January 2019

Section 9 of the Act; Articles 7, 5 and 12 of India-Philippines DTAA – In absence of FTS Article in DTAA, and in absence of PE in India, receipt of Philippines company from Indian company, being in the nature of business profit, were not chargeable to tax in India.

Geeta Jani / Dhishat B. Mehta
Chartered Accountants

 17.  [2018] 100 taxmann.com 230 (Bangalore - Trib.) DCIT vs. IBM India (P.) Ltd IT (IT)ANos.: 1288, 1291, 1294, 1297, 1300, 1303 & 1306 (Bang.) of 2017 A.Ys.: 2009-10 to 2015-16 Date of Order: 16th November, 2011

 

Section 9 of the Act; Articles 7, 5 and 12 of India-Philippines DTAA – In absence of FTS Article in DTAA, and in absence of PE in India, receipt of Philippines company from Indian company, being in the nature of business profit, were not chargeable to tax in India. 

 

FACTS


The Taxpayer was an Indian member-company of a global group. The Taxpayer was engaged in the business of selling computers, software and lease financing of its products. The group had a policy of deputing employees of one group company to another group company, as may be required for certain business projects. For this purpose, the two respective group companies entered into a standard expatriate agreement. During this period, the employer of the deputed employee paid salary of deputed employee in the home country. Thus, Philippines Group Company, (“FCo”) of the Taxpayer had deputed its employee to the Taxpayer in India. The Taxpayer reimbursed the amount equivalent to the salary to FCo. Further, the Taxpayer had withheld tax on the salary of the employee and deposited the same with Government of India. The Taxpayer did not withhold tax from the reimbursed amount.

 

According to the tax authority, FCo continued to be the employe

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