Avail 20% discount on updated CA lectures for Dec 21 .Use Code RESULT20 !! Call : 088803-20003

ICICI

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More


Taxability of Fees from offshore services – post Finance Act, 2010

CA Ankit Virendra Sudha Shah

 

General understanding on taxability of fees from offshore services under the provisions of the Income-tax Act, 1961

1.    After the retrospective amendment (with effect from 1 June 1976) brought in by the legislature vide Finance Act, 2010 by substituting the existing Explanation to Section 9 of the Income tax Act, 1961 (‘the Act’), the general understanding which now prevails is that fees from services, as rendered by the non-resident from outside India to the resident (with no performance of services in India) [the aforesaid scenario for the sake of simplicity is hereinafter referred to as ‘offshore services’] shall be income deemed to accrue or arise in India under the provisions of Section 9(1)(vii) of the Act and consequently shall be chargeable to tax in India, in light of the provisions of Sections 4, 5 r.w.s. 9(1)(vii) of the Act [however, subject to any beneficial provisions of the Double Taxation Avoidance Agreements (‘DTAA’) entered in by the Central Government].

 

2.    In a chase to overrule the judicial opinion as expressed by the Hon’ble Supreme Court in the case of Ishikawajima-Harima Heavy Industries Ltd. Vs DIT (288 ITR 408), the Indian Government had earlier vide Finance Act, 2007 introduced an Explanation Clause to Section 9 of the Act with effect from 1 June 1976, which provided for income in the nature of interest, royalty and fees for technical services (‘FTS’) to be deemed to accrue or arise in India in the case of a non-resident, whether or not it has a residence or place of business or business connection in India. The said terminologies as referred to above are part of the present Explanation to Section 9 of the Act.

 

3.    The general understanding as discussed above further got impetus, after the recent judgements of the Hon’ble Mumbai Income-tax Appellate Tribunal [‘the Tribunal’] in the case of Ashapura Minechem Limited vs ADIT  (2010) (40 DTR 42) (Tri) and Linklaters LLP vs ITO (42 DTR 233) (Tri). The Tribunal in the case of Ashapura Minechem Limited (supra) after relying on the aforesaid substituted provisions of Section 9 of the Act (as amended vide Finance Act, 2010) held that the technical services of bauxite testing and preparation of reports rendered from outside India by the China Aluminum International Engineering Corporation Ltd. [‘non-resident’] shall be deemed to accrue or arise in India under Section 9(1)(vii) of the Act [and also under Article 12 of India-China tax treaty] on the ground that the impugned services were utilized in India. Consequently, the Appellant was held vicariously liable to deduct tax at source under Section 195 of the Act. On similar analogy, fees from professional services rendered by Linklaters LLP (‘the Appellant’) to residents of India in the case of Linklaters LLP vs ITO (supra) was also held to be taxable in India as fees for technical services (‘FTS’) deemed to accrue or arise in India under the provisions of Section 5(2) read with Section 9(1)(vii)(b) of the Act. Therefore, the aforesaid judgements of Hon’ble Mumbai Tribunal seem to have served as the last nail on the taxability of fees from offshore services in India.

 

4.    However, one may find that after reading the aforesaid judgements, it seems that Hon’ble Tribunal while determining the taxability of FTS under the provisions of the Act has lost sight of the paramount principle of “income earned” as laid down under source rule of taxation for the determination of tax jurisdiction of FTS, which is discussed in ensuing paragraphs.

Importance and relevance of the Controversy

5.    As mentioned above, the controversy which is tried to be addressed vide this Article is on the taxability of fees from offshore services under the provision of Sections 4, 5
r.w.s. 9(1)(vii) of the Act. The topic is of vast importance and relevance both from present and future perspective. The issue is of importance from present perspective because the principles as laid down in the aforesaid decisions shall determine the taxability of FTS as arising from various foreign collaboration agreements entered between the non-residents and residents. Further, the issue is also of relevance to resident payers because of the vicarious liability created under the provisions of Section 195 of the Act and simultaneous disallowance of FTS under the provisions of Section 40(a)(i) of the Act.

 

6.    Similarly, the issue is of vital importance also from the future perspective because the provisions of the Draft Direct Tax Code Bill, 2009 tends to give an impression that the effect of interpretation of the new draft provisions relating to taxability of FTS shall be something similar to the existing provisions of the Act.

Assumptions

7.    For the sake of simplicity and to address the issue under relevance, it has been assumed that fees from offshore services under consideration satisfy the definition of “fees for technical services” under the provisions of Section 9(1)(vii) of the Act. In addition, the article only discusses the taxability of fees from offshore services under the provisions of the Act and one may refer to the beneficial provisions of the DTAAs, depending upon the facts of the case.

 

8.    References are made to several observations of Mumbai Tribunal decision in the case of Ashapura Minechem (supra) in this Article because of two reasons:

 

„  Since, to the best of my knowledge, it was the first decision by any Income-tax Appellate Tribunal, which was delivered after considering the effect of the amendment brought in the Explanation to Section 9 of the Act vide Finance Act, 2010; and

 

„  The observations and reasoning’s of the Mumbai Tribunal in the case of Linklaters LLP vs ITO (supra) to hold FTS from professional services as taxable under the provisions of the Act were to a certain extent similar to observations made in the Ashapura Minechem’s case (supra)

Background

9.    Sections 4, 5 read with Section 9(1)(vii) of the Act  provides for taxability of FTS in India. After having a cursory look at the legislative history of the provisions of Section 9(1)(vii) of the Act, one finds that vide Finance Act, 1976, the concept of “source rule” of taxation was introduced in Section 9 of the Act to address the difficulties faced in chargeability of income in the nature of interest, royalty and FTS. Section 9(1)(vii) of the Act prescribes three rules qua the category of payer for determining as to whether FTS is deemed to accrue or arise in India. The said rules are tabulated before for easy understanding:    

Category of Payer

Condition for determining whether FTS is deemed to accrue or arise in India

 

Exception

Government

FTS payable by payer

No

 

A Person who is resident other than Government

 

FTS payable by payer

If FTS is utilized by the payer in carrying on business or profession outside India or for making or earning any income from any source outside India

 

A Person who is non-resident

FTS payable by payer and provided FTS is utilized by the payer in carrying on business or profession in India or for making or earning any income from any source in India

 

 

No

 

10. After reading the legislative history, one finds that the intention of the legislature to tax FTS rendered from outside India was not as explicit as specifically provided for royalty income in the year of introduction ie 1976. It was only vide Finance Bill (No. 2), 1977, where the legislature in the Memorandum explaining the provisions, in very explicit terms mentioned about its intention to bring within the tax net, even FTS rendered from outside India. A question which may arise in one’s mind is that if the intention of the legislature was clear and unambiguous to tax the FTS rendered from outside India right from its introduction vide Finance Act, 1976, then why was there a need for amendments in the provisions of
Section 9 of the Act vide Finance Act, 2007 and Finance Act, 2010. However, after reading the Memorandum explaining the provisions in the Finance Bill, 2007 and Finance Bill, 2010, one finds that the amendments were specifically undertaken to undo the following ratios of the decisions as laid down while interpreting the provisions of Section 9(1)(vii) of the Act in the case of Ishikawajima-Harima Heavy Industries Ltd.(supra) and Jindal Thermal Power Company Ltd vs DCIT (TDS) (321 ITR 31) (Kar), which are as under:

„  Pre-requisite of both rendition of services and utilization of services in India; and

„  Necessity of establishment of territorial nexus between the income deemed to accrue or arise to the non-resident and the territory of India

for Fees for technical services to be deemed to accrue or arise in India under the provisions of Section 9(1)(vii) of the Act.

11.The legislature while inserting Explanation to Section 9 of the Act vide Finance Act, 2007 and further amending the language of Explanation to Section 9 vide Finance Act, 2010 explained as under:

„  That legislative intent for introduction of clauses (v), (vi) and (vii) vide Finance Act, 1976 was to give legal sanctity to the source rule.

 

„  Under the source rule of taxation, income is taxed in the country where it is earned.

 

„  The source rule would mean that irrespective of situs of services, the situs of payer and the situs of the utilization of services will determine the tax jurisdiction for the purpose of taxability of interest, royalty and FTS in India.

 

„  Further, for cases covered above, there will be no need to establish any territorial nexus between incomes deemed to accrue or arise to the non-resident under the said clauses and the territory of India.

12. With due respect to our judicial courts, one finds that in the aforesaid referred decisions, the Courts while deciding upon whether FTS is deemed to accrue or arise in India or not, interpreted Section 9(1)(vii)(c) of the Act, whereas the case before them for consideration was of Section 9(1)(vii)(b) of the Act. Section 9(1)(vii)(c) specifically reads in the condition of ‘utilisation of services’ for the purpose of determining FTS to be deemed to accrue or arise in India (applicable only in cases where payer is non-resident). Whereas in the matters for adjudication before the Courts for consideration and in case of offshore services,
Section 9(1)(vii)(b) of the Act is applicable and it does not provide for situs of ‘utilisation of services’ as sine qua non for determination of FTS to be deemed to accrue or arise in India.

13. The legislature also whether knowingly or unknowingly at the time of amending the Statute vide Finance Act, 2007 and Finance Act, 2010 seems to have not addressed the aforesaid anomaly and in its quest to undo the ratio of aforesaid judicial pronouncements, brought in the impugned amendments, with an underlying understanding that ‘situs of utilisation of services’ and ‘situs of payer’ serves as a condition of paramount importance, necessary for determination of tax jurisdiction under the source rule of taxation.

It is in the backdrop of the aforesaid background and controversy, the heart of the matter now lies in addressing the following issues:

 

 

 

 

Issues/ Queries

i.      What is the principle which determines the tax jurisdiction of FTS under the source rule of taxation in Section 9(1)(vii) of the Act?

 

ii.      Whether situs of payer and situs of utilisation of service determine the tax jurisdiction of FTS under source rule of taxation?

 

iii.      After having identified the principle which determines the tax jurisdiction of FTS, when shall fees from offshore services be subject to tax in India?

 

iv.      Whether India has a “territorial tax system”, “worldwide tax system” or “mixed tax system”?

Concept of “source rule” of taxation or “source of income”

i.      What is the principle which determines the tax jurisdiction of FTS under the source rule of taxation in Section 9(1)(vii) of the Act?

14. The concept as well as words “source of income” are not new to the Income-tax Act, 1961. In fact, this concept even existed under the Income-tax Act, 1922 (‘the 1922 Act’) [predecessor to Income-tax Act, 1961]. The provisions of Section 42(1) of the 1922 Act analogous to the present provisions of Section 9(1)(i) of the Act considers “source of income in India”  as one of the basis for determining whether income is deemed to accrue or arise in India. Similarly, the provisions of Section 9(1)(ii), Section 9(1)(iv) and other provisions of the Act are also based on the concept of “source rule” of taxation, even though one does not find words “source of income” explicitly used under the said provisions.

15. The word “source of income” is not defined under the provisions of the Act. However, Circular No. 3 of 2008 dated 12 March 2008 issued by the Central Board of Direct Taxes (‘CBDT’) on Explanatory notes of provisions relating to Direct taxes as effected vide Finance Act, 2007 explained the concept of “source of income” for the purpose of Section 9(1)(vii) of the Act. The CBDT in the aforesaid circular observed that under the source rule of taxation for Section 9(1)(vii) of the Act, it is the country where income is earned, which determines the tax jurisdiction of FTS. In other words, if income is earned in India, then FTS shall be taxed in India or otherwise, it will be taxed in the country where it is earned. Similar to “source of income”, the word ‘earned’ is also not defined under the provisions of the Act. However, the word ‘earned’ has been subject of interpretation before various judicial courts, which have been explained below in ensuing paragraphs. In addition to the judicial precedents, one may find the word “earned” is explicitly used in Section 9(1)(ii) of the Act which determines whether income chargeable under the head “Salaries” is deemed to accrue or arise in India.

16. In this connection, one refer to the decision of Hon’ble Gujarat High Court in the case of CIT vs SG Pgnatale (124 ITR 391), which has aptly explained the concept of “income earned” for the purpose of Section 9(1)(ii) of the Act. The Hon’ble Court after considering the ratio of the relevant legal precedents had observed the word ‘earned’ in narrow sense and in wider sense. The decision is of vital importance because the principles as laid down for determining “earning of income in India” were accepted by the legislature. Pursuant to the acceptance of the said principles (ie of narrow and wider sense), the legislature amended the provisions of Section 9(1)(ii) of the Act retrospectively to read the word ‘earned’ in narrow sense of rendering of services in India.

17. The Hon’ble Gujarat High Court in the aforesaid decision explained the concept of “income earned” in narrow sense and in wider sense. In narrower sense, the word “earned” refers to place of rendering or performance of services as an ingredient to determine “source of income” and in wider sense equating it with “accrued”, it means that not only the assessee under consideration should have rendered services or otherwise but also should have created a debt in his favour. Thus, the wider meaning of the word “earned” indicates something which is due and entitlement to sum of money consideration for which services have been rendered by the assessee. The expression “entitlement to a sum of monetary consideration” symbolizes right to receive money by the payee or liability of payer to pay money to the payee. So, the twin conditions for an income to satisfy the test of being “earned” in wider sense are of income being due and right to receive by the payee/alternatively may also be read as liability of payer to pay to the payee.   

18. It is prerogative to say that the above principles of source of income as found in the judgement of Hon’ble Gujarat High Court are actually fall out of the principles as laid down by the following judgements [the following decisions were also considered by the Hon’ble Gujarat High Court in the case of CIT vs SG Pgnatale (supra)], which are as under:

„  E.D.Sassoon & Co. Ltd vs CIT (26 ITR 27) (SC);

„  CIT vs Ahmedbhai Umarbhai & Co. (18 ITR 472) (SC);

„  CIT vs K.R.M.T.T. Thiagaraja Chetty & Co. (24 ITR 525) (SC);

„  CIT of Taxation vs. Kirk (1900) AC 588 (PC);

„  W.S.Try Ltd.vs Johnson (Inspector of Taxes) (1946) 1ALL ER 532 (CA); and

„  Webb vs. Stenton (1883) (11 QBD 518) (CA).

19. The principles of “source of income” juxtaposed with the words “income earned” have been aptly explained in the aforesaid decisions, which hold the field of taxation on ‘source of income’ even today after such long gestation of time.

20. Further, reference is invited to the opening words of the language of Section 9(1)(vii) of the Act, which reads as under:

“9(1)(vii). Income by way of FTS payable by….”

[Emphasis supplied]

 

 

In general sense, the words ‘payable’ means that which should be paid. However, the following decisions have held that the words ‘payable’ is somewhat indefinite in import and its meaning must be gathered from the context in which it occurs:

„  New Delhi Municipal Committee vs. Kalu Ram (1976) (3 SCC 407); and

„  Garden Silk Weaving Factory vs CIT (213 ITR 10) (Guj)

 

21. Based on the above finding of the decisions, when the word ‘payable’ in Section 9(1)(vii) of the Act is looked upon in context of the intention of legislature to tax FTS in the country where it is earned under source rule of taxation, one finds that the word ‘payable’ symbolizes an act of FTS being due and entitled to a sum of money consideration for which services are rendered or otherwise by the payee, thereby satisfying the condition of income “earned” in wider sense. Therefore, based on the above reasoning’s, one may be able to place an argument that FTS shall be deemed to accrue or arise in India, if FTS is earned (in wider sense) in India. 

22. The aforesaid interpretation also gains support from the language, legislative history of Section 9(1)(vii) of the Act and the following decision:

„  The legislature also while introducing and amending the Explanation to Section 9 to the Act vide Finance Act, 2007 and Finance Act, 2010, in the Memorandum explaining the provisions in the Finance Bills confirmed that situs of services shall not be of relevance for determination of tax jurisdiction. The legislature itself thereby choose to determine the tax jurisdiction of FTS under source rule of taxation of “income earned” in wider sense and not in narrow sense of mere “rendering of services”;

„  Further, the language of Section 9(1)(vii) of the Act itself in particular refers to usage of two expression ie of “fees for technical services payable” vis-à-vis “fees are payable in respect of”. Therefore, in the first expression, one may find that legislature intends to read the word ‘payable’ to indicate “income earned” in wider sense and in the second expression the legislature intends to indicate only liability to pay fees in respect of something; and

„  In addition to above, reliance can be placed on the decision of Hon’ble Madhya Pradesh High Court in the case of CIT vs The Central India Electricity Supply Co. Ltd. (114 CTR 160). The Hon’ble Court therein while explaining the words “due” and “payable” in context of Section 41(2) of the Act, observed that word ‘due’ has two meanings, and one of the meaning is equivalent to “payable”, thereby indicating that the words ‘payable’ can be read to include ‘due’, expressing that debt or obligation to which applied has by contract or operation of law becomes immediately enforceable, thereby satisfying the twin condition of “income earned” in wider sense.

Therefore, in light of above observations, it may be possible to place an argument that vide expression “income by way of fees for technical services payable by”, the legislature indicates that FTS shall be deemed to accrue or arise in India under Section 9(1)(vii) of the Act, under source rule of taxation, when FTS is earned in India.  

23. So, based on the above observations, if one were to read the aforesaid principle of “income earned” in Section 9(1)(vii) of the Act and then determine the tax jurisdiction of FTS, the result could be as under:

„  FTS payable by Government shall be deemed to accrue or arise in India, if the liability of Government to pay FTS arises in India and otherwise not;

 

„  FTS payable by a person who is resident shall be deemed to accrue or arise in India, if the liability of resident to pay FTS arises in India and otherwise not. In addition to above, the language of Section 9(1)(vii)(b) also provides for an exception, whereby even if liability of resident to pay FTS arises in India, but if such services are utilized by the resident in carrying on the business or profession outside India or for the purpose of making or earning any income from any source outside India, then such FTS shall not be deemed to accrue or arise in India;

 

„  FTS payable by a non-resident shall be deemed to accrue or arise in India, if the following two conditions are satisfied:

 

    Liability of non-resident to pay FTS arises in India; and

    Services are utilized by such non-resident in the business or profession carried in India or for making or earning any income from any source of income in India.

24. If looked from the perspective of fees from offshore services, then if the fees from offshore services are payable outside India, then the impugned fees cannot be brought to tax under the vires of Sections 4,5 r.w.s. 9(1)(vii) of the Act. However, the factors which shall determine such tax jurisdiction are discussed in ensuing paragraphs at Pg No. 11,
Para No. 39 to Pg No. 14, Para No. 49,
after having answered the question of relevance of situs of payer and situs of utilisation of service in determination of tax jurisdiction of FTS.

25. Further, one may argue that the legislature in the Memorandum explaining the provisions in the Finance Bill (No. 2), 1977 has in explicit terms mentioned about its intention to tax FTS rendered from outside India. But by no means the said observations can be read to mean that each and every service rendered from outside India can be brought to tax in India and specifically fees from offshore services. Therefore, unless the “liability of the payer to pay fees from offshore services arises in India”, the impugned fees cannot be taxed in India.

26. In light of the following, one may place an argument that it is the principle of “income earned” in wider sense, which determines tax jurisdiction of FTS under the source rule of taxation in Section 9(1)(vii) of the Act:

„  Express intention of the legislature to tax FTS in the country where it is earned;

„  Fallout of the legal precedents referred to above; and

„  Language of Section 9(1)(vii) of the Act.

 

27. There are other two ways of looking the aforesaid issue and both shall derive the same result as concluded above. One of the ways is explained below and the other one has been discussed while answering the question of whether India has territorial tax system, worldwide tax system or mixed tax system.

28. An another way of looking the aforesaid issue but deriving the same result, is by referring to the Notes on Clauses to the Finance Bill, 1976, which introduced the provisions of Section 9(1)(vii) of the Act (refer Appendix ‘A’). On a careful reading of the provisions of Section 9(1)(vii) of the Act and Notes on Clauses, one may find a subtle difference in the language where only words “a person who is resident” are used in Section 9(1)(vii)(b) as against the words used “person who is resident in India” in the Notes on Clauses. The words “person who is resident in India” is pre suffixed with the words “if it is payable” in the Notes on Clauses. Therefore, one possible way of reading the said line is to give a meaning that “income from fees for technical services shall be deemed to accrue or arise in India if it is payable in India by a person who is resident.” The aforesaid way of reading gets further support from the following:

„  Section 9(1)(vii)(b) of the Act only used the word “a person who is resident” and is not followed with the words “in India”, even though Section 6 uses the words “resident in India” to define the residents;

 

„  Also, the language used in Section 9(1)(vii) of the Act and in Notes on Clauses for addressing to non-resident is similar, ie words used are “non-resident” and it is not followed by words “in India”, whereas Section 6 uses the words “non-resident in India” to address the non-residents;

 

„  The said Notes on Clauses which has also introduced other clauses ie clause (v) and (vi) of Section 9(1), also used similar contrasting language for addressing “person who is resident” vis-à-vis “person who is resident in India”

 

„  Further, the same Notes on Clauses when wanted to specifically address to “person who is resident” it has used the words “resident of India” instead of “resident in India”

 

„  Also, a similar word of “Such fees payable by a person who is resident in India is used in the Memorandum explaining the provisions in the Finance Bill, 1976 (refer Appendix ‘A’).

Therefore, either one may read it as to mean only “resident in India”, as addressed in Section 6 of the Act or one may read it to mean as “payable in India by a person who is resident”.

29. In light of the above discussions, one may conclude that in either of the options as discussed above, FTS shall be deemed to accrue or arise in India only if such fees are payable in India by the resident.

 

ii.    Whether the situs of payer and situs of utilisation of service determine the tax jurisdiction of FTS under source rule of taxation?

30. Reference is first invited to the observations of the Hon’ble Mumbai Tribunal in the case of Ashapura Minechem (supra) which are relevant to the aforesaid question:

“9.….. As the laws stands now, utilization of these services in India is enough to attract its taxability in India. To that effect, recent amendment in the statute has virtually negated the judicial precedents supporting the proposition that rendition of services in India is a sine qua non for its taxability in India”

“15….That is a typical manifestation of the source rule that we have discussed earlier this order in the context of domestic law provisions, and which, in principle, requires taxability of an income in the tax jurisdiction in which it is sourced. Normally, the source of an income is the country in which a person making the payment is located.”

31. The Hon’ble Tribunal therefore, opined that “situs of utilisation of service” and “situs of payer” determine the tax jurisdiction of FTS under the source rule of taxation in Section 9(1)(vii) of the Act. On similar grounds, the Hon’ble Mumbai Tribunal has also in the order of Linklaters LLP vs ITO (supra), held that professional services rendered by the Linklaters LLP being utilized in India by resident payers, shall be subject to tax jurisdiction of India.

32. The Memorandum explaining the provisions in the Finance Bill, 2007 and Finance Bill, 2010 relating to Section 9(1)(vii) of the Act also referred to situs of payer and situs of utilisation of service as conditions for determination of tax jurisdiction of FTS. Further, the said Memorandums also mention that such source rules are well recognized in the India’s Double Taxation Avoidance Agreements.

33.In this connection, as mentioned earlier, the language of Section 9(1)(vii) of the Act prescribes the rules qua the category of payer for determination of tax jurisdiction of FTS. However, after perusing the said provisions one may find that all the rules as prescribed in Section 9(1)(vii) qua the category of payer have the common condition imbedded of ‘FTS payable by payer’ and based on observations as considered above, one may place an argument that FTS shall be subject to tax jurisdiction under Section 9(1)(vii) in India, when FTS is earned(wider sense) in India. However, it would be wrong to hold that situs of payer and situs of utilisation of service play no role in determination of tax jurisdiction of FTS. In this connection, reference is invited to Pg No. 3, para no. 9 of this article, wherein depending upon the situs of payer and situs of utilisation of service, the tax jurisdiction of FTS may be subject to an exception [see Section 9(1)(vii)(b)] or satisfaction of additional condition [see Section 9(1)(vii)(c)].

34. Therefore, one would appreciate that though situs of payer and situs of utilisation of service cannot be said to play no role in determination of tax jurisdiction of FTS in Section 9(1)(vii) of the Act, but the principle of paramount importance in determination of tax jurisdiction of FTS which is common to all category of payer is of “income earned”(see para no. 16 to 26).

35. The observation of the Memorandums as referred to above would be apt when considered in light of the DTAA. The Article under the DTAA which determines taxability of FTS, generally have a deeming clause whereby the ‘situs of the payer’ is deemed to be held as the place where FTS arises.

It would be relevant here to point out that based on the conclusions as drawn above, one may find that domestic provisions of the Act are more beneficial than the provisions of the DTAA, wherein DTAA creates a liability to tax instead of relief in given circumstances. In other words, the aforesaid provision of DTAA enlarges the ambit of domestic tax laws under the Income-tax Act, 1961. However, a general understanding, one has of DTAA is that such an agreement only provides relief from tax and do not extend the scope or incidence of taxation under the domestic legislation.

36. In this connection, Article 265 of Constitution of India provides that only by authority of law, a tax can be levied or collected, and so the source of levy of income-tax is under the
Income-tax Act, 1961 (‘the law’). Under the delegated legislation of Section 90(1) of the Income-tax Act, 1961, the Central Government is given the powers to enter into DTAA with other countries. So, a question which arises for consideration is that if the Act of legislature ie provisions of Income-tax Act, 1961 does not provide for taxability of the income on the particular principles then can the provisions of delegated legislation of DTAA create incidence of taxability on the said principles. The said question is aptly answered vide the provisions of Section 90(2) of the Act, which specifically provide that provisions of the Income-tax Act, 1961shall apply to the extent they are more beneficial to the assessee, thereby upholding the principle that DTAA cannot by itself impose any tax or enlarge the scope of taxable income or increase the rates of tax as prescribed in the Income-tax Act, 1961.

37. In addition to above, the Hon’ble Gujarat High Court in the case of CIT vs Saurashtra Cement and Chemical Industries Ltd. (101 ITR 502), as early as in the year 1975, prior to the amendment vide Finance Act, 1976, has held that a debt due to a foreigner cannot be treated as an asset or source of income in India and the interest thereon cannot be deemed to accrue or arise in India, merely because the debtor is in India, thereby upholding that situs of payer itself cannot solely determine the tax jurisdiction of income.

38. Therefore, looking it from the perspective of determination of tax jurisdiction for fees from offshore services in Section 9(1)(vii)(b) of the Act, one may conclude that “situs of payer” and “situs of utilisation of service” may not be of paramount importance as compared with the condition of “income earned” and they may be of relevance for the purpose of exception under Section 9(1)(vii)(b) of the Act.

 

 

 

iii.   After having identified the principle which determines the tax jurisdiction of FTS, when shall fees from offshore services be subject to tax in India?

39. Based on the aforesaid observations, if the argument that the principle of “income earned” shall be of paramount importance for the purpose of determination of tax jurisdiction of fees from offshore services in Section 9(1)(vii)(b) is accepted, then it would be imperative to discuss the factors which shall be of relevance for the purpose of determination of “income earned” in India.

40. In this connection, one may refer to the following legal precedents as decided in context of source of income, which are as under:

Decision when Section 9(1)(vii) of the Act was in existence

41. Reference is invited to the decision of AAR in the case of Rajiv Malhotra, in Re (284 ITR 564), wherein the AAR while considering the applicability of the words “source of income in India” in the provisions of Section 9(1)(i) of the Act, observed as under:

“Secs. 5 and 9 of the Act proceed on the assumption that income, profits and gains have a situs, though there is no indication as to how the situs has to be determined, and hence the situs has to be determined according to the general principles of law and in the light of the particular facts of each case. The words "accrue or arise" in s. 5 have more or less a synonymous sense and income or profits are said to accrue or arise where the right to receive them comes into existence. From the terms and conditions of art. 5 of the agreement relating to remuneration, it is seen that commission becomes payable to the agent only after the exhibitor participates in the show/exhibition in India and makes full and final payment due to the applicant in India…. It is, therefore, clear that source of income for the agent is participation by the exhibitors in exhibition/IFOWS in India and the agent will not be entitled to receive any commission for services rendered in case the exhibition is not held due to unforeseen circumstances…… The commission income would, therefore, be taxable under the Act in view of the specific provisions of s. 5(2)(b) r/w s. 9(1)(vi) of the Act. The facts that the agent renders services abroad in the form of pursuing and soliciting the participants and that the commission is remitted to him abroad are wholly irrelevant for the purpose of determining the situs of his income.”

[Emphasis supplied]

42. Therefore, from the above decision, one finds that rendering of services and payment made outside India have all been held to be wholly irrelevant for determining situs of “source of income”. Equally, though not mentioned specifically, it is neither the situs of payer nor situs of utilisation of services which determines the tax jurisdiction of commission income. On the contrary, it is the principle of paramount importance of “income earned” which has determined situs of “source of income” in India.  In others words, the right to receive the commission income by the agent which was dependent upon the participation of the exhibitors in the show/ exhibition in India and their making full and final payment to the applicant in India, determined the tax jurisdiction of commission income in India. No possible answer could be found of the impugned transaction not being considered under Section 9(1)(vii) of the Act, but instead interpreted as covered under Section 9(1)(i) of the Act. However, one may find that even under the provisions of Section 9(1)(vii) of the Act, the commission income for the want of aforesaid same reasons, would have been subject to tax in India.

Decision when Section 9(1)(vii) of the Act was not in existence,

43. Further, reference is made to the decision of Hon’ble Andhra Pradesh High Court in the case of Rupajee Ratanchand and Anr vs CIT (28 ITR 282), wherein the Hon’ble Court after referring to the legal precedents as available at that point of time, observed as under with respect to the question of determination of situs of income:

“…... The place where the contract is concluded may afford a guide but it will not be the sole guide. The place where the acts are done under the contract or where the contract is carried out may under certain circumstances help a Court to come to a conclusion, but they are in themselves not decisive and conclusive on the question. It may also be that the place where the right to demand and recover profits accrues may be a useful indication under other circumstances. But it is apparent from the decided cases that no unerring test can be laid down as affording a key for solving this difficult question. In the ultimate analysis, the question falls to be considered on the cumulative effect of the facts in each case.”

[Emphasis supplied]

44. Therefore, it was held that the place where the right to receive the income could also determine whether source of income arose or not in a taxable territory. However, the High Court restricted itself to lay down any principles, and observed that the tax jurisdiction of income under source rule of taxation should be determined upon the cumulative effect of the facts of the case.

45. Further, one also may refer to the following decisions which have held the “place where liability to pay the consideration arises or debt in favour of the payee arises” is the situs of “source of income” for the determination of tax jurisdiction:

„  Mansinghka Brothers Private Ltd vs CIT (147 ITR 361) (Raj.);

„  C.G.Krishnaswami Naidu vs CIT (62 ITR 686) (Mad.);

„  SAT Behwaric & Co. vs CIT (30 ITR 151) (Raj.); and

„  Salt and Industries Agencies Ltd vs CIT (18 ITR 58) (Bom.);

46. Viewed in light of the detailed analysis above, one may place an argument that it is the place or country where income is earned, governs the taxability of FTS under the provisions of Section 9(1)(vii) of the Act. In effect thus, now looking at the facts of the case in the decision of Ashapura Minechem (supra) in light of the aforesaid observations, one may conclude that liability of the Appellant to pay to the Non-resident company or a debt was created in favour of the Non-resident Company only outside India, for want of following reasons: (as understood from the facts of the case reproduced in the decision)

„  Fees from offshore services was payable to the Non-resident Company in consideration of bauxite testing services and for preparation of test reports, so that process parameters, in accordance with the test reports, could be defined to the Company (ie Ashapura Minechem) for the purpose of building a alumina refinery in India;

 

„  Services as regard to bauxite testing and preparation of reports was to be undertaken at the laboratory of the Non-resident Company outside India;

 

„  There was no requirement for performance of any services in India or a covenant which restricted the payment of consideration only on satisfaction of impugned testing and reports in India by some other laboratory or a covenant in the nature of satisfactory building of alumina refinery in India;

 

„  Consideration was payable to the Non-resident company against the services of bauxite testing and preparation of reports undertaken by the Non-resident Company outside India;

47. Based on the aforesaid facts, one finds that liability of the Appellant to pay fees for offshore services rendered by Non-resident from outside India, was earned outside India and accordingly could not have been covered under the provisions of Section 9(1)(vii) of the Act.

48. To continue with the aforesaid decision, consider for example, there was a covenant in the agreement which provided that consideration shall be due to the Non-resident Company only after the approval of the reports so prepared by the Non-resident Company, has been given by another testing facility in India, then based on the principles of “income earned”, the right to receive fees for offshore services could have been created in favour of the Non-resident Company only after the successful approval of the reports of an another testing facility in India. In such a scenario, the debt would have been created in favour of the Non-resident Company, then only in India and not outside India, even though services were rendered from outside India. In such a scenario, FTS even though rendered from outside India, shall be earned in India and accordingly would be subject to tax under the provisions of Section 5 r.w.s. 9(1)(vii) of the Act.

49. In light of the aforesaid discussion and legal precedents, one may have to satisfy the factors which establish the principle of “income earned” in India, before reaching to a conclusion of taxability of FTS under source rule of taxation in Section 9(1)(vii) of the Act and it would not be correct to determine the tax jurisdiction of FTS only on the basis of situs of payer and situs of utilisation of service.

 

 

iv.  Whether India has a “territorial tax system”, “worldwide tax system” or “mixed tax system”?

50. After having concluded on the principles which determine the tax jurisdiction of FTS in Section 9(1)(vii) of the Act, the next important concept which requires discussion is of ‘doctrine of nexus’.  It would be of relevance first to discuss, whether India has a “territorial tax system”, “worldwide tax system” or “mixed tax system”. The reference of the words “territorial tax system” was recently found in the judgements of Hon’ble Mumbai Tribunal in the case of Ashapura Minechem case (supra) and Linklaters LLP vs ITO (supra). The Hon’ble Tribunal while rejecting the reliance of the Appellant’s on the decision of Ishikawajima Harima Heavy’s case (supra) of having territorial nexus within India as a sine qua non for taxability of offshore services rendered by non-resident in India, observed as under:

“The concept of territorial nexus, for the purpose of determining the tax liability, is relevant only for a territorial tax system in which taxability in a tax jurisdiction is confined to the income earned within its borders. Under this system, any foreign income that is earned outside of its borders is not taxed by the tax jurisdiction,……. In other major tax systems, the source and residence rules are concurrently followed. On a conceptual note, source rule of taxation requires an income sourced from a tax jurisdiction to be taxed in this jurisdiction, and residence rule of taxation requires income, earned from wherever, to be taxed in the tax jurisdiction in which earner is resident……. Except in a situation in which a territorial method of taxation is followed, which is usually also a lowest common factor in taxation policies of tax heavens, source rule is an integral part of taxation system ….. It is thus fallacious to proceed on the basis that territorial nexus to a tax jurisdiction being sine qua non to taxability in that jurisdiction is a normal international practice in all tax systems. This school of thought is now specifically supported by the retrospective amendment to section 9”

[Emphasis supplied]

51. There are essentially three types of tax strategies applied worldwide, which are as under:

„  Territorial tax system;

„  Worldwide tax system; and

„  Mixed tax system

Under territorial tax system as rightly explained by the Hon’ble Tribunal above, a taxpayer is responsible for paying taxes only on that part of business which they do within their home country or state. In other words, it relies on the “territorial” principle of only taxing income earned inside national borders. So, a multinational corporation in a country having territorial tax system, would be required to pay taxes to their home country only for the parts of the business that are done within than country. As one could imagine, this can lead to great deal of overseas operations in order to save money on taxes. On the other hand, in worldwide tax system, a taxpayer is taxed on all the business that they do worldwide by their home government. In other words, if country ‘X’ has worldwide tax system then he shall interfere with the sovereignty of other nations by taxing income earned by residents of country ‘X’ inside their borders. Whereas in the case of mixed tax systems, elements of both Territorial and Worldwide tax systems are in place. For most part of the countries have elements of mixed tax systems. No country uses a pure worldwide or territorial taxation, but all systems share at least some feature of both worldwide and territorial approaches.

52. India is no exception to the aforesaid tax systems and follows “mixed tax system”. Elements of worldwide tax system are found while taxing residents of India and elements of territorial tax systems are found while taxing non-residents of India. ‘Doctrine of nexus’ is considered in India for the purpose of determining tax jurisdiction of income in case of non-residents.                

53. The ‘doctrine of nexus’ for determination of tax jurisdiction of income of non-residents in India was approved by the Hon’ble Supreme Court in the case of Electronics Corporation of India Ltd (183 ITR 43) [Three Member Bench decision] as early as in the year 1989 while rejecting the submission of extra-territorial application of the same provisions of Section 9(1)(vii) of the Act, which are presently being considered. The relevant observations of the aforesaid Hon’ble Supreme Court decision are as under:

“5. …... Therefore, a Parliamentary statute having extra-territorial operation cannot be ruled out from contemplation. The operation of the law can extend to persons, things and acts outside the territory of India. …..In other words, while the enforcement of the law cannot be contemplated in a foreign State, it can, nonetheless, be enforced by the Courts of the enacting State to the degree that is permissible with the machinery available to them. They will not be regarded by such Courts as invalid on the ground of such extra-territoriality.

6. But the question is whether a nexus with something in India is necessary. It seems to us that unless such nexus exists, Parliament will have no competence to make the law. It will be noted that Art. 245(1) empowers Parliament to enact law for the whole or any part of the territory of India. The provocation for the law must be found within India itself. Such a law may have extra-territorial operation in order to subserve the object, and that object must be related to something in India. It is inconceivable that a law should be made by Parliament in India which has no relationship with anything in India. The only question then is whether the ingredients in terms of the impugned provision indicate a nexus. The question is one of substantial importance, specially as it concerns collaboration agreements with foreign companies and other such arrangements for the better development of industry and commerce in India. In view of the great public importance of the question, we think it desirable to refer these cases to a Constitution Bench, and we do so order.”   

                                                                 [Emphasis supplied]

 

54. Based on the aforesaid relevant observations, one may conclude that the principle of ‘doctrine of nexus’ was well read down in the provisions of Section 9(1)(vii) of the Act. However, the ingredient which shall determine such nexus was referred to the Constitution Bench of the Hon’ble Supreme Court, since the question was of substantial importance. It would be important to mention here that the decision of the Constitution Bench is still awaited. However, there are reports that before the matter could be placed before the Constitution Bench, the appeal was withdrawn. However, be as it may be, we were blessed with the findings of Hon’ble Supreme Court on ‘doctrine of nexus’ applicable in India.

55. It would now be apt to explain the importance of the principle of ‘doctrine of nexus’ in determining tax jurisdiction and its principles as recognized under the provisions of Section 9(1) of the Act:

Doctrine of Nexus in Tax Jurisdictions

56. It is recognized by law of nations that a foreigner, so long as he is within the limits of a state is in all respects, subject to its laws. Ordinarily, legislation does not apply to foreigners in respect of acts done by them outside the domains of the sovereign powers enacting, and this is a rule based on international law by which one sovereign power is bound to respect the subjects and the rights of all other sovereign powers outside its own territory. It is reasonable to take the view that there should be some nexus between the person, thing or act sought to be covered under the jurisdiction of the legislating state, although no firm guidelines appear to be available as to how close that nexus should be. It is, however, a question for determination in each case whether an impugned legislation is really extraterritorial in its operation. The ‘doctrine of nexus’ has been applied in determining this question and it involves a consideration of two elements:

„  The connection must be real and not illusory; and

„  The liability sought to be imposed must be pertinent to the connection.

57. So, there has been a need for certain minimum standards for the fiscal protection of foreigners or aliens if there is to be any meaningful international intercourse of investment or technology and therefore, the jurisdiction to tax aliens/ foreigners in a customary international law may fall under the following three main categories:

„  Taxation based upon the presence of the alien within the jurisdiction;

„  Taxation based on the presence of the alien property within the jurisdiction; and.

„  Taxation based upon the economic activity of the alien within the jurisdiction

58. Further, tax legislation is not regarded as extraterritorial if there is some nexus or connection between the taxing state and the person or the income sought to be taxed. In this connection, reference is invited to the decision of Hon’ble Federal Court in the case of AH Wadia vs CIT (17 ITR 63, 121-122), wherein the Hon’ble Court observed as under:

“The connection founded on the residence of the person in, or a business connection with, the territory of the taxing state, or the situs of it in the money or property or other source of income from which the taxable income is derived, would be sufficient to establish the territorial connection.”

59. Further, reference is made to the decision in the case of Broken Hill South Ltd vs CIT (New South Wales) (56 Comp LR 337), which has elaborated the doctrine of nexus or connection as under:

“It is within the competence of the state legislature to make any fact, circumstance, occurrence or thing in or connected with the territory the occasion of the imposition upon any person concerned therein of a liability to taxation or any other liability. It is also within the competence of the Legislature to base the imposition of liability on no more than the relation of the person to the territory. The relation may consist in presence within the territory, residence, domicile, carrying on the business there, or even remote connections. But the connection must be real and not illusory and the liability sought to be imposed must be pertinent to that connection.”

60. Thus, based on the aforesaid principles, the customary international law that comprehends levy of taxes by a state where there is connection between the state and the taxpayer on either of possible basis:

„  Territorial nexus, based on domicile or residence of the taxpayer in the taxing state; or

„  Economic nexus, based on the economic activity within, or connected with, the taxing state.

If one were to define economic nexus, in common parlance, it is regarded as part of ‘territorial nexus’, a nexus between the person or income sought to be taxed on the one side and the taxing country on the other.

61. It is in light of the aforesaid principles, one would appreciate that Section 4 read with Sections 5(2), 7, 8 and 9 of the Act provide for the chargeability of the following income to income-tax, in the case of non-residents:

„  Income is received in India;

„  Income is deemed to be received in India [Section 7];

„  Income accrues or arises in India;

„  Income is deemed to accrue or arise in India [Section 8 and 9]

62. It is important to highlight that all the aforesaid principles with regard to nexus or connection are well established under different provisions of Section 9(1) of the Act, which are as under:

 

 

 

 

Nexus based on

 

Income deemed to accrue or arise in India

Nexus or Connection

Nationality

Section 9(1)(iii) provides for income chargeable under the head ‘Salaries’ payable by the Government to a citizen of India for service outside India

 

 

Citizenship of India

Situs or Economic Activity

 

     Shares of the Indian Company

Section 9(1)(iv) provides for a dividend paid by an Indian company outside India

 

Based on the principle of source of income ie of situs of shares of the Indian Company being in India

 

     Property

Section 9(1)(i) provides for all income accruing or arising, whether directly or indirectly, through or from any property in India or from any asset in India or transfer of a capital asset situate in India

 

 

Property or Capital asset is situated in India

     Business Operations

Section 9(1)(i) provides for all income accruing or arising, whether directly or indirectly, through or from any business connection in India

 

 

Existence of Business Connection in India

     Source

Section 9(1)(i) provides for all income accruing or arising, whether directly or indirectly, through or from any source of income in India

 

Section 9(1)(ii) provides for income which falls under the head “Salaries” if it is earned in India ie services are rendered in India

 

Section 9(1)(v), 9(1)(vi) and Section 9(1)(vii) of the Act provides for income by way of interest, royalty and fees for technical services respectively.

 

Income earned in India

 

 

Services rendered in India

 

Income earned in India (as explained in earlier paragraphs)

 

63. Similarly, one may refer to the following judicial precedents wherein time and again, the judicial authorities have uphold the principle of ‘doctrine of nexus’ between the person who is subject to tax and the country imposing the tax as a pre-requisite for the purposes of taxation:

„  CIT vs Eli Lilly and Co. (India) P. Ltd and Ors. (312 ITR 225) (SC);

„  Hoechst Pharmaceuticals Ltd. Vs State of Bihar (154 ITR 64) (SC);

„  Mahaveer Kumar Jain vs CIT (277 ITR 166) (Raj); [decision following the judgement of Electronics Corporation of India Ltd case (supra)]

„  Worley Parsons Services Pty Ltd., In re (312 ITR 273)(AAR);

„  Wallace vs CIT (16 ITR 240, 246) (PC);

„  Caltex vs CIT (21 ITR 278) (Bom.); and

„  Governer-General in Council vs The Raleigh Investment Co. Ltd. (12 ITR 265) (FC)

64. Based on the aforesaid discussions, one may conclude that ‘doctrine of nexus’ is well recognized and accepted principle for the purpose of determining tax jurisdiction of income specifically in cases of non-resident in India. Further, from above, it is equally well settled that “source of income in India” is recognized as one of the “doctrine of nexus” to establish territorial nexus in India.

65. Therefore, one may find that it is possible to argue that the observations made by the legislature in the Memorandum explaining the provisions in the Finance Bill, 2007 of no necessity to establish territorial nexus was made in order to undo the ratio of the decision in the case of Ishikawajima-Harima Heavy Industries case (supra) which interpreted ‘territorial nexus’ in light of rendition and utilisation of services in India, without recognizing that “source rule” of taxation itself is one of the ‘doctrine of nexus’ accepted to establish territorial nexus in India. Similarly, the observation of the Mumbai Tribunal in the decisions as referred above, on principle of territorial nexus being relevant only in territorial tax system may not hold good in light of the aforesaid observations. So, even after looking the issue of determination of tax jurisdiction of FTS from the point of view of principles of “doctrine of nexus”, the result under this alternative also remains the same that “source of income”, being the necessary nexus or connection, must have relationship with India ie of “income earned” in India.

66. In light of above particulars, the following summary can be drawn as regard to discussion on relevance of ‘doctrine of nexus’ for the purpose of determination of tax jurisdiction of income in case of non-residents in India:

„  India neither follows pure “territorial tax system’ nor pure ‘worldwide tax system’, but follows “mixed tax system”;

 

„  ‘Doctrine of nexus’ is read down in the provisions of Section 9(1)(vii) of the Act vide the Apex Court judgement in the case of Electronics Corporation of India Ltd’s case (supra) and “source of income in India” is considered as one of the ‘doctrine of nexus’ for establishment of territorial nexus in India; and

 

„  “Source of income” should arise in India for the taxability of fees from offshore services in India.

 Conclusions

67. In the backdrop of the aforesaid discussions, one may conclude as under:

However, it would be relevant to mention that views as discussed above may or may not find acceptance before the lower judicial authorities more particularly because of the amendment carried out in Section 9 of the Act vide Finance Act, 2010 and aforesaid Mumbai Tribunal decisions. However, depending upon the facts of the case and acceptance of the interpretation of principles such as “source of income”, the interpretation of words “payable” and “due” and “doctrine of nexus” in Section 9(1)(vii) of the Act, one may stand good chance before higher judicial authorities.

 

Sr. No.

 

Issues/ Queries

Refer Pg No. - paragraphs No.

1.

What is the principle which determines the tax jurisdiction of FTS under the source rule of taxation in Section 9(1)(vii) of the Act?

 

   

5-14 to 9- 29

2.

Whether situs of payer and situs of utilisation of service determine the tax jurisdiction of FTS under source rule of taxation?

 

 

9-30 to 11-38

3.

After having identified the principle which determines the tax jurisdiction of FTS, when shall fees from offshore services be subject to tax in India?

 

 

11-39 to 14-49

4.

Whether India has a “territorial tax system”, “worldwide tax system” or “mixed tax system”?

 

 

14-50 to 19-66


(Disclaimer:- The views as discussed above are purely personal and may or may not find acceptance of others and therefore, the author cannot be held responsible for any personal or professional liability arising out of the same. Further, it does not constitute professional advice or a formal recommendation.

Considering reference to certain old decisions as well as decisions reported in other than ITR publication, independent check of the ratio of said decisions and decisions referred there under cannot be undertaken. Whereas, an effort has been made to correctly reproduce the contents of the ratio of decisions, circulars, notes on clauses, memorandums, decisions, etc, however in case of any mistake, the error is highly regretted.)

 

Appendix ‘A’

Notes on Clauses to Finance Bill, 1976

“Clause 4 seeks to make certain amendments in Section 9 of the Income-tax Act relating to income deemed to accrue or arise in India.

…..Sub-clause (b) seeks to insert three new clauses, namely, clause (v), clause (vi) and clause (vii) in sub-section (1) of Section 9 if the Act……

Under the new clause (vii), income from fees for technical services shall be deemed to accrue or arise in India if it is payable by the Government, or by a person who is resident in India, or by a person who is non-resident……………. The provision will, however, not be applicable in respect of fees for technical services payable by a resident of India in respect of services……”

 

Relevant extracts of Memorandum explaining the provisions in the Finance Bill, 1976

“…38. “Source rule” regarding place of accrual of income by way of interest, royalty and fees for technical services – A non-resident taxpayer is chargeable to tax in India in respect of income from whatever source derived which is received or is deemed to be received in India or which accrues or arises or is deemed to accrue or arise to him in India. The existing provisions in the Income-tax Act which provides that certain income will be deemed to accrue or arise in India are couched in general language. The absence of a clear-cut source rule sometimes creates uncertainty about the chargeability of certain types of incomes in the case of non-residents. In order to avoid any doubt or dispute in regard to the accrual of income by way of interest, royalties and fees for technical services in the case of non-residents, it is proposed to make certain provisions in the Income-tax Act clearly specifying the circumstances in which such income shall be deemed to accrue or arise in India.

…. 41. Income by way of fees for technical services will be deemed to accrue or arise in India if they are paid by the Government. Such fees payable by a person who is resident in India will also be deemed to accrue or arise in India, except in cases where the fees are payable in respect of technical services utilized in a business or profession carried on by the person outside India or for the purposes of making or earning any income from a source outside India. Fees for technical services payable by a non-resident will, however, be deemed to accrue or arise in India only in cases where the fees are payable in respect of services utilized in a business or profession carried on by the non-resident in India or where such services are utilized for the purpose of making or earning income from a source in India…..”

 

"Loved reading this piece by Rajvi?
Join CAclubindia's network for Daily Articles, News Updates, Forum Threads, Judgments, Courses for CA/CS/CMA, Professional Courses and MUCH MORE!"






Category Income Tax, Other Articles by - Rajvi 



Comments


update