What the courts have decided on section Article 12, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Ishikawajima-Harima Heavy Industries Ltd v DIT
Supreme CourtHelps taxpayerSuperseded by amendment
Our turnkey contract has offshore supply and offshore services alongside Indian work. Is the whole contract taxable in India?
No — a composite turnkey contract can be split. Profits on equipment supplied and paid for outside India, where title passes outside India, are outside the Indian charge, because the contract being signed in India is immaterial and there must be a sufficient territorial nexus. On offshore services the Court read s.9(1)(vii) as requiring the services to be both utilised in India and rendered in India; that second requirement has since been removed retrospectively by statute, so only the offshore supply holding survives on the domestic law side.
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Linklaters LLP v ACIT (International Taxation), Mumbai
ITATHelps taxpayerValidity unconfirmed
The Assessing Officer has taxed my client, a UK limited liability partnership, under the Independent Personal Services Article of the treaty because its partners are professionals. Can that Article apply to a firm at all?
No, on this Tribunal's view. The Mumbai Tribunal held that Article 15 of the India-United Kingdom DTAA deals only with the taxability of independent personal services or independent activity of a similar character and not with a partnership firm, and that the assessee, not being an individual, was outside it. On the same order the Tribunal also held, following its own decisions in the assessee's earlier years, that the remuneration received for providing legal services was not fees for technical services and that the treaty overrode the Act.
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eBay International AG v ADIT
ITATHelps taxpayer
We charge Indian sellers a fee for listing on our overseas marketplace. Is that fees for technical services, and do our Indian support companies make us taxable here?
No on both, and note how the second answer is reached. Providing a platform on which others transact is not the rendering of managerial, technical or consultancy services, so the user fees are not fees for technical services. On the treaty the Tribunal accepted that the Indian group companies, working exclusively for the Swiss company, were dependent agents - the assessee lost that limb - but held that a dependent agent becomes a permanent establishment only if it performs one of the functions listed in Article 5(5), and marketing and collection work is not among them. They were not a place of management either. Without a permanent establishment the business profits article keeps the income out of the Indian charge.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.