Law:

Section:

Section 90, read with section 9, of the Income-tax Act, 1961 and articles 5 and 7 of the Double Taxation Avoidance Agreement between India and USA - Double taxation relief - Where agreement exists - Applicant, an Indian company, entered into an international transportation services agreement with an American company - Under said agreement, applicant has to provide services to American company for transportation of packages in India and American company has to provide services to applicant for transportation of packages throughout world - For services rendered by American company to applicant in respect of out-bound consignments, it would have to make payments; so also American company would have to pay to applicant for services rendered by it in respect of in-bound consignments - Admittedly, in case of in-bound consignment, only specified amounts are paid to applicant and balance remains with American company - However, in case of out-bound consignments, here instead of American company receiving compensa-tion from applicant, pays to latter compensation for its services, which can only be booking and collecting parcels and sending them to airlines/couriers from where American company collects and delivers to consignees in foreign countries - 'Compensation' in terms of agreement includes not only charges for services of applicant but also for all operations of contractors encompassing compensation, salaries, etc. of employees of applicant, repairing expenses, etc. - American company has right to audit shipment of dimensional weight of packages as also internal accounts and operating records of applicant - American company undertook risk of shipments and kept policies of insurance of applicant alive by paying premiums - Whether on facts, business activities carried out by applicant in India cannot be said to be that of its own but are for and on behalf of American company and applicant is an agent acting for and on behalf of American company - Held, yes - Whether since in case of out-bound consignments, booking orders, collecting parcels, etc., as also in case of in-bound consignments in regard to clearance and delivery of parcels/packages, applicant is acting…

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