Landmark Cases on International Taxation and DTAA

Income from business deemed to accrue or arise in India under Section 9(1)(i) Explanation 1 must be limited to the part reasonably attributable to operations carried out within India. Amounts received outside India for activities conducted entirely outside India are not taxable in India.

Profits derived by an assessee from the operation of aircraft in international traffic are not disputed by the Assessing Officer, implying their taxability under specific provisions.

Payments for technical services are taxable as fees for technical services (FTS) if the services are rendered for the business in India and are technical in nature, made available to the assessee whenever requisitioned. Tax treaties with a 'make available' clause may exempt payments for software AMC if no technical knowledge, skill, or know-how is made available.

Payments for concurrent access to sophisticated portal services are considered royalty, but payments for specialized software are not royalty if no right to independently use the computer is granted.

The term 'effectively connected' in Article 12(5) of the India-Japan DTAA means 'really connected', focusing on the substance of the connection rather than its form. This interpretation has been affirmed by the Delhi High Court and the Supreme Court.

Income earned by an Indian company from its branch offices outside India is taxable in India, even if services were rendered outside India, when it falls under Section 9 of the Income-tax Act, 1961, read with the relevant Double Taxation Avoidance Agreement (DTAA).

The case distinguishes itself from situations where an assessee claims non-residency and taxability only on Indian income, by highlighting a scenario where the assessee was the clear beneficial owner of a foreign bank deposit of Rs. 196 crores, failing to explain the contents of a Base Note.

Distribution or subscription revenue received by a non-resident is not taxable in India if there is no Permanent Establishment (PE) in India, as such income is considered business income.

This case holds that the applicability of a Double Taxation Avoidance Agreement (DTAA) to a transaction should be decided in accordance with the provisions of the DTAA itself, even if the domestic law's meaning of a term has been amended.

Reimbursement of salary and other costs for seconded employees cannot be treated as fees for technical services (FTS) under the Act or the India-UK DTAA, as it requires a finding that the service was 'made available' to the Indian company.

Goodwill is considered an 'asset' under Explanation 3 to Section 2(22)(e) and thus falls under the category of 'any other business or commercial right of similar nature'.

The time limit for filing Form 67 to claim foreign tax credit is directory, not mandatory. If no negative consequences are contemplated for non-adherence, the provision is considered directory.

Payments for services rendered by technically qualified persons are not necessarily 'fees for technical services' under Explanation 2 to Section 9(1)(vii) if the services do not make available technical knowledge, plans, or designs to the user.

Payments for access to databases containing collated information from journals and articles are not treated as royalty payments. This is because such access does not involve the use or right to use copyrighted material in the sense contemplated by royalty provisions.

The definition of 'service' in the SEZ Act, 2005, read with Section 51 of the Act, overrides the word 'service' as it accrues under Section 10AA of the Income Tax Act. This is based on relevant government instructions.

In interpreting tax treaties, the OECD Commentary and technical explanations cannot be considered when determining the scope of specific treaty articles, such as paragraph 2 of Article 8 of the India-USA Tax Treaty.

An Indian subsidiary created as a legal facade for taxation purposes, not genuinely engaged in onshore contracts, does not make income earned in India taxable.

A non-resident assessee cannot be assessed for alleged overseas income if no evidence connects it to business in India. The revenue cannot presume income earned with a business connection in India without substantiation.

When calculating the period an assessee is in India for tax purposes, the period is counted from the date of arrival to the date of departure, necessarily including both the start and end dates.

Tax authorities must 'look at' a contract, examining the parties' intention based on its express terms, rather than dissecting it or giving it an artificial construction.

Income earned by an Indian company from its permanent establishment in Oman is not taxable in India if the India-Oman DTAA permits such income to be taxed in Oman and the Assessing Officer has not established that the income is taxable in India.

Taxability of payments under a Double Taxation Avoidance Agreement (DTAA) depends on whether the term 'paid' is used, indicating taxation on a payment basis rather than on an accrual basis. If the DTAA specifies 'paid', tax liability arises only upon actual receipt of the sum.

The definition of royalty under the Income Tax Act is wider than the definition of royalty under a Double Taxation Avoidance Agreement (DTAA).

A case is factually distinguishable if the 'made available' specifications and procedures enabled the assessee to render services independently to its customers.

Foreign commission paid to non-residents is not taxable in India, thus no TDS liability arises on such payments.

A unilateral amendment to the Income Tax Act cannot override a Tax Treaty unless the treaty definition itself is amended. Reliance on High Court decisions is misplaced if they do not consider this principle.

Fees for included services and fees for technical services are taxable as income under Section 9(1)(vii) if they make available technical knowledge, expertise, or skills to the recipient, even if the service provider does not have a business connection in India.

The decision in Edenred Pte. Ltd. v. Deputy Director of Income Tax (International Taxation) is cited in legal arguments before the tribunal concerning the taxability of certain payments, with specific reference to decisions involving fees for included services and technical services.

Section 44BBB of the Act cannot be applied to income from offshore supplies if the supplies were made outside India without the involvement of a Permanent Establishment in India. Treaty provisions may also preclude such taxation.

When calculating the number of days an individual is present in India for residency purposes, the date of arrival should be excluded.

A Permanent Establishment (PE) under Article 5(1) of the OECD model tax treaty comes into existence only when three criteria are satisfied: physical existence of a location, the right to use that place for business, and carrying on business through that place.

This case likely deals with the issue of whether reimbursements received by an assessee for seconded employees constitute salary taxable in India, and whether TDS was correctly deducted.

Interest paid by an Indian branch to its Head Office is taxable in India as income accruing or arising in India, even if the branch is a Permanent Establishment (PE), especially after the insertion of an explanation to Section 9(1)(v) of the Income Tax Act.

Payments received from Indian customers cannot be taxed in India under section 9(1)(vi) of the Act if they are not characterized as royalty under the relevant Double Taxation Avoidance Agreement (DTAA). Amendments to the Act cannot be incorporated when construing the scope of 'royalty' in a DTAA.

Income paid or loaded in a foreign location but actually received in India is taxable in India under Section 5(2)(a) of the Income Tax Act. This is particularly relevant when the assessee has not claimed benefits under a Double Taxation Avoidance Agreement (DTAA).

Payments for the use or right to use computer software are considered royalty income if the amendment to Section 9(1)(vi) by Explanation 4 of the Finance Act 2012, which applies retrospectively, is read into the Double Taxation Avoidance Agreement (DTAA).

Payments for the acquisition of a copyrighted article, such as software, do not constitute royalty under the Income-tax Act or Double Taxation Avoidance Agreements. The distinction between a copyright right and a copyrighted article is significant, with the former being taxable as royalty and the latter not.

Payments for computer software do not constitute royalty under Section 9(1)(vi) or Article 12 of a DTAA if the licensee cannot commercially exploit the licensed product, despite restrictions on intellectual property.

Where an assessee transfers funds from an NRE account abroad to an NRE account in India through banking channels, the onus to explain the source of funds under Section 69 is discharged, making such remittances not taxable under Section 5(2)(b).

Transfer of distribution rights along with the right to broadcast and telecast sports channels amounts to transfer of copyright. Income derived from procuring advertisements for broadcast/telecast channels can be considered commission income.

The Tribunal's decision in Allianz SE v. ADIT (2012) 51 SOT 399 (Pune) was considered and, in some instances, relied upon in subsequent cases regarding the classification of payments as 'business profits' rather than 'royalty'. However, it was also noted that this decision was not always followed, with other courts distinguishing it or holding payments as royalty.

The Income Tax Appellate Tribunal follows the Madras High Court's decision in ADIT v. First Advantage (P.) Ltd., 77 Taxmann.com 195 (Madras HC) regarding international taxation matters.

Intra-group services, which are not in the nature of shareholder or stewardship activities, are to be treated as such based on supporting email correspondence and OECD Guidelines, and CIT(A)'s order on this issue is upheld.

Where e-products or online databases are provided via subscription, it does not constitute a transfer of copyright, therefore payments received are not taxable as royalty.

The case is cited as authority within a larger discussion of international taxation cases, indicating its relevance in this area of tax law. It appears in lists of citations related to international taxation matters, often alongside other Mumbai Tribunal decisions concerning foreign entities and their tax liabilities in India.

Even if a Permanent Establishment (PE) exists in India, no further profit can be attributed to a foreign enterprise once the arm's length principle has been satisfied.

A non-resident company providing technology, know-how, and services in connection with business carried on in India is taxable in India. However, if the Assessing Officer does not provide material proving the foreign service provider rendered technical service or made available technological know-how to the assessee in India for its BPO business, then such services are not taxable in India.

Pre-sales activities, such as procuring orders, identifying buyers, negotiating prices, and requesting orders be placed with the foreign headquarters, are not auxiliary in nature and can lead to the establishment of a permanent establishment (PE) in India.

Profits derived from operating aircraft in international traffic are covered under Article 8(1) of the Tax Treaty, and income from ancillary services like baggage screening and technical support provided to other airlines at an international airport is not connected to such operations for treaty purposes.

Payments for computer software are not taxable as fees for technical services (FTS) under the India-Mauritius tax treaty if they do not involve the rendition of any technical service or provide an enduring benefit to the recipient. Such payments are treated as business income taxable only if a permanent establishment exists.