which is covered under business profits article viz, Article 3 of the treaty. Admittedly the assessee does not have PE in India and hence, as per the express provision of Article 3 of the DTAA, business profit cannot be taxed in India.
