ITO vs. Nokia India (P.) Ltd. [2015] 59 taxmann.com 120 (Delhi – Trib.) A.Ys.: 2006-07, Dated: July 8, 2015

Facts:
The taxpayer was an Indian company (“ICo”). ICo was a member-company of a Finland based company (“FinCo”). ICo was setting up a plant in India. To ensure that the plant complied with global manufacturing facility standards of FinCo, ICo engaged another Finland company to review plans prepared by Indian consultants in respect of HVAC, electrical and fire protection systems. The services were to be performed only outside India. However, employees of Finland company intermittently visited India only for attending meetings with the taxpayer. According to the taxpayer, the payments were not taxable under India- Finland DTAA . Hence, it did not deduct tax from the same.

Held:

• The scope of services of Finland company was review of systems description, diagrams, cost estimates, building designs, preliminary system design and quality control, equipment list/selection criteria , layout proposals, conducting inspections etc; and meetings in India and Finland, in connection therewith.
• These services were not for imparting any technical knowledge or experience that could be used by the taxpayer independently in its business and without recourse to Finland company. Thus, they did not ‘make available’ any technical knowledge, skill or experience nor did they consist of development and transfer of a technical plan or technical design to the taxpayer. Accordingly, the payments did not qualify as FTS under India-Finland DTAA .
• Further, as per India-Finland DTAA , if the services do not qualify as FTS, the taxability should be examined as per Article 7 (read with Article 5) of the India-Finland DTAA .
• In terms of Article 7(1), ‘Business Profits’ earned by a Finland company is taxable in India only if it carries on business in India through a PE in India. If a Finland company does not have a PE in India, no portion of the income from services provided to a customer in India are taxable in India.
• In the instant case, Finland comapny did not have any office/place of business in India; the services were performed primarily from outside India; and its employees made intermittent visits to India only for the purpose of attending meetings with the taxpayer. Accordingly, it did not have a PE in India.
• Therefore, payments received by Finland company were not taxable in India in terms of India-Finland DTAA .