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2008] 305 ITR 394 [2008] 174 Taxman 124 (AAR) AUTHORITY FOR ADVANCE RULINGS (INCOME-TAX), NEW DELHI Anapharm Inc., In re* JUSTICE P.V. REDDI, CHAIRMAN AND A. SINHA AND RAO RANVIJAY SINGH, MEMBER A.A.R. NO. 746 OF 2007 SEPTEMBER 11, 2008 Section 9 of the Income-tax Act, 1961, read with articles 7and 12 of the Double Taxation Avoidance Agreement between India and Canada - Income - Deemed to accrue or arise in India - Whether for considering a payment of consideration as 'fees for technical/included services' in terms of article 12(4)(b), mere provision of technical services is not enough; it additionally requires that service provider should also make its technical knowledge, experience, skill, know-how, etc., known to recipient of service so as to equip it to independently perform technical functions itself in future without help of service provider - Held, yes - Applicant is a company incorporated in Canada - It provides clinical and bioanalytical services to assist pharmaceutical companies around world in development of new drugs or generic copies of drugs already being marketed - It has entered into agreements with two Indian pharmaceutical companies for rendering said services - In terms of agreements, applicant provides to recipients only final results and conclusions of data of bioequivalence tests and not clinical procedure, analytical methods, etc., which are proprietary items of applicant - Clients pay fees to applicant in lieu of above services - Whether fees received by applicant for services provided to Indian companies can be considered to be 'fees for included services' within meaning of article 12(4) - Held, no - Whether fee paid by Indian companies to applicant in respect of bioequivalence tests conducted by it is in nature of 'business profits' under article 7 of DTAA and same is not taxable in India, as applicant does not have a permanent establishment in India - Held, yes FACTS The applicant is a company incorporated in Canada. It is a contract research organization which provides clinical and bioanalytical services to assist pharmaceutical companies around the world in the development of new drugs or generic copies of drugs already being…

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