India: Web-related services not taxable fees under tax treaty with United States; project office not PE

India: Web-related services not taxable fees

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).

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  • Payment for web hosting, promotion services not taxable as “fees for included services” under tax treaty with United States: The Ahmedabad Bench of Income-tax Appellate Tribunal held that there was no sharing of knowledge or know-how or any technology to the taxpayer (an Indian company). Therefore, payments made to the non-resident company were not taxable as “fees for included services” under the income tax treaty between India and the United States. The case is: Esm Sys Pvt Ltd. Read a July 2020 report [PDF 335 KB]

  • Payment for database access, research report not taxable as royalty under tax treaty with Switzerland: The Mumbai Bench of the Income-tax Appellate Tribunal held that consideration received for non-exclusive and non-transferrable access to a database and market research report was not taxable as a “royalty” under the income tax treaty between India and Switzerland. The case is: IMS AG. Read a July 2020 report [PDF 311 KB]

  • Project office not permanent establishment (PE) because it was preparatory or auxiliary in nature: The Supreme Court of India held that a project office set up by a Korean company in India with respect to executing a contract with an Indian company did not constitute a PE in India under the income tax treaty between India and Korea. The high court found that the project office was not involved in the core activities of the taxpayer but was solely an auxiliary office meant to act as a liaison office between the taxpayer and the Indian company. Thus, given that the activities carried out by the project office were in the nature of preparatory or auxiliary character, the project office did not constitute a PE in India. The case is: Samsung Heavy Industries Co. Ltd. Read a July 2020 report [PDF 317 KB]

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