Law: Income Tax Act, 1961

Section: 90

Section 90 of the Income-tax Act, 1961, read with article 20 of the Double Taxation Avoidance Agreement between India and Republic of Korea - Double taxation relief - Where agreement exists - Whether fundamental requirement of article 20(1)(a) is that remuneration should be paid by contracting State; however, expression 'payment by a contracting State' ought not to be given a rigid or literal interpretation so as to cover payments made directly by Government or a department of Government; even if payment is made out of State's funds set apart for that purpose, requirement of section 20(1)(a) would be satisfied and Indian income-tax cannot be levied in such a case - Held, yes- Applicant, which is an undertaking of Korean Government, has opened a liaison office in India to assist and facilitate Korean business in India and has appointed one 'J', a Korean national, as general manager at its Indian office - It claims that remuneration payable to 'J' is exempt from income-tax in India in terms of article 20 of DTAA - Whether since applicant has omitted to furnish requisite clarification with supporting documents to prove required situation, remuneration payable to 'J' will not be exempt from tax in India - Held, yes FACTS The applicant is an undertaking of the Korean Government which assists small enterprises for the purpose of promotion of small and medium sized business organizations in various ways. It has opened a liaison office in India to assist and facilitate the Korean business in India and to act as an interface between them and the Governmental authorities. For the purpose of looking after the affairs of liaison office, a Korean national, 'J', has been appointed as a general manager at its Indian office. The applicant has sought advance ruling on the question whether the remuneration payable to said Korean national by Republic of Korea and/or by the Indian liaison office will be exempt from tax in India in terms of article 20 of the DTAA between India and the Republic of Korea. HELD On the facts, it is not possible to give a ruling that the benefit of clause (1)(a) of article 20 can be invoked by the applicant. 'J' is an employee of the applicant but not…

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