Facts :- Cable & Wireless Networks India Private Limited (‘the applicant’) is engaged in the business of providing international and domestic long distance telecommunication services in India.
It proposes to enter into an agreement with its group company, Cable and Wireless UK (‘C&W UK’) to provide end to end international long distance telecommunication services to its Indian customers. Under the proposed agreement, the applicant would provide the Indian leg of the service by using its own network and equipments and network of other domestic operators and the international leg of the service would be provided by C&W UK, using its international infrastructure and equipment. The applicant will carry the calls and data within India and C&W UK will further carry those calls and data to the recipients outside India. The network and equipments of C&W UK will not be used in India and the applicant?s network and equipment will not be used outside India. For the above services, the applicant will pay fees to C&W UK.
Issues before the Authority for Advance Ruling (‘AAR’)
- Whether the amount payable by the applicant to C&W UK would be in the nature of “royalties” or “fees for technical services” (‘FTS’) either under the Income-tax Act, 1961 (‘ITA’) or under the Double Tax Avoidance Agreement entered into between India and the United Kingdom (‘India-UK DTAA’)
- Whether C&W UK has a Permanent Establishment (‘PE’) in India under Article 5 of the India-UK DTAA
- Whether the payment to be made by the applicant would suffer withholding tax or not, and if yes, at what rate?
Contentions of the applicant
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