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| The Tax Publishers2019 TaxPub(DT) 8272 (Del-Trib) INCOME TAX ACT, 1961
Section 90
It was clear that service PE representing eight deputationists had absolutely no role to play either in creating or making IP rights available to JCB India. It was not even the case of AO that these eight deputationists had anything to do with the grant of IP Rights to JCB. The service PE, as the very name suggested and the actual position indicated was concerned only with activities of rendering services after grant of IP Rights. Thus, it followed that albeit royalty received by assessee arose out of IP Rights which were in the nature of right or property but same could not be considered as effectively connected with service PE of assessee in India.
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Double taxation relief - Agreement between India and UK - Receipt of royalty income in terms of 'TTA' with Indian entity - Non-resident assessee having 'service PE' in India--AO alleging connection of royalty income with service PE
Assessee based at UK entered into Technology Transfer Agreement (TTA) with JCB India Ltd. to licence know-how and related technical documents consisting of all drawings and designs with an exclusive right to manufacture and market the 'Excavator Loader (P.92 version)' in the territory of India under the brand name 3DX. Assessee and JCB India also entered into an IPAA pursuant to which JCBE sent some of its employees on deputation to JCB India to manage overall operations of JCB India. During the year assessee had earned 'royalty income' from JCB India. Revenue held that secondment of employees by JCBE to India resulted in establishment of service PE of assessee as per article 5(2)(k)(i) of DTAA between India and U.K. and payment of royalty made by JCB India to JCBE in respect of rights granted by JCBE to JCB India under TTA, was effectively connected with such 'service PE' of assessee in India and accordingly, royalties was taxable in view of article 7 of Indo-UK DTAA.Held: It was clear that service PE representing eight deputationists had absolutely no role to play either in creating or making IP rights available to JCB India. it was not even the case of AO that these eight deputationists had anything to do with the grant of IP Rights to JCB. The service PE, as the very name suggested and the actual position indicated was concerned only with activities of rendering services after grant of IP Rights. Thus, it followed that albeit royalty received by assessee arose out of IP Rights which were in the nature of right or property but same could not be considered as effectively connected with services PE of assessee in India.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. :
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