Law:

Section:

Section 9 of the Income-tax Act, 1961, read with article 12, of the Double Taxation Avoidance Agreement between India and USA - Income - Deemed to accrue or arise in India - Applicant, a company incorporated in USA, is engaged in business of supplying advance technology for manufacture of radial tyres - It entered into a technology transfer agreement with an Indian company, CEAT under which it agreed to grant CEAT a perpetual irrevocable right to use know-how and to transfer ownership of Tread and Side wall Designs/patterns [TSD] required for manufacture of radial tyres for a lump sum consideration - Know-how would be transferred by applicant to CEAT in shape of technical documentation and designs - Under agreement, applicant has also to provide consultancy and assistance including training services to CEAT - On these facts, applicant has sought advance ruling on its tax liability on amount to be received by it from CEAT - Whether essence and predominant nature of transaction is transfer of technical know-how to CEAT in sense of granting it right to use know-how which is basically contained in documents and, therefore, consideration received by applicant from CEAT towards technology transfer/technical know-how and services connected therewith is clearly liable to be taxed as royalty under section 9(1)(vi) and also under section 9(1)(vii) - Held, yes - Whether, however, since ownership in tread and side wall designs/patterns is transferred absolutely to CEAT, amount of consideration related thereto cannot be brought to tax as royalty in India either under article 12(5) of DTAA or under section 9 of Act - Held, yes - Whether fee for consultancy and assistance services payable to applicant under agreement falls within scope of 'fee for included services' as defined in para 4 of article 12 of DTAA and, therefore, consideration received for same is liable to be taxed in India as 'fee for included services' under Treaty and as 'fee for technical services' under Act - Held, yes FACTS The applicant is a company incorporated in the USA. It is, inter alia, engaged in the business of supplying advance technology for the manufacture of radial tyres. Being approached by an…

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