Case Law Details
Brief of the Case
Authority for Advance Rulings held In the case of Cummins Limited, UK that the agreement shows that the CTIL, a company incorporated in India is working with the applicant only to ensure market competitive pricing from the suppliers. The applicant maintains contract supply agreement with suppliers after identifying the products availability, capacity to produce and competitive pricing. The applicant is not imparting its technical knowledge and expertise to the Indian company based on which the Indian company will acquire such skills and will be able to make use of it in future. Therefore, the ’make available’ clause under India-UK Treaty is not satisfied. Further, nature of services related to identification of products and competitive pricing cannot qualify as royalties under the provisions of Article 13 under India-UK Tax Treaty because it is not related with the use of, or the right to use any copyright, patent, trademark, design or modal, plan, secret formula or process etc.
Facts of the Case
The applicant, Cummins Limited is a company incorporated in the UK. Cummins Technologies India Limited (CTIL) is a company incorporated in India. CTIL is engaged in the business of manufacture and sale of turbochargers. CTIL purchases turbocharger components directly from third party in UK and US and in relation to such purchases, Cummins Limited provides supply management services vide Material Suppliers Management Service Agreement dated 7th December, 2010. The agreement is effective from 1st July, 2010. As per the agreement CTIL pays supply management service fees calculated at 5% of the base prices from the suppliers.
The applicant requested for ruling on the followings issue – whether such management service fees is in the nature of “Fees for Technical Services” or “royalties” within the meaning of the term in Article 13 of the India-UK DTAA, the applicant has no PE in India, whether such amount received will be taxable in India, whether transfer pricing provisions will be applicable for such transaction and whether any TDS liability u/s 195 exists for such transaction.
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