Landmark Cases on International Taxation and DTAA

Interest payments made by an Indian branch to its head office are not taxable in India when they are in the nature of intra-entity adjustments and not income arising in India.

The principal purpose of the consideration, rather than the incidental use of trademarks, is determinative in classifying payments as royalty for taxability.

The ratio of the Blue Dart Express Limited case cannot be universally applied to distinguish technical or consultancy services under Section 9(1)(vii) and Section 80-O due to material differences in their language. Differences in statutory language can prevent the universal application of a previous decision.

An agent is considered independent if it acts in the ordinary course of its business and its activities are not exclusively devoted to the assessee.

The case supports the application of Article 13(4) of a Double Taxation Avoidance Agreement (DTAA) in determining the taxability of certain payments.

A principal and agent relationship exists between a reinsurance agent and non-residents, allowing for tax considerations related to reinsurance premiums paid to non-residents.

The mere fact that an acceptance test is carried out in India does not mean that title to goods has not passed outside India, making the transaction not taxable in India if title passed abroad.

The distinction between a sale and a license of computer software is based on whether ownership rights are transferred or merely the right to use the software. Payments received for a license to use software, without transfer of ownership, are generally considered royalty income.

Double Taxation Avoidance Agreements (DTAAs) operate in deviation from the general principles of taxation. If a DTAA recognizes taxing power with a foreign country, it implicitly takes away India's corresponding power to tax, acting as a bar on Sections 4 and 5 of the Income Tax Act.

Profits exceeding 10% cannot be attributed to the mere signing of contracts or conclusion of trading operations in India when such activities do not constitute a Permanent Establishment.

Managerial services under Section 9(2) require the adoption and carrying out of an organization's overall policies, not merely the procurement of machinery.

Income received as sales commission does not fall under the definition of Fees for Technical Services (FTS) if it is not in the nature of managerial, technical, or consultancy services.

The exclusion provided under Explanation (ix) to Section 153B of the Income Tax Act applies only when a reference for exchange of information has been made as per Sections 90/90A of the Act. If such a request is not made in terms of a Double Taxation Avoidance Agreement (DTAA), the assessment may be barred by limitation.

The Delhi High Court upholds an ITAT decision, confirming that no royalty was payable by M/s Dabur Nepal Pvt. Ltd. to the assessee. This decision emphasizes principles of judicial discipline in following prior tribunal rulings.

Revenue received from distributing broadcasting rights is not royalty income if it only grants a distribution right, not a copyright. Such distribution rights are purely commercial.

Additions to an assessee's income are unjustified if there is no material showing funds were diverted from India to source deposits in a foreign bank account, especially when the assessee has been a non-resident for a significant period.

Where an assessee claims treaty benefits under Article 13(4) of the India-Mauritius DTAA, exempting capital gains from Indian taxation, brought forward short-term and long-term capital losses cannot be set off against such exempt gains, nor can they be carried forward to subsequent years.

Receipts from slot chartering are considered shipping income eligible for beneficial provisions of a tax treaty, as slot hire agreements are directly or indirectly connected and an integral part of the enterprise's business of operating ships.

Where an issue regarding the levy of surcharge and a tax treaty has been decided in favour of the assessee, consequential grounds of appeal do not require separate adjudication.

A person is not outside India for purposes of determining residency status if they are visiting for tourism, medical treatment, or studies, even if they are not regularly employed outside India.

Payments for technical or consultancy services are considered 'fees for included services' and are taxable in India under the DTAA if they involve the transfer of technical knowledge, skill, or process, or the development or transfer of technical plans or designs. However, payments for general management, financial, legal, or public relations services do not qualify.

Reliance on Gracemac v. DIT (42 SOT 550) is incorrect if that decision has already been held to be not good law by the ITAT.

Commission charged by commission agents outside India is not taxable in India.

The dictionary meaning of "technical" includes "professional" services, but not all professional services qualify as technical services; professionalism and expertise are essential.

The Non-Discrimination clause in tax treaties, such as the India-US and India-Japan treaties, prevents disallowance of expenses paid to associated enterprises where the clause is pari materia, even if the Assessing Officer initially disallowed a portion.

If a tax treaty does not have a specific clause for fees for technical services (FTS), then such income should be treated as business income. This business income can be taxed in India only if there is a permanent establishment (PE) in India and the income is attributable to the activities of that PE.

Commission paid to non-resident agency companies for services that do not involve making technical or managerial expertise available is considered business profit and not fees for technical services. Such commission is not chargeable to tax in India if the services are rendered abroad.