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To facilitate shooting in foreign locations for film and TV Indian production houses utilizes services of overseas entities, the issue then arises whether these payments are subject to tax in India, in the hands of overseas parties. Endemol, an Indian production house known for producing reality shows like Big Boss approached the Authority of Advance Ruling (AAR) to seek a ruling on the tax incidence in India arising out of payments made by it to two overseas companies. In both instances, the AAR  rules that the foreign entities would not be subject to tax in India.

During fiscal 2010-2011, Endemol  had produced the reality show ‘Khatron ke khiladi series -3’. The shooting is done outside India primarily in Brazil, The Indian took the services of a Singapore based company named Noise Associates to procure the services of a technical expert . After examining thedetails of the  contract  between the Singapore company and Endemol, AAR held that the payment made to Singapore company would fall within the parameters  of the excluding clause contained in the article- Royalties and Fees for Technical Services in the India- Singapore tax treaty. Thus there would be withholding of tax in India against payments made to Noise Assosciates for services rendered by it. Further Singapore company do not have a permanent place of establishment in India so the payment received by it could not be taxable in India as business income.

The other matter heared by AAR related to made by Endemol during fiscal 2010-2011 in connection with the shooting of its reality show ‘Wipe Out’, in Argentina, in this case the Indian company uses the services of argentine company for for technical and production crew and equipment for the overseas shoot. The AAR observed that the composite contract was in the nature of works contract under section 194 C of the Indian Income Tax Act. The services were rendered outside India and the payment were also received by the Argentine company outside India. Thus in the absence of any business connection in India the payment could not be subject to tax in India, AAR  held.

Rulings of the AAR have a persuasive effect in tax assessment of similar cases. Thus production houses facing litigation on payments made for overseas shooting could benefit from these rulings.

Thanks for Reading!!

Esha  Agrawal

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