Business Support Services / financial services not in the nature of technical services within the meaning of Article 12.5(b) of the DTA between India and the Netherlands

The applicant is said to be providing scientific and technical services to Overseas Shell group entities. SSSABV, a company incorporated in Netherlands, through its branch in the Philippines, is currently providing back office financial services relating to accounts etc. to the applicant. It is seen that software are installed for that purpose; but it has not been clarified whether they are installed in India or in the Philippines. It appears to us that this aspect may not matter, as the software is used by the Philippines branch of SSSABV for rendering the services to the applicant and not by the applicant itself, on the facts as now disclosed. Similarly, whether SSSABV Netherlands, has intellectual property rights on the software used, also does not appear to be material. As we see it, the Netherlands company is providing through its branch, output to the applicant through the services included in the agreement. From a look at the distribution of responsibilities amongst the two companies shown in the annexure, it is seen that SSSABV provides services to the applicant without any involvement of the applicant. In that context, it cannot be said that anything is made available to the applicant in terms of the agreement. It is also seen that the customer care centre is handled by SSSABV Netherlands through its branch in Philippines and a timing is fixed for contact. In one sense, it appears to be service through back office, rather than a support service. Since the services are rendered by SSSABV Netherlands though through its branch in Philippines, we see no occasion for taking the view, on the facts of the case, that the treaty that will be applicable would be the one between India and the Philippines.

We therefore rule on question No.(i) that the consideration paid for the financial services received by the applicant is not in the nature of fees for technical services within the meaning of Article 12.5(b) of the DTAC between India and the Netherlands. Since there was no contention that SSSABV had a permanent establishment in India in terms of Article 5 of the DTAC between India and Netherlands, on question No. (ii) we rule that the payment received by SSSABV is not chargeable to tax in India. Since there is no liability to tax in India we rule on question No.(iii) that the applicant has no obligation to withhold tax under section 195 of the Income-tax Act.

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