November 2010
Payment by PE to head office towards reimburse-ment of technical expenses, being not on account of any specific technical services which were ‘made available’, it was not covered under Article 13. Also, on facts, the payment was not attributable to PE.
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ADIT v. Bureau Veritas
(2010) 131 TTJ (Mum.) 29
Article 7, 13 of
India-France DTAA
A.Y. : 2002-03. Dated :
29-10-2009
3. Payment by PE to head
office towards reimburse-ment of technical expenses, being not on account of any
specific technical services which were ‘made available’, it was not covered
under Article 13. Also, on facts, the payment was not attributable to PE.
Facts :
The assessee was a French
company. The assessee had a PE in India. The PE had, broadly, two kinds of
activities — marine services and certification services. Marine services
included inspection, testing and survey of ships. The certification services
included ISO certification and occupational, heath and safety certification.
The PE had made provision in
respect of technical fees payable to the head office. The assessee had claimed
that the amount provided was towards reimbursement of actual expenses incurred
by the head office. The Tax Authority contended that the amount represented FTS
earned by head office from PE and since tax was not deducted by PE at the time
of credit of the amount, it should be disallowed u/s.40(a)(i) of the Income-tax
Act and added back to the income.
Held :
The Tribunal held as follows
:
(i) Having regard to the
Protocol to India-France DTAA, the scope of FTS is restricted to payments
which ‘made available’ technical knowledge, experience, etc. As the amount
represented allocation of technical and administrative expenses, it was not
for any specific technical services, which were ‘made available’. Hence, it
would not be covered under Article 13 of India-France DTAA.
(ii) The amount was also
not income ‘attributable to PE’. It was also not taxable under any other
provision of India-France DTAA.
