Facts
- The applicant, Real Resourcing Limited is a company incorporated in the UK and is a tax resident of the UK.
- The applicant provides recruitment services (the applicant places a candidate with an Indian company) and referral services (the applicant would refer potential Indian clients to a third party based in India).
- The applicant has an address in New Delhi –which is a virtual office wherein the applicant has rented use of the address and telephone numbers in New Delhi without any actual office space. The applicant has no physical presence in India.
Issues before the AAR
The following question was raised before the AAR:
- Whether the payment received by the applicant for the proposed recruitment services and referral services from the Indian clients is liable to withholding under section 195 of the Income tax Act, 1961 (“the Act”) read with the Double Taxation Avoidance Agreement (“tax treaty”) between India and UK
Contentions of the applicant
- Payments received in respect of the above services are not chargeable to tax in India as the applicant does not have a permanent establishment (“PE”) in India. Further, such services are not in the nature of fees for technical services as provided in the India-UK tax treaty.
- Therefore, while making payments to the applicant, the Indian clients are not obliged to withhold tax at source.
- Reliance was placed on the ruling given by the AAR in Cushman & Wakefield Ltd 305 ITR 208.
Contentions of the revenue
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