S.No.

Particulars

Country

Status

Ruling

1

(1997) 223 ITR 416

Switzerland

Non-resident
company

• Indian subsidiary of Swiss co. floated to provide consultancy services to the Swiss co. would constitute business connection in India in view of the continuous process in respect of the series of sale & purchase transactions undertaken by the Swiss co. & its subsidiary.

• In addition, the subsidiary would amount to a PE in terms of article 5.2 read with 5.5 & 5.6 of the Double Taxation Avoidance Agreement (DTAA.)

2

(1997) 228 ITR 55

Singapore

Non-resident company

Company incorporated & existing in Singapore doing sub contract work of ONGC-services related to burial of pipes-activities performed in Indian territory for a total period of 46 days-oil well not owned by Singapore co.-activities covered by Para 3 of TAA. Singapore co. did not have a PE in India & its profits were not taxable in India.

3

(1996) 222 ITR 551Teknisil (Sendirian) Berhard

Malaysia

Non-resident company

• Applicant co. entered into an agreement with a Korean co. to supply skilled Labourers for extracting oil in offshore projects in India. Labourers work on barges under the supervision of the Korean co. Amounts received by the applicant as technical service fees constitutes business income.

• When technical services or royalties are received in the course of business, one can’t deny them the treatment envisaged by article 7, specially intended for application to business income.

• On the basis of the facts of the case, amount received by the Malaysian co. for the supply of labour outside India is not taxable in India since the co. does not have a PE as per DTAA between India & Malaysia.

4

(1997) 228 ITR 487

France

Non-resident company

• The applicant rendering engineering and other services for 28 to36 months through establishing project offices in India would constitute PE.

• The profits of the applicant attributable to the operations carried out by its P.E. in India will be liable to tax.

5

Unreported

United States of America

Non-resident company

• The applicant, a foreign co. engaged in international courier business, entered into a service agreement with an Indian co. engaged in domestic courier business.

• The waybill in respect of outbound consignments bears the name of the applicant.

• By virtue of clause (5) of Article 5 of the DTAA, it was held that the Indian co. is an independent agent of the applicant in India and it will not constitute a PE in India.

• As such the applicant is not liable to tax on amounts received by it from the
  Indian co.

6

TVM Ltd. (1999) 102 Taxman 578

Mauritius

Non-resident company

• Section 9 read with Articles 5 & 7 of DTAA between India & Mauritius – Income – Deemed to accrue or arise in India – TVM is a non resident co. incorporated in Mauritius – TVI is an Indian co. – For TVI is engaged in preparation & licensing of TV programmes while TVM broadcasting, purchase these programmes from TVI – TVM has entered in a separate solicitation agreement with TVI to solicit & collect advertisement in India on commission basis – TVM has no fixed place of business in India – TVM & TVI have same

• shareholders – As per article 7 of DTAA, TVM would be liable for tax in India
  only if it has P.E. in India – Whether close relationship between two cos. & even
  the possibility of TVM being able to exercise control over TVI may not be
  enough to constitute latter a P.E. – Held Yes.

• Whether for present, there being nothing to show that securing advertisement for programmes developed by TVI is an ordinary incident of TVI’s business, TVI cannot be considered an agent of TVM with an independent status within meaning of article 5(5) of the DTAA so as to say TVM has no P.E. in India – Held Yes.

• Whether even a non independent agent can be deemed to be a P.E. only if he can act independently in the matter of concluding contracts on behalf of principal on his own, freely & without control from principal & if such is situation in instant case, TVI would not constitute a P.E. for TVM – Held Yes.

• Whether, therefore, business profits earned by TVM through TVI are profits deemed to accrue or arise in India u/s 9 but, they are not taxable in India by virtue of article 7 of DTAA provided a) TVM’s liability to pay tax in Mauritius is established; and b) only TVM & not TVI is shown to exercise generally power to conclude advertisement contracts for sale of air time – Held Yes.

7

Horizontal Drilling International S.A.(1999) 152 CTR 401 (AAR)

France

Non-resident company

• The applicant, a French co., was awarded a contract by GAIL for installation of gas pipelines using horizontal drilling technique for a lump sum consideration.

• The project lasted for less than six months. As such the applicant could not have said to have a P.E. in India

8

(1999) 104 Taxman 377 (AAR)

Netherlands

Non-resident company

• The applicants, being two companies incorporated in Netherlands were sub contractors in the performance of a contract by a Korean co. with an Indian public sector corporation.

• The business of the applicants was to carry out under water operations for various purposes connected with oil wells & oil exploration, for the purpose of extracting oil or providing for transport of the oil produced. These operations were to be carried out on board of the diving vessel.

• The applicant’s work could be described as ‘installation project’ as they were engaged in a project of rectifying or supplementing installation of pipelines. However, the applicants could not be said to have a P.E. since the work was completed before six months.

• Hence, the income derived by the contractor was not taxable in India.

9

Brown & Root Inc.(1999) 237 ITR 156

United States of America

Non resident company

• The applicant, a company incorporated in USA, was a sub contractor with Hyundai Heavy Industries for the installation of sub-sea gas pipelines to be laid in off shore India.

• The scope of work included mobilisation & demobilisation of diving personnel & equipment. It did not maintain any office or fixed place of business in India.

• The Authority held that the income of the applicant from the sub contract would be taxable as Business Profits. However, no P.E. is said to exist by virtue of Article 5(k) of DTAA between India & USA – since the work of the applicant lasted for only 39 days.

• Article 5(k) of the DTAA stipulates that the specified establishment should exist for a period of 120 days in order to become a P.E.

• Therefore, no income became taxable in respect of the applicant in India.

10

DTAA between INDIA and  USA

United States of America

Non Resident company

• American Company entering into an Agreement with Indian Company and supplying Executive Personnel , who are paid by American Company and Indian Company paying the American Company for Services , having a Permanent Establishment in India.

• The Amount invoiced by Indian Company to Foreign Company is liable to be taxed as Business Profits under
• Article 7 of the DTAA.