TaxTMI 
TaxTMI 
2004 (10) TMI 88
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....ilable, both in electronic form as well as in hardcopy which used to be delivered physically till advent of E-commerce revolution which made e-delivery possible. A BIR provides information in respect of a company on various aspects e.g. its existence, operations, financial condition, management's experience, line of business, facilities and location of the prospect and also information about any suits, liens, judgements etc.. After filing of this application D&B group has undergone a change in shareholding pattern and the group companies as a result of re-structuring with effect from 1 st March, 2004. The applicant was permitted to bring on record the changes in shareholding of associates and to amend annexures to the application. We shall refer to the position of the D&B and its associates companies after the restructuring. Dun & Bradstreet Espana, S.A. Spain (the applicant) continues to be a subsidiary of Dun & Bradstreet International Limited, USA (D&B US), an American company, and Dun & Bradstreet Information Service India (P) Limited (DBIS), an Indian company has now become a 100% subsidiary company of Dun & Bradstreet SAME Limited ("DB SAME), a company incorporated in Cayman....
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....ant's average domestic price at which it is sold to local customers in Spain. It is specifically averred that the applicant does not have any subsidiary, branch or office or place of business in India. It is also stated that it does not have any employee, advisor or agent in India nor is any employee deputed to India. 2. The applicant being a tax resident of Spain is entitled to the benefit of the Double Taxation Avoidance Agreement entered into between the Government of the Republic of India and the Kingdom of Spain effective from January 12, 1995 vide Notification dated 21 st April, 1995 (for short the "treaty"). As per section 90(2) of the Act, the provisions of the Act would apply to the extent they are more beneficial to the applicant. Article 7 of the treaty deals with taxability of the business profits therefore payments made by DBIS for the electronic purchase of BIRs to the applicant would be its business income and taxable in India only if the applicant has permanent establishment (PE) in India within the meaning of the article 5 of the treaty and it is asserted that it does not have a PE in India. On these facts the applicant sought rulings of the Authority on the follo....
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....nt's claim of being a tax resident of Spain is established. The payments made by DBIS to the applicant for electronic purchases of business information reports, are part of applicant's revenue receipts so the taxability will have to be considered under article 7 read with article 5 of the Treaty. On the facts and circumstances of the case, the applicant would be held as having PE in India under article 5 of the Treaty. Many appellate authorities held that the server located in India would constitute a PE of the firm or company. The appellant categorically stated that DBIS purchases BIRs on the server of the applicant. In the case of Ericsson Telephone Corporation India AB, Sweden, the Authority held that the character of royalty or fees for technical services would not change even if these were to be considered under article 7 of the treaty and that would mean section 44D read with section 115A of the Act would apply to the case of the applicant. Therefore, DBIS would have to withhold tax in India after calculating the tax liability under the Act. As BIRs are copyright protected and the end-users are required to use BIRs for their own purpose, this would give rise to 'royalty' and ....
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....x x x (i) a premises used as a sales outlet (j) to (k) x x x x x x x x x x x x 3. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include: • the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise; • the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display; (c) the maintenance of a stock or goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods and merchandise, or of collecting information for the enterprise; • the maintenance of a fixed place of business solely for the purpose of advertising, for supply of information, for scientific research or for other similar activities which have a preparatory or auxiliary character, for the enterprise. 4. Notwithstanding the provisions of paragraphs 1 and 2, where a person-other than an agent of an independent status to whom paragraph 5 applies- is acting in a Contracting State on be....
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....a deemed inclusion clause. It also commences with nonobstante clause and says that notwithstanding the provisions of paras 1 and 2, a person acting in a contracting state on behalf of an enterprise shall be deemed to have a permanent establishment in the first mentioned state, if any one of clauses - (a) or (b) thereof - applies. Clause (a) deals with a person who has and habitually exercises authority to conclude contract on behalf of the enterprise in the first mentioned state unless the activities are limited to the purchase of goods or merchandise for the enterprise; and clause (b) deals with a person who acts without authority, but habitually maintains a stock of goods or merchandise in the first mentioned state from which he regularly delivers them on behalf of the enterprise. Para 5 incorporates a deemed exclusion clause and says that an enterprise of a contracting State shall not be deemed to have permanent establishment in the other contracting State merely because it carries on business in the other State through a broker, general commission agent or any other agent of an independent status provided that such persons are acting in the ordinary course of business. Nonethel....
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....a 4 contains a deeming provision to include within the meaning of the expression 'PE' a person who acts on behalf of the enterprise in a contracting state if one of the two conditions mentioned in clauses (a) and (b) thereof, is satisfied. It is nobody's case that DBIS has and habitually exercises in India an authority to conclude contracts on behalf of the applicant. Therefore, clause (a) does not apply. The case of the Commissioner is that DBIS habitually maintains stock of goods and delivers them on behalf of the enterprise, as DBIS has a password protected access to the website of the applicant to access the BIRs of the applicant's server farm which amounts to maintaining of stock of goods or merchandise on behalf of the applicant and that receiving payment and allowing access to the BIRs from the website of the applicant amounts to delegation of sale function by the applicant to DBIS. Though there can be no difficulty in accepting that in the case of e-commerce, it is not necessary to maintain a physical stock and inventory and that a line access to inventory would be sufficient to equate it with maintenance of stock, yet it is not possible to accept the contentions of the Com....
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.... who acts a doer, force or power that accomplishes things" And, section 182 of the Indian Contract Act defines 'agent' as a person employed to do any act for another or to represent another in dealing with third parties. A close reading of the above extracts brings out the essence of the term 'agent' 'An agent' works for another in accordance with his authority while dealing with third parties. The record in this does not justify the conclusion that DBIS is an agent of the applicant. The DBIS is carrying on in its own business and is an independent entity. It is not under the control and instructions of the applicant in carrying on its business. Further, in regard to purchase of BIRs it acts on its own, settles its own price depending upon the market conditions, (which not controlled by the applicant) and pays the purchase price to the applicant for BIRs, as fixed by the applicant, which is the average market rate of BIR in Spain. There is no material before us to conclude that DBIS itself is an agent of the applicant. The role of DBIS vis-à-vis applicant is that it purchases BIRs from the applicant as and when a customer for BIRs approaches DBIS it connects the applicant for pur....
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....e of credit card and travellers' cheques by travellers all over the country and were serving 13 group companies in Asia and the Pacific. The information was being passed on to the Hong Kong computer centre of the applicant by leasing lines from VSNL. For the use of computer set up in Hong Kong and in USA , the American company was charging fees to the Indian company. The question posed by the applicant for seeking advance ruling of the Authority was: whether payment due to the applicant under the transaction with the Indian company was liable to tax in India under article 12(3)(a) or 12(3)(b) of the Treaty between India and USA . It was ruled by the Authority that the transmission of the information through encryption as the data relating to clients by maintaining strict confidentiality and it was for downloading of the software that the royalty was paid. According to the agreement between the applicant and the Indian company, the facilities were to be accessed only by the Indian company and the consideration was payable for the specific programme through which the Indian company was to cater to the needs of the group of companies located in Japan, Asia, Pacific etc. The transactio....
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....some clients, such as Expert credit guarantee corporation , in fact, access the server themselves to download BIR. The applicant does not have any server in India for the use of DBIS. Indeed the applicant has specifically averred that the copyright in the BIR would neither be licensed nor assigned to either the DBIS or the Indian customer. From these aspects it is clear that the aforementioned ruling of the Authority is distinguishable on facts. If a group of companies collects information about the historical places and places of interest for tourists in each country and all informations are maintained on a central computer which is accessible to each constituent of the Group in each country, can a supply of such information electronically on payment of price be treated as royalty or fee for technical services? We think not. The next case relied upon by the Commissioner is also a ruling of the Authority in Ericsson Telephone Corporation India AB (224 ITR 203). In that case the applicant was a company incorporated in Sweden. It provided, inter alia, services within radio and telecommunication. It entered into contracts with three Indian companies for the introduction of the cellul....