Bharati Axa General
Insurance Co. Ltd.
(2010) 326 ITR 477 (AAR)
Article 12 of
India-Singapore DTAA;
S. 195 of Income-tax Act
Dated : 6-8-2010
6. On facts, payments made
to Singapore company for certain services were, neither FTS nor royalty. As it
did not have PE in India they were not taxable as business profits.
Facts :
The applicant was an Indian
company (‘IndCo’) engaged in general insurance business. IndCo entered into
agreement with a Singaporean company (‘SingCo’) for receiving assistance such as
business support, marketing information technology support services and strategy
support, etc. Although services were to be provided on continuous basis, no
employee of SingCo was to visit India for providing the services. SingCo did not
have any business establishment in India. SingCo was to be paid a fee equivalent
to the actual cost incurred by it and a markup of 5% thereon.
The applicant sought ruling
of AAR on the following questions :
(i) Whether the payments
for providing services were FTS in terms of Article 12 of India-Singapore DTAA
?
(ii) Whether payments for
providing access to hardware and software hosted in Singapore, and related
support services, were ‘royalty’ in terms of Article 12 of India-Singapore
DTAA ?
(iii) As SingCo did not
have PE in India in terms of Article 5 of India-Singapore DTAA, whether its
receipts were chargeable to tax in India ?
Held :
The AAR concluded as follows
:
(i) Neither clause (a) nor
clause (c) of Article 12(4) of India-Singapore DTAA, which defines FTS, was
attracted. Although some service could be categorised as technical services,
for treating them as FTS, the DTAA required these to be ‘made available’.
Relying on the clarification of ‘make available’ in MOU to India-USA DTAA and
AAR’s ruling in Intertek Testing Services India P Ltd, In re (2008) 307 ITR
418 (AAR) and in Ernst & Young P Ltd, In re (2010) 323 ITR 184 (AAR), the
services fell short of the requirement of ‘make available’. Hence, the
payments for those services were not FTS under Article 12(4) of
India-Singapore DTAA.
(ii) Provision of access
to hardware and software did not result in ‘use of’, or ‘right to use’,
copyright of literary/scientific work. Hence, payments for those services were
not ‘royalty’ under Article 12(3) of India-Singapore DTAA.
(iii) On facts, as SingCo did not have PE
in India, its receipts cannot be taxed as ‘business profits’ under DTAA.
