Case Law Details
This article summarizes a recent ruling of the Authority for Advance Rulings (AAR) [AAR No. 811 of 2009 dated 1 December 2009] in the case of Federation of Indian Chambers of Commerce and Industry (Applicant) on the issue of taxability of payments made for obtaining certain services from a wing of the University of Texas (UT), USA, UT(IC2). Considering the facts of the case, the AAR held that as the services do not satisfy the criterion of ‘make available’ under the applicable India-USA Tax Treaty (Tax Treaty), the payments are not taxable under the same. As the payments are not liable to be taxed under the Indian Tax Law (ITL) read with the Tax Treaty, the Applicant would not be required to withhold taxes on its payments to the UT.
Background and facts of the case
- The Applicant is a non-profit company, registered under the Companies Act, 1956. The Applicant entered into a Memorandum of Understanding (MOU) with the Defence Research Development Organization (DRDO). Under the MOU, the Applicant has to assist the DRDO laboratories in the identification and business development of competitive global technologies from its inventory of existing defense-related inventions. In order to implement the MOU, the Applicant and the DRDO have jointly initiated a program wherein a major part of the services would be completed by the Applicant. The rest of the services would be done with the assistance of UT(IC2) for which the Applicant would need to make payments to the UT.
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