Landmark Cases on International Taxation and DTAA

Payments for bandwidth services are not taxable as royalty under section 9(1)(vi) of the Income-tax Act if the assessee only has access to the services and not to any equipment, and the service provider retains control over the infrastructure and processes.

A Most Appropriate Procedure (MAP) order is an adjustment to an assessment order, not an annulment of it.

A project office in India does not automatically constitute a permanent establishment (PE) for a foreign entity. No income earned by the assessee from operations outside India can be taxed in India if there is no PE in India.

The hiring of bandwidth capacity alone does not constitute a taxable supply of service, and the Assessing Officer's decision to tax it is overturned. Interconnectivity Usage Charges (IUC) are defined as payments between service providers based on call termination.

Payments made for payroll processing are not Fees for Technical Services (FTS) if they do not involve managerial, technical, or consultancy services.

The central control and management of a company is considered to be situated at the place where its board of directors holds its meetings.

Profits attributable to marketing activities in India are assessed on a fact-based approach, considering the role of the permanent establishment in income generation. While a specific percentage like 35% has been attributed in past cases, there is no rigid rule, and attribution depends on the specific facts of each case.

The Tribunal distinguishes its earlier decision in Siemens Mobile Communications SPA vs. DCIT in cases where the facts are not analogous, particularly concerning the existence of a dependent agent permanent establishment (DAPE).

Tax deducted at source outside India relating to foreign income is not part of the total income. The total income of a resident in India includes all income from sources outside India.

Income of a non-resident is not taxable on a gross basis if it leads to a less favourable tax treatment compared to a resident performing similar services, especially considering Double Taxation Avoidance Agreements (DTAAs) that may exclude the application of specific domestic tax provisions like section 44D.

Decisions of the Authority for Advance Rulings (AAR) can have persuasive value for other parties, even if the tax treaties involved differ, provided there's no material fact making the definition of 'FTS' unworkable.

For income to be considered 'fees for technical/included services', the taxpayer must satisfy a twin test: rendering services and making technical knowledge available simultaneously. The mere access to a database does not constitute the rendering of such services.

Fees for technical services are taxable in India only if the 'make available' test is satisfied, meaning the recipient of the service is enabled to apply the technology or knowledge. If technology or technological services are not made available to the Indian entity, the payment is not taxable as fees for technical services.

A contract clause granting unfettered rights to enter any premises is not necessarily indicative of a taxable permanent establishment if the specific circumstances of the agreement and the activities performed do not establish such a presence.

Payments for software, including license charges and IT support services, are not to be treated as royalty under the Act or relevant Double Taxation Avoidance Agreements (DTAAs). Consequently, there is no obligation to deduct tax at source on such payments.

A notification under Section 90(1) is a mandatory condition for courts, authorities, or tribunals to give effect to a Double Taxation Avoidance Agreement (DTAA) or its protocols.

Section 172(1) of the Income Tax Act confers an absolute right upon the Income Tax Officer to levy and recover tax in a summary manner from non-residents owning ships, notwithstanding other provisions of the Act. The assessee has no right to object to this summary assessment.

Receipts representing the recovery of costs incurred on boarding and travelling for trainees do not contain embedded income elements.

The prevailing legal position prior to 08.05.2010 was that fees for technical services rendered outside India were not taxable in India. Retrospective amendments to tax law do not impose a withholding tax liability on a tax deductor for payments made when the law did not impose such a liability.

Subscription fees received by an organization for accessing information within a database do not constitute payment for "information concerning industrial, commercial or scientific experience" under Section 9(1)(vi) of the Income Tax Act. The payment is for accessing the information itself, not for the knowledge of the assessee's experience in creating or maintaining the database.

For a non-resident, taxability is determined solely under Section 5(2)(b) of the Income Tax Act, which relates to accrual, and Section 5(2)(a) has no application. Receipt of income by a non-resident occurs when an Indian company credits their account.

An assessee is not estopped from invoking treaty benefits in a subsequent year, even if it exercised a different option in earlier years. The choice of treaty protection can be reassessed annually based on which option is more beneficial.

Treaty provisions override the Act's provisions, meaning receipts not treated as royalty under the treaty cannot be taxed as such under the Act.

When considering the taxation of fees for computer software and technical services, the enduring benefit test and the nature of the services rendered are crucial in determining whether such payments constitute business income or fees for technical services under a tax treaty.

The purchase of computer software from foreign residents is a matter considered in light of the IT Act and established legal positions, as evidenced by the Tribunal's observations.

Tax treaties are interpreted to grant benefits, and the facts of a specific case must be distinguished from prior decisions to deny such benefits.

There is no employer-employee relationship between a payer and a payee when personnel are seconded, meaning the payee cannot enforce rights against the payer and is considered a third party. Entitlements to foreign allowances arise from the secondment letter from employer member companies.

For a non-resident, taxability is determined by accrual under Section 5(2)(b) of the Income Tax Act, and a credit entry in the books of an Indian company amounts to receipt by the non-resident.

International taxation matters involving show-cause notices under Section 148 of the Income Tax Act may be exempted from the mandatory faceless proceedings procedure.

A taxpayer may be eligible for foreign tax credit for taxes paid on income that is exempt in India, as demonstrated by the citation in cases discussing the disallowance of foreign tax credit claims.

The case is authority for the principle that where an Indian entity is given authority to execute local work but overall responsibility remains with a foreign entity, this does not necessarily constitute a consortium, and the foreign entity's liability should be assessed based on the specific contractual terms.

A payment is considered 'fees for technical services' (FTS) if it is charged for services that are rendered in India and are taxable in India. If the services are not taxable in India, then the payee is not liable for deduction of tax at source.

A non-resident company may not have a Permanent Establishment (PE) in India if its activities at the project site are limited and do not satisfy the 'business test' under the relevant Double Taxation Avoidance Agreement (DTAA). This is especially true if the entire work is carried out by a subcontractor.

An agency Permanent Establishment (PE) does not exist if the assessee principal can demonstrate that they were not the agent's sole client and that the agent's activities were not exclusively or almost exclusively for the assessee.

An individual leaving India to take up employment outside India is not assessed based on whether they ultimately stayed in the foreign country or were merely travelling.

Payments for the purchase of a copyrighted article, such as software, do not constitute royalty payments under Section 9(1)(vi) if the copyright itself is not acquired. Royalty payments arise when there is a transfer of rights associated with the copyright itself.

Export commission paid to non-resident agents is not taxable in India if services were rendered and commission paid outside India, and the agents have no permanent establishment in India.

The expression 'make available' in the context of fees for technical services means that the payer must come to possess the technical knowledge provided, enabling them to utilize it independently in the future. Services consumed without leaving anything tangible with the payer for future use do not constitute 'make available' of technical services, even if the benefit flowed directly to the payer.

The Delhi High Court's decision in Director of Income-Tax (International Taxation) v. Alcatel Lucent USA, Inc. is cited for a legal principle, but the provided passage does not explicitly state what that principle is. It is used by both the revenue and the assessee in arguments.

Referral fees are not taxable in India as fees for technical services if they are considered commission income under Article 7 of a Double Taxation Avoidance Agreement.

This decision addresses the taxability of royalties and fees for technical services in the context of international taxation and Double Taxation Avoidance Agreements (DTAAs). It considers the impact of amendments to Section 9(1)(vi) of the Income Tax Act.

Commission income earned by a foreign agent from an Indian exporter is not taxable in India if the services for which the commission is paid are rendered outside India. The right to receive the commission is acquired when services are rendered, and if this acquisition occurs outside India, the income accrues outside India.

Income from technical services is not taxable under Section 44D r/w Section 115A if it is exempt under a Double Taxation Avoidance Agreement (DTAA). The case examined similar issues concerning construction supervisory services for a refinery complex.

Expenditure incurred in foreign currency outside India is includible in 'export turnover' for computing deduction under Section 10A and 10B. This expenditure is also considered contributable to the delivery of computer software outside India.

The Indian company is considered the employer of foreign technicians deputed to it, even if their salaries are disbursed by the foreign company, if the Indian company exercises supervision and control over their work and deducts tax at source under Section 192. The reimbursement of salaries to the foreign company in such cases is not taxable in the hands of the foreign company.

Payments for obtaining the right to use computer software, including the granting of a license, are taxable as royalty under Section 9(1)(vi) read with Article 12 of the India-USA DTAA, and not as a sale of a copyrighted article.

A special provision normally excludes the operation of a general provision, based on the maxim 'generalia specialibus non derogant'.