INCOME TAX ACT, 1961

--Income --Deemed to accrue or arise in India under section 9(1)(vii)Technical know-how services made available to Indian company--Applicant submits that it is a company based in Netherlands and is in the business of manufacture and sale of sugar confectionary and gum. It also provides operational and other support services for the benefit of companies of PVM Group (Perfetti Group) situated in various countries. It has entered into a Service Agreement with its group company, Perfetti India, which is effective from 1-4-2010. Under the agreement, the Applicant will incur cost in providing various operational and other support services for the benefit of group companies by drawing its own resources as well as on those available from other Group Companies or third parties and will invoice the cost incurred for providing such services on cost to cost basis without charging any mark up. The employees and other personnel engaged by the Applicant for providing these services will not visit India. Applicant submits that being a tax resident of the Netherlands, the provisions of India-Netherland Double Taxation Avoidance Convention (DTAC) will apply to the extent they are more beneficial when compared to the provisions of the IT Act, 1961 (Act). Under para 5(b) of article 12 of the DTAC, any service to qualify as 'fees for technical services' (FTS), the service should be technical or consultancy in nature and the services should 'make available' technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. The definition of FTS under the DTAC is more restrictive than under the Act and hence, being invoked. Applicant submits that the term 'make available' has not been defined under the DTAC, but an inference may be drawn from India-USA DTAC which has an identical definition in paragraph 4(b) of article 12 for defining 'fees for included services'. Under the Memorandum of Understanding of India-USA DTAC, 'make available' means that the person acquiring the services is enabled to independently apply the technology, that there should be transfer of technical knowledge, skill, etc., from the service provider to the recipient in order for the services to qualify as making available technical knowledge, skill, etc. Held: /b> Applicant seeks advance ruling on the following questions:- 1. On the facts and circumstances of the case, whether the payment to be made by 'Perfetti India' for the cost to be allocated by 'the Applicant' will not be taxable in India in the hands of the applicant as per the provisions of the Double Taxation Avoidance Agreement ('DTAA') entered into between India and the Netherlands? 2. On the facts and circumstances of the case, whether the cost to be allocated by the applicant on Perfetti India will be in nature of income and not chargeable to tax in India? 3. On the facts and circumstances of the case, if the applicant is taxable in India for the costs to be allocated to Perfetti India, whether Perfetti India will be liable to withhold taxes under section 195 on the payments to be made by Perfetti India towards the cost to be allocated by the applicant? 4. Assuming that the applicant has no other taxable income in India, on the facts and circumstances of the case; a. The applicant will be absolved from filing a tax return under the provisions of the Act; and b. The transfer pricing provisions of section 92 to section 92F will be applicable to the applicant in respect of the payment to be made by Perfetti India?