Law:

Section:

Section 9 of the Income-tax Act, 1961, read with article 12 of DTAA between India and Netherlands (Royalty/Fees for Technical services) - Income - Deemed to accrue or arise in India - Applicant is a company incorporated in India and is a tax resident of India - It mainly renders technical services to overseas 'S' group companies using desktop based IT applications - 'S' has set up as part of its global finance functional plan, a company, namely, SSSABV incorporated in Netherlands which is supporting global finance functions of 'S' - SSSABV in turn has set up a branch office in Philippines to provide a range of business support services to various 'S' Group entities - Applicant has entered into a service level agreement with SSSABV Philippines branch, whereby that branch is providing back office financial services relating to accounts, etc., to applicant - For rendering these services, SSSABV charges a monthly operation fee - Applicant has approached this authority with a view to ascertaining taxability in India of payments being so made to SSSABV and consequently on its obligation if any for withholding tax - From a look at distribution of responsibilities amongst two companies, it is apparent that SSSABV provides services to applicant without any involvement of applicant and in that context, it cannot be said that anything is made available to applicant in terms of agreement - Further, customer care centre is handled by SSSABV Netherlands through its branch office in Philippines and a timing is fixed for contract - Thus, in one sense, it appears to be service through back office, rather than a support service - Whether in view of above, it has to be ruled that consideration paid for financial services received by applicant is not in nature of fees for technical services within meaning of Article 12.5(b ) of DTAA between India and Netherlands - Held, yes - Whether since SSSABV does not have a permanent establishment in India in terms of Article 5 of DTAA between India and Netherlands, it is further ruled that payment received by SSSABV is not chargeable to tax in India - Held, yes [In favour of assessee] FACTS The applicant is a company incorporated in India…

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