TaxTMI 
TaxTMI 
2011 (12) TMI 78
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....m of standardization of processes within a strong control framework. It is also aimed at cost effective deployment of standard system and processes while maintaining control to a high standard with clear accountabilities. SSSABV in turn has set up a branch office in Philippines to provide a range of business support services to various Shell Group entities. The SSSABV branch is registered with the Philippines Economic Zone Authority. Currently, the branch performs the back - office finance services related to accounts payable, accounts receivable, supply accounting, credit and collection, general ledger accounting and taxation. The applicant has entered into a service level agreement with the SSSABV Philippines branch, whereby that branch provides business support services to the applicant. The services to be provided, include invoice processing, monitoring operational execution, SOX (Business Controls - Board) and goods receipts/invoice receipts and other services relating to accounts payable/receivable. It also includes general accounting and credit management. For rendering these services, SSSABV charges a monthly operation fee based on the on-going tariff or on-going charges/ra....
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....al services under Article 12 of the Convention. Since SSSABV did not have a permanent establishment in India in terms of Article 5 of the convention, the payment made by the applicant to SSSABV being the business income of SSSABV, is not taxable in India. Since the payment was not taxable in India as income, the applicant has no obligation to withhold tax in terms of section 195 of the Act. 3. In its comments, the Revenue submitted that the applicant is receiving high technical services which result in benefit to it by cost effective deployment of standard systems and in standardizing processes. Therefore, what was being provided was technical services. Whether the technology was made available to the applicant could not be determined on the scanty facts disclosed by the applicant. Information on whether the employees of the applicant were being trained for making use of the services, the exact nature of the services being provided and the manner in which they are being provided and were being utilized and what was the impact of such services on the functioning of the applicant, all are relevant facts not disclosed by the applicant. It was therefore relevant to know the practice....
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....hilippines branch, the applicant submitted that it was India-Netherlands Convention that applied because SSSABV was incorporated in Netherlands, was the tax resident of Netherlands and was controlled and managed from Netherlands. The Philippines branch was only a branch and the income earned through that branch was taxable in Netherlands where the head office of the company was situated. Even if SSSABV was found to be a resident of both Netherlands and Philippines, by applying the tie-breaker rule, it had to be found that the treaty between India and Netherlands applied, in view of the fact that the effective management of SSSABV vesting with its Board of Directors, was from Netherlands. It was therefore reiterated that the treaty that had to be applied was the one entered into by India and Netherlands and the ruling had to be on the basis of Article 12 of that treaty. 6. At the hearing, on behalf of the applicant it was submitted that in terms of section 90(2) of the Act, the applicant was entitled to opt for application of the treaty between India and Netherlands and going by the treaty, read with the most favoured nation clause, clause (b) of paragraph 4 of Article 12 had to ....
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.... is not taxable in India in the absence of SSSABV having a permanent establishment in India and consequently, the applicant has no obligation to withhold tax on the said payment in terms of section 195 of the Act. The essential contention on behalf of the Revenue is that the services rendered are technical in nature and consequently, what is being paid by the applicant to SSSABV is liable to be taxed as fees for technical services. Alternatively, the Revenue contended, that the payment was in the nature of royalty and taxable as such. This alternate contention is met on behalf of the applicant by submitting that the applicant has not sought a ruling on the question whether the payment was taxable as royalty, but had sought a ruling only on the operations cost involved in the agreement and not about the earlier part. The applicant not having raised any question on royalty, there was no occasion for this authority to rule on that question. 8. On behalf of the Revenue it is sought to be contended that the agreement is not simply relating to data management or consultancy services. The exact nature of the services or details of the services are not disclosed. The applicant is to emp....