TaxTMI 
TaxTMI 
TaxTMI 
2023 (7) TMI 134
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....d one Alibaba.com Hong Kong Limited. The AO did not accept the certificate of incorporation and the Tax Residency Certificate (TRC) issued to the assessee by the authorities in Singapore. 2. The AO also held that the assessee had a 'business connection' in India by way of its agreement and transactions with M/s. Infomedia 18 Pvt. Ltd. (Infomedia) an Indian company, and therefore, the assessee's income was taxable in India as per the provisions of section 9(1)(i) of the said Act. The AO also held that in the alternative, the payments made by the Indian subscribers to the assessee was also taxable in India as Fees for Technical Services (FTS) within the meaning of the said Act, as well as the DTAA. 3. The Dispute Resolution Panel (DRP) confirmed the order of the AO in respect of denial of treaty benefit. The DRP also held Infomedia was a dependent agent permanent establishment (DAPE). The DRP accordingly held that there was a permanent establishment / business connection of the assessee in India and its income was taxable in India as a business profit / business income. The DRP, however, rejected the argument of the AO that the payments received by the assessee was not taxable in I....
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....porated under the laws of Singapore and the same is evidenced from the certificate of incorporation. The Assessee was incorporated on November 06, 2011 in Singapore. The document indicates that the entire control and management of the assessee is from Singapore. 6. Since the entire control and management of the company is from Singapore, therefore, in terms of Article 4 of Indo-Singapore DTAA, it is a tax resident of Singapore, holding a valid 'tax resident certificate' which has been placed in the paper book. The entire structure of various holding companies of the 'Alibaba.com Group' shows the immediate holding company is 'Alibaba.com International (BVI) Holding Ltd.', a company incorporated in British Virgin Island and the ultimate holding company is 'Alibaba.com Ltd.', a company incorporated in Cayman Island. The Group Structure Chart of Alibaba.com Group has been explained in the impugned order as under:- 7. During years under consideration, the assessee has transacted with 'Alibaba.com Hong Kong Ltd.' (Alibaba Hong Kong) by way of availing of a Web Hosting and related services. It has been clarified that Alibaba Hong Kong is not the parent company of the assessee as has bee....
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....s with their product and services, and customers who were looking or searching for such product and services would refer to the yellow pages. The assessee is also providing same kind of facility by providing portal for giving information about the different product and services in the electronic form. Explaining the brief overview of the subscription arrangement for the services, Mr.Pardiwalla submitted that: a. The subscribers would register with the Company availing services provided by the assessee (i.e., putting advertisements on its website) by agreeing to the terms of the ITP/GSS agreement and payment of the applicable fees; b. The company would then authenticate and verify the details provided by the Subscribers through a third party agency; c. Each subscriber would be given an Account upon receipt of payment by the Company and successful authentication and verification by the third party agency; d. Once the Account is received by the Subscribers, they could proceed to display information about their business, products sold and offer to buy or sell products or services for visitors to the assessee's Website to browse; e. The users would click on the products th....
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....is owned by Alibaba.com Hong Kong, but also entire subscription services are provided by the said Hong Kong Company, and, since, India and Hong Kong do not have a DTAA, the benefit under DTAA will not be applicable to the assessee. The AO, on the issue of apportionment of income in the hands of the assessee, thereafter concluded that revenue of the assessee is partly taxable as "Royalty" partly as "Fee for technical services", and partly as business receipts. The Revenue's stand as concluded by AO can be summarized in the following manner: "a) Alibaba Singapore is not eligible to avail the benefits of the India-Singapore Tax Treaty on the grounds that, firstly, the assessee has no presence in Singapore and that the entire management of the assessee is based in Hong Kong; secondly, the Services to the Indian Subscribers are provided by Alibaba Hong Kong, since it is the owner of the Website; and lastly, the Website is a trade mark of Alibaba Hong Kong; b) Information constitutes a 'business connection' for the assessee in India since the definition of business connection is an inclusive one; c) The subscription fees earned is partly in the nature of business income, royalty ....
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.... in Singapore and the entire management as well as the services provided to the Indian subscribers is through Alibaba Hong Kong based at Hong Kong and not at behest of the assessee, that is, Alibaba Singpore. It was submitted that the assessee does not have a permanent establishment in terms of Article 5(8a) and 5(8c) in the form of Infomedia, that is, it would constitute a dependent agent of permanent establishment of assessee in India. 13. We find, the ITAT, after hearing the rival submissions, has given extensive factual findings as to why the conclusion of the AO as well as DRP were erroneous. 14. We have also considered the orders passed by the AO and the DRP. As correctly noted by the ITAT, the entire focus of the AO is that the website www.alibaba.com is registered in Hong Kong and is the trademark of Alibaba Hong Kong. AO has completely denied the existence of the assessee as an independent entity as if the assessee was only a front or a shadow entity of Alibaba Hong Kong. If the AO was so convinced that the entire activity in India to various subscribers was actually carried out by Alibaba Hong Kong and not by assessee, then we would have expected him to do something to ....
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....ersuaded ITAT to come to the conclusion that it was not agreeing with the view taken by DRP as well as the AO that either assessee is not a tax resident of Singapore in terms of India Singapore DTAA or that the benefit should not be given to the assessee. 16. The ITAT has also held that the tax residency certificate is sufficient to determine the proof of residency and the income-tax authorities cannot ignore the valid tax residency certificate issued by the Government authority of the other contracting state, that is, Singapore. 17. The ITAT also rejected the submissions of the revenue, relying on Vodafone International Holdings B.V. (Supra), that the I.T. authorities have blanket powers to negate or ignore the tax residency certificate given to the assessee by Singapore Tax Authority. The ITAT held that the Hon'ble Supreme Court, in that case, only observed that the Tax residency certificate does not prevent the tax authority to enquire into a possible tax fraud, which is not even the allegation in the matter at hand. 18. On the issue of as to whether assessee has any business connection in India in the form of Infomedia and whether Infomedia constitutes a dependent agency PE ....
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....2 to section 9(1)(i) which was inserted by the Finance Act, 2003, w.e.f., April 01, 2004. The Explanation 2 read with proviso categorically excludes from the purview of business connection the activities of an independent agent acting in the ordinary course of their business. The ITAT also relied upon Circular 7 of 2003 dated May 09, 2003 issued by CBDT which clarified that the term "business connection" would not include the cases of business activities being carried out through, interalia, any independent agent if any such independent agent is acting in the ordinary course of its business. Therefore, this is also a factual finding of ITAT. 22. While coming to its conclusion on the independence of Infomedia, the ITAT has held on facts that Infomedia has entered into several collaborations with other partners like assessee and assessee does not have any financial, managerial or any other type of participation in Infomedia, that Infomedia carries out host of other activities for other clients and Infomedia is an independent entrepreneur. Further while dealing with the assessee, Infomedia has been compensated for its services by the assessee. ITAT also has concluded on facts that th....