Law: Income Tax Act, 1961

Section: 9,195

Section 9, read with section 195, of the Income-tax Act, 1961 and articles 13 and 5 of the DTAA between India and UK - Income - Deemed to accrue or arise in India (Fees for technical services - Royalties) - Applicant is a UK based company - CTIL, an Indian company, purchases turbocharger components directly from UK company and in relation to such purchases, applicant provides supply management services under Material Suppliers Management Service Agreement - CTIL is working with applicant only to ensure market competitive pricing from suppliers and applicant maintains contract supply agreement with suppliers after identifying products availability, capacity to produce and competitive pricing - Whether since applicant is not imparting its technical knowledge and expertise to CTIL, based on which CTIL will acquire such skills and will be able to make use of it in future, make-available clause in DTAA is not satisfied, and thus, said services are not in nature of 'fees for technical services' - Held, yes - Whether further, nature of services being related to identification of products and competitive pricing, cannot qualify as 'royalties' under provisions of article 13 because it is not related with use of, or right to use any copyright, patent, trademark, design or modal, plan, secret formula or process etc. - Held, yes - Whether moreover in absence of any PE of applicant in India, fees received are not taxable in India - Held, yes [Para 14] [In favour of assessee] FACTS â–  The applicant, Cummins UK, is a company incorporated in the UK. CTIL, a company incorporated in India is engaged in the business of manufacture and sale of turbochargers. CTIL purchases turbocharger components directly from UK company and in relation to such purchases, the applicant provides supply management services vide Material Suppliers Management Service Agreement. â–  The applicant sought advance ruling on issue whether the supply management service fees received by it from 'CTIL' is in the nature of 'Fees for Technical Services' or 'royalties' in term of article 13 of the India-UK Double Taxation Avoidance Agreement and submitted that in view of the fact that Cummins, U.K.…

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