Que.No.1 The payment received / receivable by the applicant in connection with IVTC Services are taxable as FTS under section 9(1)(vii) of the Act. The exception provided under section 9(1)(vii)(b) of the Act is not available to the applicant.
Que.No.2&3 The payments received / receivable in connection with the cost incurred and recovery of administrative cost for and on behalf of X India are chargeable to tax as FTS under section 9(1)(vii) of the Act.
Que.No.4 As the applicant has tax presence in India, X India / Indian customers are required to withhold taxes under section 195 of the Act at the rate in force mentioned in the Finance Act for the relevant year on the payment made / proposed to be made to the applicant.
Que.No.5 Since the applicants are taxable in India under section 9(1)(vii) of the Act, the applicants are bound to file returns in India under section 139 of the Act.
AUTHORITY FOR ADVANCE RULINGS (INCOME TAX)
19th Day of March, 2012
A.A.R. Nos. 886 to 911, 913 to 924, 927,929 and 930 of 2010
Name and address of the applicant – XYZ
RULINGS
These applications are by affiliates of X group of companies. ABC, the parent company is incorporated in A country. X group of companies is engaged in the business of Inspection, Verification, Testing and Certification (‘IVTC’) services. The X group has various business lines and the IVTC services described in the application are structured into those business lines. The applicants are currently providing IVTC services directly to Indian customers and also through X India, an affiliate of this group incorporated in India. According to the applicants, services outside India are provided to the Indian customers directly and the applicants raised invoices for the services rendered, which the Indian customer pays for. In the case of services rendered through X India, the arrangement between Indian customer and X India. However, at times the Indian customers desire to have services rendered outside India where X India does not have any presence but the applicants have presence. At times X India may not have the requisite capability. In such cases, X India sub-contracts a portion of the work to the applicants. The applicants provide those services and issue analysis reports either to the X India or at times directly to Indian customers. The applicants raise invoices on X India for the services provided by them or to the Indian customers of X India.
