To facilitate foreign investment into the country a number of steps have been taken by Government of India in the past. Setting up an Authority for Advance Rulings (Central Excise, Customs & Service Tax) to give binding rulings, in advance, on Central Excise, Customs and Service Tax matters pertaining to an investment venture in India is one such measure. The legal provisions of Advance Rulings were introduced through the Finance Acts of 1998, 1999 and 2003.
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Assessee was a tax resident of Singapore. The applicant sought a ruling on taxability of subscription fee received from users in India to access the online information database maintained by it. AAR was of the view that the market intelligence services provided by the applicant on online portal was taxable as Royalty as per Clause (iv) of Explanation 2 to Section 9(1) (vi) of the Income Tax Act, 1961 The same was also taxable as Royalty as per Article 12(2) of India -Singapore Double Taxation Avoidance Agreement.
On the terms of the agreement, it appears to us, that it is only an agreement to share the product of the Research and Development allegedly without payment of royalty, but paying a consideration for the use described as the contribution towards the costs of the researchincurred by that particular party. This payment occurs only on use of the product of the research and not otherwise. This payment can hence only be understood as a consideration for the use of the process or formula developed by that member. It would satisfy the definition of royalty under Explanation 2 to Section 9(1 )(vi) of the Act. The applicant is either the recipient of the consideration or the conduit through which the consideration is paid to the concerned party.
The applicant is in the business of gathering, collating and making available or imparting information concerning industrial and commercial knowledge, experience and skill and consequently the payment received from the subscriber would be royalty in terms of clause (iv) of Explanation 2 to Section 9(1)(vi) of the Act. If so, the subscription received is royalty liable to be taxed as such under the Act.
In Vodafone International Holdings BV Netherlands vs. Union of India and another (345 ITR 1 (SC). a three judge bench of the Supreme Court has laid down that what is needed is to consider the transaction in its entirety and to look at the transaction as a whole. The Supreme Court has advocated that a transaction must be looked at and not looked through.
As regards consultancy services, the question is whether such services are made available in the context of the DTAC between India and France read with the DTAC between India and US relied on by the applicant. It is seen that the advice and assistance rendered by the French Company to the applicant are not transient in nature and are capable of being used by the applicant on its own. It is true that some of the consultancy services rendered may not have that quality of permanency and may be a one time assistance, but advice on business strategy, on general management, on marketing and commercial matters,
the Authority for Advance Rulings (AAR) in the case of Z (A.A.R. No.1048 of 2011) held that income from sale of Compulsory Convertible Debentures (CCDs) by the applicant is taxable in India as ‘Interest’ under Section 2(28A) of Income-tax Act,1961 (the Act) and Article 11 of India-Mauritius tax treaty (tax treaty). Further the AAR held that sale of Indian company shares by a Mauritius company is not exempt under the tax treaty.
AAR held that a consortium formed by the Applicant with another non-resident, to bid for a turnkey contract, is liable to be taxed as Association of Persons (AOP) according to the Income-tax Act, 1961 (the Act) and the Double Tax Avoidance Agreement (tax treaty) between India and Germany. The AAR also held that an internal division of responsibility between consortium members does not alter the formation of an AOP and indivisible nature of the contract.
he first question relates to taxability of amount received on release and relinquishment of tenancy rights, whereas, the second question relates to capital gains on sale of 596 shares and as such do not involve determination of fair market value. As regards the amount received on release of tenancy rights, the tenancy rights are in respect of real estate and would be gains derived from alienation of immovable property. As the immovable property is situated in India, the gains are taxable in India under Article 13.1 of the DTAA.
Centrica India Offshore Private Ltd., (AAR) – It was held that personnel seconded to the Taxpayer, a group company in India, did not become its employees in the absence of an obligation undertaken by the Taxpayer to pay employment costs of such personnel. This was held despite the fact that the Taxpayer exercised control and supervision and was also responsible for the work of the personnel.
XYZ Ltd. (AAR) – 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. 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.
