Case Law Details
CIT Vs Colgate Palmolive Marketing (Bombay High Court)
Bombay High Court held that since the Assessee does not have a Permanent Establishment in India, income earned by it as business profit would not be taxable in India by virtue of the provisions of Article 7 of the India-Malaysia DTAA.
Facts- The Assessee, i.e. Colgate Palmolive Marketing SDN BHD, is an entity incorporated in Malaysia and is engaged in the business of marketing, distribution and sale of household products, fabrics and personal care. Colgate Palmolive (India) Limited (CPI) entered into an Agreement with the Assessee for use of the Assessee’s SAP system.
As per the said Agreement, the Assessee was to charge CPI for the use of the SAP system. CPI was required to make payments towards consideration for the use of the system, consideration towards rendering services comprising of costs of maintenance, up-gradation of the system to keep it functional and fees for training personnel for using the SAP system. For the Financial Year 199899, as per the said Agreement, CPI paid to the Assessee a sum of USD 11,80,500/- for the use of the SAP system and a further sum of USD 3,85,000/- towards rendering services as mentioned above.
During the course of assessment proceedings, AO observed that the payments received on account of the use of the SAP system were covered under the definition of ‘Royalty’ as defined under Explanation 2 (iii) to Section 9 (1) (vi), and accordingly taxed the same. Furthermore, the AO also observed that the payments received on account of rendering services were in the nature of ‘fees for technical services’. Accordingly, by an Order passed u/s. 143(3) of the Act, the AO completed the assessment by taxing the said payments.
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