Section 9(1): Income deemed to accrue or arise in India under the Income Tax Act, 1961

Income deemed to accrue or arise in India under Income Tax Act 1961: Section 9(1).

“Income deemed to accrue or arise in India” refers to:

• Those incomes which is received and accrue or arise or deemed to accrue or arise in India.
• All those income which are received in India but deemed to accrue or arise outside India.
• All those income which are received outside India but accrue or deemed to accrue or arise in India.

Related Cases:

1. S. 9(1)(i), Expln, 195 of IT Act, 1961, arts. 5(1),7(1),(2) of DTAA with South Africa—The payment made to non resident company towards commission for services rendered by it abroad are not liable to be taxed in India either under the Income-tax Act, 1961 or under the DTAA between India and South Africa. Therefore, Indian company-applicant is not liable to deduct tax at source under s. 195 of the Act. Since the non resident company is not rendering services of a managerial, technical or consultancy nature and, therefore, liability to tax cannot be fastened on it by invoking the provisions dealing with fee for technical services—Spahi Projects P. Ltd. In re. (2009) 315 ITR 374 (AAR)
2. S. 9(1)(vi), 44BB & 44BBB of IT Act, 1961, arts 5, 7 & 12 of DTAA between India & Mauritius—Double taxation relief—The assessee is a company incorporated in and tax resident of Mauritius and it was also issued a Mauritian tax residency certificate. The assessee is engaged in the business of marine and general engineering and construction and it secured inter alia contract of charter hook up accommodation barge for a project. The assessee did not have a PE in India and accordingly, its profit cannot be brought to tax in India. Barge hire charges amounts to royalty within the meaning of S. 9(1)(vi) and also under art. 12 and is liable to tax in India under S. 44BB of the Act—A.Director of IT vs. Valentine Maritime (Mauritius) Ltd. In re. (2010) 130 TTJ 417 (ITAT-Mum)
3. S. 9(1)(vi) & 90 of IT Act, 1961, art. 12 of DTAA between India & Australia—Applicant an Australian company, entered into a contract with an India company for setting up an alumina refinery whereby it was required to provide conceptual and basic engineering services and deliverable for the design of the refinery, therefore, amount received for the work performed under the contract is royalty within the meaning of para 3 of art. 12 of DTAA between Australia and India and the entire receipts representing royalty income are taxable in India in splitting rate both under the Provisions of IT Act as well as DTAA—Worely Parsons services Pvt. Ltd. In re. (2009) 223 CTR 84 (AAR)
4. S. 9(1)(i) & 245R of IT Act, 1961—Deemed income—On issue whether income is deemed to have accrued or arisen to the applicant on offshore supplies from outside India for executing the contract in India. In absence of relevant facts and documents and clarification in the application no ruling can be given on the said issue—Yongnam Engineering & Construction (Pvt.) Ltd. In re. (2009) 224 CTR 356 (AAR)
5. S. 9(1)(vi), 9(1)(vii), 90 & 195 of IT Act, 1961, art 12 & 13 of DTAA with UK—Double taxation relief—Applicant engaged in the business of providing international long distance and domestic long distance telecommunication service in India proposes to enter into an agreement with another group company namely C & W UK with a view to providing end to end international long distance telecommunication services to its Indian customers. The payment does not constitute fees for technical services within the meaning of S. 9(1)(vii) or art. 13(4) of DTAA with UK. Telecome services are standered services the payments does not constitute royalty. Hence, the payments made by the applicants to C & W UK are in the nature of business profit and in the absence of there being any PE of C & W in India, same is not taxable in India. Since such income is not chargeable to tax under the Act, there is no question of making any deduction at source under S. 195 of the Act—Cable & Wireless Networks India (P) Ltd. In re. (2009) 224 CTR 463 (AAR)
6. S. 9(1)(vi) & 90 of IT Act, 1961, S.14 & 51 of Copyright Act, 1957, art. 5 & 7 of DTAA between India & Japan—Double taxation relief—Applicant a Japanese company, marketing licensed software product mostly through a distribution channel comprising value added resellers (VARs) and the prices are indedpenently determined by them, subject to certain restrictive terms, cannot be said to be the agents much less dependent agents of the applicant as the business of a VAR is not confined to the dealings only with the applicant and its products nor it is controlled by the applicant except to the extent necessary to promote its own business and, therefore, the applicant cannot be deemed to have a PE in India and, therefore, the payment received from VARs by the applicant cannot be taxed in India as business profits under art. 7 of DTAA with Japan—Dassault Systems K.K. In re. (2010) 322 ITR 125 (AAR)
7. S. 9(1)(i) of IT Act, 1961, art. 5 of DTAA between India & UK—Double taxation relief—Assess, an English company, operating an international television chennel, appointed its Indian subsidiary BWIPL as its authorised agent in India to solicit orders for the sale of advertising airtime on its television chennel and against such services, Indian subsidiary is paid commission by the assessee. Hence, advertisment revenue derived by the assessee through orders procured by its Indian subsidiary is not in India as the advertisement revenue through Indian subsidiary vis-a-vis transaction is at arms length price—BBC worlwide Ltd. vs. Dy. Director of IT. In re. (2010) 128 TTJ 411 (DEL)
8. S. 9(1)(vi), 90 & 195 of IT Act, 1961, art. 6 of DTAA between India & Australia—Double taxation relief—As per the agreement taken place between india & Australian Company, the Australian Company had to assist Indian Company for setting up a plant for manufacture of bitumen by using Biturox Process. The Australian Company which has not PE in India granted the right to use the Biturox Process which is embedded in the plant to be set up based on basic design engineering packege and not the right to use the license and further such services were not rendered in India. Payment made by India company against such services to Australian company is not royalty as it is not based on the amount of use. Therefore, the amount paid by Indian company is not taxable in the hands of Australian Company and thus, there is no requirement for deduction of tax at source—Indian Oil Corporation Ltd. vs. Dy. CIT. In re. (2010) 128 TTJ 467 (MUMBAI)
9. S. 9(1)(vii) of IT Act, 1961, art. 7(1)12 of DTAA between India and Australia—Non-resident—The applicant, a non-resident self funding organization established under a treaty between Australia and New Zealand, was accorded the status of an international organization by virtue of the law made by those nations. It provided accreditation to conformity assessment bodies (CABs) in several countries including India. The main function of the applicant was to accredit, following successful assessment, those bodies considered competed and impartial to provide an effective service in various spheres. When once the applicant of the “royalty” clause in art. 12 of the DTAA was excluded, the only possibility was to treat the income as business profits but since, the applicant has no pe in India, by virtue of art. 7(1) of the DTAA, such profits cannot be subjected to tax in India. Since there was no transfer of any skill or technical knowledge of experience or process or know-how to the CABs on account of grant of accreditation to them, therefore, it cannot be said that the applicant was imparting any knowledge or skills to the CABs which were utilized by the CABs in conducting their business—Joint Accreditation System of Australia and New Zealand. In re. (2010) 326 ITR 487 (AAR)
10. S. 5(2)(b), 9(1)(ii) & 15 of IT Act, 1961—Income—The criteria of applying the definition of S. 5(2)(b) would be such income which is earned in India for the services rendered in India and not otherwise. Under S. 15 even on accrual basis salary income is taxable i.e., it becomes irrespective of the fact whether it is actually received or not, only when services are rendered in India, it becomes taxable by implication. However, if services are rendered outside India, such income would not be taxable in India. If the number of days worked by the assessee outside India as extracted in assessment order taken into consideration it would emerge that assessee has worked outside India for a period of 225 days and such income earned by assessee outside India is not taxable—DIT(International Taxation) vs. Prahlad Vijendra Rao. In re. (2011) 239 CTR 107 (Kar)
11. S. 9(1)(vii) of IT Act, 1961, art. 5 & 12 of DTAA between India & Germany—Double taxation agreement—The applicant is a company incorporated the laws of Germany and is engaged in the business of architectural designs and drawings and it having undertaken a contract as consultant for supply of architectural designs and drawings for constructing complex of Tamil nadu legislative assembly whereby it is prepared complete working drawings and details for proper execution of work during construction and offered technical advice to the sub-contractor or by deploying its expertise and required to be associated with all the stages of the work starting with the conceptual design stage and ending with the completion, the transaction cannot be described as a pure and simple sale of drawing and design and, thus, the consideration received by the applicant has to be legitimately treated as fees for technical services—GMP International GmbH. In re. (2010) 321 ITR 411 (AAR)
12. S. 9(1)(vii) 44BB, 44DA & 115A of IT Act, 1961—Non-resident—The applicant is a company incorporated in Norway and a marine geophysical company that conducts seismic survey and provides offshore seismic data acquisition and other associated services to global oil companies. It hired a seismic vessel from another non-resident company for providing 3D seismic data acquisiton and onboard proceessing services to ONGC. The seismic survey and related services is an integral part of the exploration/prospecting activities for mineral oil (Petroleum and natural gas) and, therefore, second limb of S. 44BB(1) is clearly attracted and not S. 44DA or S. 115A. Thus, tax has to be deducted at source from the payments made by the applicant—Wave field Inseis Asa. In re. (2010) 230 CTR 106 (AAR)
13. S. 9(1)(vi) & 195, arts. 7 & 12 of DTAA between India & Switzerland—Double taxation relief—Applicant, an India comany, proposes to enter into a cost contribution agreement (CCA) with its group company ABB zurich in Switzerland whereby it is required to make payment to the said company representing its share of the cost incurred towards basic research and development activities carried out by ABB Zurich. Hence, the payment made to ABB Ltd., towards the applicants share of the cost incurred in respect of R & D activities are not liable to be taxed under the IT Act, 1961 as business income in the absence of PE in India, having regard to art. 7 of the tax treaty. Nor can it be subjected to tax as royalty or fees for technical services under art. 12 of the treaty. The applicant is not under an obligation to withhold the tax under s. 195 of the Act as the Income is not chargeable to tax—ABB Ltd. In re. (2010)
14. S. 9(1)(vii)  & 90 of IT Act, 1961, arts. 7 & 13 of DTAA between India & France—Double taxation relief—Assessee a company incorporated in the Republic of France has a branch office in India and it made a provision for reimbursement of technical expenses payable to the head office. Therefore, payment towards reimbursement of technical expenses to the head office which is not on account of any specific technical services having been “made available,” cannot be brought to tax under art. 13 of DTAA between India and France—A. Director of IT vs. Bureau Veritas. In re. (2010) 131 TTJ 29 (ITAT-Mumbai)
15. S. 9(1)(vii) of IT Act, 1961—Income deemed to accrue or arise in India—The Supreme Court in Ishikawajima-Harima Heavy Industries Ltd. vs. Director of Income tax (2007) 228 ITR 408 adopted a twin test of (i) services being utilized in India, and (ii) rendered in India or to have such a live link with India for taxing in India and income earned by a non-resident. Reading the provision of S. 9 in its plain sense, Supreme Court requires two conditions to be met—the service which are the source of the income that is sought to be taxed, has to be rendered in India, as well as utilized in India, to be taxable in India. Both the above conditions have to be satisfied simutaneously—Grasim Industries Ltd. vs. S.M. Mishra. In re. (2011)
16. S. 9(1)(vii), 90, 195 & 201(1) of IT Act, 1961, art. 12 of DTAA between India & USA—Double Taxation relief—The liability to deduction tax at source under S. 195 is dependent upon the taxability of the income in the hands of the recipient. When the payment made by the assessee company is not chargeable to tax as per the provisions of IT Act in the assessee company is not chargeable to tax as per the provisions of the Act in the hands of the receipient, or as per the provisions of DTAA between India and USA, the question of liability to deduct tax does not arise and when no tax is liable to be paid by the recipient, the provisions of s. 195 are not attracted and the assesee has no obligation to deduct tax at source—ACIT vs. IIC System (P) Ltd. In re. (2010) 127 TTJ 435 (ITAT-Hyd B)
17. S. 9(1)(vii) of IT Act, 1961, art. 5 & 12 of DTAA between India & Germany—Double taxation agreement—The applicant is a company incorporated the laws of Germany and is engaged in the business of architectural designs and drawings and it having undertaken a contract as consultant for supply of architectural designs and drawings for constructing complex of Tamil nadu legislative assembly whereby it is prepared complete working drawings and details for proper execution of work during construction and offered technical advice to the sub-contractor or by deploying its expertise and required to be associated with all the stages of the work starting with the conceptual design stage and ending with the completion, the transaction cannot be described as a pure and simple sale of drawing and design and, thus, the consideration received by the applicant has to be legitimately treated as fees for technical services—GMP International GmbH. In re. (2010) 229 CTR 139 (AAR)
18. S. 9(1)(vi) & 90 of IT Act, 1961, art. 12 of DTAA between India & USA—Double taxation relief—The payments made by end users for granting of licence in respect of copyright in computer software are in the nature of royalty. In the present case the assessee i.e. a US company, having supplied micro soft software products to end users through distributors in India its terms and conditions attached to the end user licence agreement with clear stipulations that the product is protected by copyright and other intellectual property laws and that the product is licensed and not sold, the payments made by the end users for granting of licence in copyright and other intellectual property rights in the product and therefore, within the meaning of S. 9(1)(vi), it is held royalty and under art. 12 of said DTAA, same is taxable in India—MICROSOFT CORPORATION  vs. A. Director of IT. In re. (2010) 134 TTJ 257 (ITAT-Delhi)
19. S. 9(1)(vi) & 90 of IT Act, 1961, art. 12 of DTAA between India & USA—Double taxation relief—The payments made by end users for granting of licence in respect of copyright in computer software are in the nature of royalty. In the present case the assessee i.e. a US company, having supplied micro soft software products to end users through distributors in India its terms and conditions attached to the end user licence agreement with clear stipulations that the product is protected by copyright and other intellectual property laws and that the product is licensed and not sold, the payments made by the end users for granting of licence in copyright and other intellectual property rights in the product and therefore, within the meaning of S. 9(1)(vi), it is held royalty and under art. 12 of said DTAA, same is taxable in India—MICROSOFT REGIONAL SALES CORPORATION  vs. A. Director of IT. In re. (2010) 134 TTJ 257 (ITAT-Delhi)
20. S. 9(1)(vii), 90 & 195 of IT Act, 1961, art. 13 of DTAA between India & France—Double taxation relief—One of the discernible common factors in Indian DTAA with UK, USA and Switzerland are that unless the fees for services that ancillary and subsidiary, as well as inextricably and essentially linked to the sale of property is attributable to PE and fulfills the other requirements laid down under the relevant article dealing with business profits, the same cannot be taxed in the source country. In the present matter the activities of conducting impact tests by French company on the cars manufactured by the assessee company in the presence of assessee’s representative and submission of test reports which are utilized for product development in India is in the nature of technical services and, therefore, payment made by the assessee to French company for such tests is fee for technical services within the meaning of art. 13(4) of the DTAA between India and France as well as S. 9(1)(vii) of the Act and therefore, these payments made by the assessee to French company are chargeable to tax in India and liable to deduct tax at source under S. 195 of the Act—Maruti Udyog Ltd. vs. ACIT (International Taxation). In re. (2010) 130 TTJ 66 (ITAT-Delhi)
21. S. 9(1)(i) 90 & 195 of IT Act, 1961, art. 5 & 7 of DTAA between India & USA—Double taxation relief—A product purchase agreement (PPA) was executed by and between N and its affiliates on the one part and LT of USA & its affiliates on the other part for inter alia, supply of products to NI, Indian unit of N, to meet its manufacturing requirements in India. LT entered into an assignment agreement with the applicant, Indian company of the same group, irrevocably assigning all its banefical rights title, interest, obligations and duties under the said PPA in favour of the applicant. US company has no fixed place, PE in India as the applicant never acted as an agent much less as a dependent agent of the US company and is carrying on its business operations by itself without any direction or instruction from the latter, supplying goods to NI on a principal to principal basis as per the terms of the assignment agreement and, thus, the in view of art. 7.2 of the DTAA, the business profits of the US company are not taxable in India and, therefore, the applicant is not needed to withhold tax under S. 195 of the Act—Laird Technologies India (P) Ltd. In re. (2010) 229 CTR 322 (AAR)
22. S. 9(1)(i) 90 & 195 of IT Act, 1961, art. 5 & 7 of DTAA between India & USA—Double taxation relief—A product purchase agreement (PPA) was executed by and between N and its affiliates on the one part and LT of USA & its affiliates on the other part for inter alia, supply of products to NI, Indian unit of N, to meet its manufacturing requirements in India. LT entered into an assignment agreement with the applicant, Indian company of the same group, irrevocably assigning all its banefical rights title, interest, obligations and duties under the said PPA in favour of the applicant. US company has no fixed place, PE in India as the applicant never acted as an agent much less as a dependent agent of the US company and is carrying on its business operations by itself without any direction or instruction from the latter, supplying goods to NI on a principal to principal basis as per the terms of the assignment agreement and, thus, the in view of art. 7.2 of the DTAA, the business profits of the US company are not taxable in India and, therefore, the applicant is not needed to withhold tax under S. 195 of the Act—Laird Technologies India (P) Ltd. In re. (2010) 323 ITR 598 (AAR)
23. S. 9(1)(viii), 115A(1)(b) & 195 of IT Act, 1961, art. 12 of DTAA between India & USA—Double taxation relief—The receipts under the contract attributable to software and installation and other services are difinitely covered by cl. (b) of para 4 of art. 12 of DTAA. The applicant AAI has entered into a contract for automation upgrade of a runway at IGI Airport with US company, which involves supplying hardware, software and providing services in connection with installation thereof by the latter, US company is bound to provide necessary information to operate, maintain and repair the system delivered under the contract. Therefore, payment towards supply of software as a part of package  of  setting up upgraded automation system at IGI Airport by applicant to US company can be legitimately brought within the fold of art. 12(4)(b) of Indo-US DTAA as information and inputs concerning various technical aspects based on the expertise and experience of US company are made available to applicant thourgh the mechanism of this software which enables it to apply the technology and, thus, same is liable to be taxed in India. Further, the payment made for installation services too is taxable although, the payment for hardware is not taxable in India—Airports Authority of India. In re. (2010) 323 ITR 211 (AAR)
24. S. 9(1)(vii) of IT Act, 1961, art. 5 & 12 of DTAA between India & Germany—Double taxation agreement—The applicant is a company incorporated the laws of Germany and is engaged in the business of architectural designs and drawings and it having undertaken a contract as consultant for supply of architectural designs and drawings for constructing complex of Tamil nadu legislative assembly whereby it is prepared complete working drawings and details for proper execution of work during construction and offered technical advice to the sub-contractor or by deploying its expertise and required to be associated with all the stages of the work starting with the conceptual design stage and ending with the completion, the transaction cannot be described as a pure and simple sale of drawing and design and, thus, the consideration received by the applicant has to be legitimately treated as fees for technical services—GMP International GmbH. In re. (2010)
25. S. 9(1)(vii), 192 & 195 of the IT Act, 1961—TDS—The assessee is not liable to deduct tax from the amnout representing of the salery paid by US company to its managing director who was appointed by US company under secondment agreement and seconded to its Indian subsidiary having already suffered tax at source, while remitting the same to US company under S. 195 of the IT Act—ITD software solutions (India)(P)(Ltd) vs. ITO. In re. (2009) 122 TTJ 410 (ITAT-Bang)
26. S. 5(2) & 9(1)(i), Expln. 1 (b) of IT Act, 1961—Income deemed to accrue or arise in India—The applicant is a company incorporated under the laws of Netherlands and also tax-resident. The applicant is a subsidiary of Saudi Arabian Oil Company and it operates its offices in various country to render services in relation to supply chain management, technical support, finance support and administrative support to Saudi Arab Co and its group companies. It proposes to establish an officer in India for undertaking procurement support activities for its head office and Saudi Arab Co Indian office undertake procurement support services for the purpose of export outside India of various goods/products required by Saudi Arab Co. Income received by the applicant for procurement support services rendered in India to its holding company and affilate entities through the branch office in India is not covered under cl. (b) of Expln. 1 to S. 9(1)(i) and having accrued or arisen in India is taxable in India in view of S. 5(2) of the Act—Arab Co Overseas Company BV. In re. (2010) 322 ITR 612 (AAR)
27. S. 9(1)(vii) & 91(1), Expln. of IT Act, 1961—Income deemed to accrue or arise in India—As per retrospective amendment to Explanation to S. 9(1) by the Finance Act, 2010, w.e.f. 1st June, 1976, the income of the non-resident shall be deemed to accrue or arise in India under cl. (v) or cl. (vi) or cl. (vii) of S. 9 (1), and shall be included in his total income. Therefore, fees earned by the assessee, a UK based partnership firm for professional services in connection with its project in India is taxable in India—Linklaters LLP vs. ITO (International Taxation). In re. (2010) 132 TTJ 20 (ITAT-Mum)
28. S. 9(1)(ii), 40(a)(iii) & 192 of IT Act, 1961—Business Expenditure—For the applicability of provisions of s. 40(a)(iii) the payment should be chargeable to tax under the head Salaries. Admittedly, the payment of salaries has been made by the assessee for the services rendered outside India to non-resident. Therefore, the salary payments are not chargeable to tax in India within the meaning of S. 192 and, thus, no tax at source is deductible. Since, the salary paid to non-residents for services rendered in Netherlands is not chargeable to tax in India, provisions of S. 40(a)(iii) will not be applicable and therefore, no disallowance under S. 40(a)(iii) can be made in respect of salary paid to non residents for the services rendered abroad—Dy. CIT vs. Mother Dairy Fruits & Veg. (P) Ltd. In re. (2011) 141 TTJ 97 (ITAT-Delhi)
29. S. 9(1)(i) & 90 of IT Act, 1961, art. 5 & 7 of DTAA between India & South Korea—Double taxation relief—As per art. 5 of the DTAA, PE means a fixed place of business through which the business of an enterprise is wholly or partly carried on. The business of the South Korean company is partly carried on by the Liasion Officer (LO). As per art. 5(2), PE shall include especially an office. The office is not defined either under the IT Act or under the DTAA. LO is an officer and cannot be excluded from the world office as contained in art. 5(2) of DTAA. Hence, as per art. 5(2), LO becomes a PE. LO of the South Korean company being engaged in procuring purchase orders in India for the latter after negotiating the deal, there exists a business connection in India. Since as per art. 5 of the DTAA, the LO is PE and having freedom to fix the sale price and conclude the contract and therefore, its activities cannot be said to be of preparatory or auxiliary nature and income attributable to the LO is taxable under S. 7 of the DTAA—Dy. DIT (International Taxation) vs. Jebon Corporation India Liasion Office. In re. (2010) 1 ITR (Trib) 655 (Bang)
30. S. 9(1)(vii), 195, 197, 201(1) & 201(1A) of IT Act, 1961, art. 12 of DTAA between Indian & Singapore—TDS—The ITO issued certificate under S. 197 which authorized the assessee to pay without deduction of income-tax the sum credited in the name of LLAH. Hence, the Assessing Officer cannot subsequently treat the assessee as an assessee in default under S. 201, more so when the Assessing Officer has not made any disallowance under S. 40(a)(i) thereby accepting that no tax is required to be deducted at source—Bovis Lend Lease (India)(P) Ltd. vs. ITO. In re. (2010) 127 TTJ 25* (ITAT-Bang B)(UO)
31. S. 9(1)(vi), 9(1)(vii), 90 & 260A of the IT Act, 1961, art. 7 & 12 of DTAA between India and USA—Double Taxation Avoidance Agreement—The assessee, a company incorporated and tax resident in USA rendered service for advertisement, publicity and sale promotion keeping in mind their mutual interests and in this context, the use of trademark, trade name etc. and other enumerated services mentioned in the agreement with the assessee are incidental to main service, therefore, the payments received are neither in nature of royalty nor in the nature of fee for technical services, but business income and assessee not having any PE in India, thus, such business income is not taxable in India—Director of I.T. vs. Sheraton International Inc. (Delhi)
32. Income Tax Act, 1961, sections 9(1) (vii), 90 and 195—Tax deducted at source— The following questions were framed for consideration by this Authority: “(i) Whether on the facts and circumstances of the case, the amount paid or payable by the applicant to HMFICL under the terms of the secondment agreement dt. 13th March, 2006 is in the nature of income accruing to M/s. HMFICL in respect of which, tax is liable to be deducted at source by the applicant under the provisions of IT Act, 1961 ? (ii) If the answer to the first question is in the affirmative, what is the rate at which tax is required to be deducted at source by the applicant ? (iii) Whether, on the facts and circumstances of the case, HMFICL has a PE in India and any income can be attributed to it under the provisions of IT Act read with DTAA ?”. While answering the question, the Authority for Advance Rulings held that:—”At the resumed hearing on 15th Sept., 2008, a contention was raised by the learned counsel for the applicant that the real and economic employer of the seconded employee is the applicant because the day-to-day working of the employee is supervised and controlled by the applicant. It is therefore submitted that the amount paid in the form of reimbursement shall be deemed to be payment made towards salary and not FTS. Certain passages in OECD Commentary on art. 15 of the model treaty have been relied upon to substantiate the argument. We must say that such contention goes contrary to the averments made and the stand taken in the application. In the view we have taken, it is unnecessary to comment on the tenability of the contention and the applicability of the passage cited by the learned counsel. In view of the foregoing discussion, the first question is answered in the negative and we hold that no tax is liable to be deducted at source by the applicant in respect of the payments made or to be made to HMFICL under the terms of the secondment agreement. The other two questions do not call for any answer.” Cholamandalam ms General Insurance Co. Ltd.. In re. (2009) 10 ITCD 4 (AAR)
33. S. 9(1)(vii), 44BB & 44DA of IT Act, 1961—Non-resident—To attract the first part of S. 44BB, the non-resident must be: (a) engaged in the business of providing services or facilities; (b) such provision of services/facilities must be in connection with the prospecting for or extraction or production of mineral oils. As between the competing provisions, namely S. 9(1)(vii) r/w S. 44DA and 44BB, S. 44BB being a more specific provision. If the non-resident is engaged in the business of providing services in connection with the prospecting etc. of mineral oils, the computation provisions relating to fees for that technical services will have to yield to S. 44BB. If all the services that are in nature of technical services within the meaning of Expln. 2 to S. 9 are to be computed in accordance with S. 44DA, very little purpose will be served by incorporating a special provision in S. 44BB for computing the profit in relating to the services connected with exploration and extracting of mineral oils. The provision will then operate in a very limited field. Thus, the income of the applicant-a company incorporated in Poland and a tax resident of Poland; has to be computed in terms of S. 44BB of the Act—Geofizyka Torun SP. ZO. In re. (2010) 320 ITR 268 (AAR)
34. S. 9(1)(vii), 90 & 195 of the IT Act, 1961, Art 12 & 13 of DTAA between India and Korea—Double Taxation Avoidance Agreement—No tax is liable to be deducted at sources by applicant in respect of reimbursement of part of salary by applicant paid by foreign company to its deputed employee in India to work under the instruction of applicant under a secondment agreement for mutual benefit of insurance business of both the parties which does not result generation of any income in the hands of foreign company, thus, cannot be treated as fees for technical services under Expln. 2 to S. 9(1)(vii) or art. 13(4) of DTAA between India and Korea—Cholamandalam MS General Insurance Co. Ltd. In re. (AAR)
35. S. 5(2)(b) & 9(1)(i) of IT Act, 1961—Income deemed to accrue or arise in India—Sec. 5(2)(b) brings to tax any income from whatever source derived which accrues or arises or is deemed to accrue or arises to a non-resident person in India during the year. This provision has two components (a) income which accrues or arises in India; and (b) is deemed to accrue or arise in India. Since in the present case the Indian Offices of the non-resident assessee-company practically carry out all operations of the business of the commission agent except the formation of contract between the vendors and the buyers, it cannot be held that no income accrues or arises in India from commission; however CIT(A) overstated the role of the Indian offices in the overall conduct of business, instead of allocation of commission at 30 per cent, commission income is allocated to the Indian operations at 50 per cent—Linmork International (Hong Kong) Ltd. vs. Dy. CIT. In re. (2011) 139 TTJ 697 (ITAT-Delhi)
36. S. 9(1)(i), 44B, 195, 201(1) & 201(1A) of IT Act, 1961—Income deemed to accrue in India—The expression business connection is of wide meaning but at the same time it is also well settled principles by different judicial pronouncements that there should be close and intimate relationship between the business operations of the non-resident and his agent in India. In the present case also, the assessee-Indian company is independent agent of a foreign company in respect of booking of cruise tickets in India for non-respect company and therefore, within the meaning of S. 9(1)(i), no business connection is established and it cannot be said that any income has accrued to the foreign company in India—Dy Director of IT vs. Star Cruises (India) Travel Services (P) Ltd. In re. (2010) 134 TTJ 204 (ITAT-Mum)
37. S. 2(47), 9(1)(i), 195 and 201 of the IT Act, 1961—TDS—A non-resident assessee acquired shares of another non-resident company without deducting any tax at source while making payment. Agreement in question was not filed before the court. Show cause notice issued to the assessee seeking to treat it as an assesee in default to failure to deduct tax at source while making payment to non-resident assessee. It was held that the petitioner shall be entitled to question the decision of the authority on the preliminary issue before the High Court, in the event the same is decided against it. The question of law to that extent shall remain upon. The decision of the authority shall be based on the interpretation of the agreement in question and in accordance with law—Vodafone International Holdings B.V. vs. Union of India & Anr. (SC)
38. S. 5(2), 9(1)(vi), Expln 2, 40(a)(i), 195 of IT Act, 1961, art 26(3) of DTAA with USA, art. 264 of DTAA with UK—Double taxation relief—The assessee was engaged in the business of television broadcasting and software development. The article 26(3) of the DTAA between India and USA and article 26(4) of the DTAA between India and the UK are not similarly worded, both articles are intended to avoid discrimination. The provisions of S. 40(a)(i) as it existed prior to its amendment by the Finance (No. 2) Act, 2004 w.e.f. April 1, 2005, provided for disallowance of payment made to non-residents alone, where tax is not deducted at source at the time of remittance, and similar payment to residents does not result in disallowance in the event of non-deduction of tax at source. The payment made to non-resident for hire of transponders is royalty and therefore tax has to be deducted at source for such payments made by non-residents—Asianet Communications Ltd. vs. Dy. CIT. In re. (2010) 1 ITR (Trib) 683 (ITAT-Chennai)
39. S. 9(1)(iv) & 195 of IT Act, 1961—Deemed Income—Two directors of the assessee-company travelled to Singapore for purchase of plant know-how persuant to the resolution of board of Directors of the assessee-company. As per the agreement, the assessee-company paid some amount to the Signapore Company and rest of amount was payable in instalments. As per cl. 10(a) of the said agreement, the title in the documents stood transferred to the Indian assessee and it became the owner and could use the same for any purpose albeit after a period of five years. Therefore, the said payment cannot be termed as royalty so as to attract TDS —CIT vs. Maggronic Devices (P) Ltd. In re. (2009) 228 CTR 241 (HP)
40. S. 9(1)(vi), 195, 201 & 201(1A) of IT Act, 1961, art. 12 of  DTAA between India & Singapore—Double taxation relief—In terms of art. 12(7) of DTAA between India and Singapore, if the payment of royalty is made by tax resident of Singapore to another tax resident of Singapore, same does not arise in India—Set Satellite (Singapore) PTE. Ltd. vs. Addl. Director of IT. In re. (2010) 132 TTJ 459 (ITAT-Mum)
41. S. 9(1)(vii), Expln 2, of IT Act, 1961, art. 5(3), 7(1) of DTAA between India and Singapore—Non-resident—The applicant, a company formed in Singapore, secured four work orders, two in the financial year 2009-10 and the other two in 2010-11. For these projects, the parties were different and all the projects were independent projects and there was no interconnection and interdependence amongst them. Therefore, aggregation of the periods of the contracts could not be made for these four contracts and thus, the applicant could not be said to have a permanent establishment (PE) in terms of art. 5(3) of the DTAA between India and Singapore because the duration of each of the projects executed in financial year 2010-11 did not exceed 183 days—Tiong Woon Project P. Ltd. In re. (2011) 338 ITR 386 (AAR)
42. S. 9(1)(vi) of IT Act, 1961, art. 5,7,12 of DTAA between India and Sri Lanka—Non-resident—Since without the agreement being in place, any usage of the computer programme by the customers would have amounted to copy right  infringement. The applicant non resident company entered into a software licence and maintenance agreement with Indian company. Under the agreement the applicant allowed Indian company to use the software product (the licensed programme) owned by it. The licensed programme was to be installed into the computer machines designed by Indian company and for such installation and implementation of licensed programme, the applicant was to be paid. Further the applicant granted Indian company the right to make copies of the licensed programme to be installed on equipment only at designated sites of such Indian company. Thus, the fees paid by Indian company to the applicant are taxable as royalty under cl. (v) of Explanation 2 to S. 9(1)(vi) of the Act and since the fees payable by Indian company to the applicant arose in India, thus, are taxable under art. 12(2) of the DTAA in India—Millennium IT Software Ltd. In re. (2011) 338 ITR 391 (AAR)
43. S. 9(1)(ii), 40(a)(iii) & 192 of IT Act, 1961—Business Expenditure—For the applicability of provisions of S. 40(a)(iii) the payment should be chargeable to tax under the head Salaries. Admittedly, the payment of salaries has been made by the assessee for the services rendered outside India to non-resident. Therefore, the salary payments are not chargeable to tax in India within the meaning of S. 192 and, thus, no tax at source is deductible. Since, the salary paid to non-residents for services rendered in Netherlands is not chargeable to tax in India, provisions of S. 40(a)(iii) will not be applicable and therefore, no disallowance under S. 40(a)(iii) can be made in respect of salary paid to non residents for the services rendered abroad—Dy. CIT vs. Mother Dairy Fruits & Veg. (P) Ltd. In re. (2011) 141 TTJ 97 (ITAT-Delhi)
44. S. 9(1)(vii), 44BB & 44DA of IT Act, 1961—TDS—Non-resident—The applicant is a company incorporated under the law of Dubai Technology and media free zone, Dubai and is tax resident of UAE. The applicant conducts seismic surveys and provides offshore seismic data acquisition and other associated services to global oil companies and it was awarded 3 contracts by ONGC for 2D seismic, gravity and magnetic data acquisition in different survey areas of Western and Eastern Indian Offshore. Hence, the activities undertaken by the applicant satisfy the ingredients of S. 44BB and, therefore, income earned by it in India has to be computed in terms of provisions of S. 44BB of the Act—Seabird Exploration Fz LIC. In re. (2010)
45. S. 9(1)(vi), 44BB, 44DA & 115A of IT Act, 1961—TDS—Non-resident—The applicant is a company incorporated under the laws of Norway and is a tax resident of Norway and is a marine geophysical company that conducts seismic surveys and provided offshore seismic data acquisition and other associated services to global companies. The applicant company was awarded 3 year contract by ONGC for 3D seismic data acquisition and on board processing offshore India in different survey areas of western and Eastern Indian Offshore. For the purpose of executing the contract, the applicant entered into a contract with a company incorporated in Faroe Islands. Therefore, in these situations, second limb of S. 44BB (1) clearly attracts and the tax has to be deducted at source from the payments made by the applicant company @ 4.223 per cent—Wavefield Inseis Asa. In re. (2010)
46. S. 9(1)(vii), 40(a)(i), 195 of IT Act, 1961—Deduction of tax at source—If the foreign party does not have a Permanent Establishment in India, Payment of fees for technical services by the resident assessee to a non-resident on account of fees for technical services is taxable in the hands of the foreign party as per the deeming provisions of S. 9(1)(vii) and hence, TDS is deductible from such payment under S. 195 of the Act—Indian Summer vs. ACIT. In re. (2010) 4 ITR (Trib) 181 (ITAT-Delhi)
47. S. 9(1)(vii), 44D, 90 & 115A of IT Act, 1961, art. 7, 12 & 19 of DTAA between India & Australia—Double taxation relief—Assessee, an Australian company, entered into contracts with two Indian companies for evaluation of coal deposits and iron ore deposits, respectively and conducting feasibility studies for transporting the same. Assessee having PE in India and doing its business having opted to be taxed under the provisions of DTAA, therefore, it has to be taxed as an independent enterprise in India as per sub-cl. (2) and (3) of art. 7 and the regular provisions of the Indian tax law i.e. S. 28 to 43C would apply to the exclusion of S. 9(1)(vii), S. 44D and S. 115A of the Act 1961—Rio Tinto Technical Services vs. Dy. CIT. In re. (2010) 131 TTJ 179 (ITAT-Delhi)
48. S. 9(1)(vii), 90 & 195 of IT Act, 1961, art. 12 of  DTAA between India & China—Double taxation relief—Assessee company (AML) entered into on agreement with a china based company under which the assessee company was to pay US $ 1 million in consideration of bauxite testing services by Chinese company in its laboratories and prepare test reports. The technical services being provided by resident of one of the contracting States in the other contracting state is what will be covered by the basic rule under art. 12(4) of the Act. Further the deeming fiction under art. 12(6) provides that irrespective of the suits of technical services having been rendered, the fee for technical services will be deemed to have accrued in the tax jurisdiction in which persons making the payment is located—Ashapura Mini chem Ltd. vs. ACIT.  In re. (2010) 131 TTJ 291 (ITAT-Mum.)
49. S. 9(1)(i), Expln. 1(b) of IT Act, 1961—Income deemed to accrue in India—Assessee is a foreign company and its Indian Branch office carried out activities of identification of suppliers, quality control, pre-production meeting, online inspection, post-manufacturing inspection, handling of logistic and co-ordination of shipment under an agreement with another foreign company for providing assistance to its customer in connection with purchase of goods from India fall within the scope of Expln. 1(b) to S. 9(1)(i) and, thus, no part of assessee income against such services is taxable in India—Mondial Orient Ltd. vs. ACIT. In re. (20100 129 TTJ 560 (BANG)
50. S. 9(1)(i), Expln. 1(b) of IT Act, 1961—Income deemed to accrue in India—Assessee is a foreign company and its Indian Branch office carried out activities of identification of suppliers, quality control, pre-production meeting, online inspection, post-manufacturing inspection, handling of logistic and co-ordination of shipment under an agreement with another foreign company for providing assistance to its customer in connection with purchase of goods from India fall within the scope of Expln. 1(b) to S. 9(1)(i) and, thus, no part of assessees income against such services is taxable in India—Mondial Orient Ltd. vs. ACIT. In re. (2010) 129 TTJ 560 (BANG)
51. S. 9(1)(vi) of IT Act, 1961—Income deemed to accrue or arise in India—The assesses do not have PE in India and income from sale of copyrighted articles by assessees to a company in India is not royalty either under Income-tax Act or under the treaty between India and USA—Lelankani Mauritius Ltd. & Anr. vs. Dy. Director of IT. In re. (2010) 132 TTJ 124 (ITAT-Bangalore)
52. S. 9(1)(i) of IT Act, 1961—Income deemed to accrue or arise in India—In the case of an offshore supplier, since the entire transaction is completed on the high seas, the profits on such sale do not arise in India and they are not taxable in India. In the present case also all the activities relating to offshore supply of equipment to Indian company by the assessee company including delivery of bill of lading, having taken place outside India and from such offshore supply, the revenue earned by the assessee did not accrue or arise in India even though such supply was made under a composite turnkey contact and such revenue earned by the assessee relating to offshore supply of equipment is not taxable in India—Technip Italy Spa vs. CIT. In re. (2011) 136 TTJ 403 (ITAT-Delhi)
53. S. 9(1)(vii), 9, Expln. 40(a)(ia), 90 & 195 of IT Act, 1961, art. 13 & 15 of DTAA between India and UK—Business Expenditure—By amendment in the Finance Act, 2007, the legislature inserted the Explanation with retrospective effect from 1st June, 1976 to S. 9(2), whereas the assessment year involved is 2004-05 relevant to previous year 2003-04 and it is impossible for the assessee to deduct tax in the financial year 1st April, 2003 to 31st March, 2004, when the obligation to deduct TDS was not on the assessee during that period—Sterling Abraive Ltd. vs. ACIT. In re. (2011) 140 TTJ 68 (ITAT-Ahd.)
54. S. 9(1)(vii), Expln. 2, 194C 194J, 201(1)(1A) of IT Act, 1961—Deduction of tax at source—The maximum time limit for initiating and completing the proceedings under S. 201(1) has to be at par with the time limit available for initiating and completing the reassessment. If the payee has furnished the return of income without disclosing the sum paid by the payer on which tax was deductible as per the provisions of the Act then the tax deductible at sources can be recovered from the payer by treating him as the assessee in default if the income has not been assessed in the hands of the payee—ACIT vs. Merchant Shipping Services Pvt. Ltd. In re. (2011) 8 ITR (Trib) 1 (ITAT-Mum.)
55. S. 9(1)(i) of IT Act, 1961—Income deemed to accrue or arise in India—Provisions of S. 9(1)(i) makes it clear that any income directly or indirectly accruing or arising to a non-resident, through or from any business connection in India, is in principle taxable in India. However, one important principle which is clearly discernible from the statutory provision is that even when there is a business connection, by way of an agent or otherwise, the income which can be subject to tax in India by the non-resident or by the agent. As per cl. (a) of Expln. 1 to S. 9(1)(i) makes it clear that in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. Where the agent of the non-resident has been compensated for the service rendered by it to the non-resident, and it is not the case the revenue that the agent has not been paid arms length or fair remuneration for the services so provided in India, no further income of non-resident can be brought to tax in terms of S. 9(1)(i) r/w S. 5(2)(b) whether or not this agent constitutes a business connection and, thus, no taxability is impossible under S. 9(1)(i) on the non-resident company—Addl. Director of It (International Taxation) vs. Star Cruise India Travel Service (P) Ltd. In re. (2011) 140 TTJ 561 (ITAT-Mum.)
56. S. 9(1)(vii) of IT Act, 1961 art. 9 & 13 of DTAA between India & Denmark-Double Taxation Relief-The assessee is a non-resident company incorporated under the laws of Denmark & carried on the business of shipping, chartering and related business and maintains a global telecommunication facility between itself and its agents in various countries. The system comprise of booking and communication software, hardware and data communication network and it enables co-ordination of cargoes and parts of call for the assessees fleet. The expenses incurred by the assessee are in respect of systems which mainly included network costs, data communication, data production, data processing costs etc. Without these systems the international shipping business cannot be conducted nor would be agents of the assessee across the world be to discharge their role as agents of the assessee. This facility enables its agents across the world to access several information like tracking of cargo of a customer, transportation schedule, customer information, documentation system and several other information. In respect of such cost sharing the assessee has raised invoice on its agents therefore, the amount received by assessee company from its agents in India towards their share of cost of global telecommunication facility provided to the agent to enables them to have access to variety of information regarding tracking of cargo, transportation schedule, etc. to facilitate international shipping business being only reimbursement of cost not involving any project element and it cannot be considered as fees for technical services. Dampskibsselskabet AF 1912 A/s Aktieselskabet Vs. Addi. DIT. In re. (2011) 142 TTJ 70 (ITAT-MUM)
57. S. 9(1)(i), 90 & 195 of IT Act, 1961, art. 5 & 7 of DTAA, between India & Netherlands —Double taxation relief—For the purpose of executing a contract of dredging, the assessee hired a dipper dredger along with co-ordinator and two operators from Dutch company and in this regard, it executed a dredging contract on its own utilizing the dipper dredger. Against the use of said dipper  dredger, the payment made by the assessee company to the Dutch company is nothing but hire charges and, the dipper dredger which was leased to the assessee to be used under its direction, control and supervision cannot construed as PE of the Dutch company and, therefore, the said payment made by the assessee to Dutch company is not liable to be taxed in India and the assessee is not required to deduct tax under S. 195 at source—Dy. Director of IT vs. Dharti Dredging & Infrastructural Ltd. In re. (2010) 133 TTJ 692 (ITAT-Hyd.)
58. S. 9(1)(i) & 90 of IT Act, 1961, art. 5, 7 & 12 of DTAA between India & Germany—Double taxation relief—The assessee, a German company merely sells the materials/CKD units to DCIL which carries out further activity of assembling the same and selling the finished cars. This transaction ends with the assessee selling the raw materials/CKD. No income from such sale accrues or arise to the assessee in India. Mere existence of subsidiary does not by itself constitute the subsidiary company a PE of the parent. The main condition for constitution of PE is carrying on of business in India, and as regards sale of parts/CKD, no operations in respect of the manufacture and sale of parties is carried out by the assessee in India. Therefore, when no profit is resulted to the assessee from the activities of DCIT and thus, its income is not assessable in India—Dy. Director of IT vs. Daimler Chrysler A.G. In re. (2010) 133 TTJ 766 (ITAT-Mum.)
59. S. 9(1)(i) & 90 of IT Act, 1961, art. 5, 7 & 12 of DTAA between India & Germany—Double taxation relief—The assessee, a German company merely sells the materials/CKD units to DCIL which carries out further activity of assembling the same and selling the finished cars. This transaction ends with the assessee selling the raw materials/CKD. No income from such sale accrues or arise to the assessee in India. Mere existence of subsidiary does not by itself constitute the subsidiary company a PE of the parent. The main condition for constitution of PE is carrying on of business in India, and as regards sale of parts/CKD, no operations in respect of the manufacture and sale of parties is carried out by the assessee in India. Therefore, when no profit is resulted to the assessee from the activities of DCIT and thus, its income is not assessable in India—Dy. Director of IT vs. Daimler Chrysler A.G. In re. (2010) 133 TTJ 766 (ITAT-Mum.)
60. S. 9(1)(vii), Expln. 2, 195(2) of IT Act, 1961, art. 5(2)(j), 13 of DTAA between India & Italy—Deduction of tax at source—For applicability of Explanation 2 to S. 9(1)(vii) of the Act, the technical services must be providing managerial, technical or consultancy services and these managerial, technical or consultancy services should not be for construction, assembly etc. Act.13(5) of the DTAA with Italy excludes from its purview application of art. 13(1) and (2), if the person rendering service has a permanent establishment or a fixed base in India. In this case, assessee company which is engaged in the business of viscose filament yarn (vfy), carbon black, branded garments, fertilizers textiles and insulators and having a textile unit entered under a collaboration agreement with a Italian company and agreed to deploy its technicians for reinstalling and recommissioning of the machinery at the assessees premises. For reinstalling and recommissioning in India, the assessee was liable to pay the consideration. Since the persons who rendered  the services were not presnet in India for the required number of days as envisaged by the art. 5(2)(j) of the DTAA and, therefore, the amount would not be chargeable to tax in the hands of the foreign company—Aditya Birla Nuvo Ltd. vs. ADIT. In re. (2011) 11 ITR (Trib) 812 (ITAT-Mum.)
61. S. 9(1)(i) of the IT Act, 1961—Deemed Income—The concepts of profits of business connection and should not be mixed up and that while the concept of business connection is relevant for the purpose of application of S. 9, the concept of PE is relevant for assessing the income of non-resident in DTAA—Ansaldo Energia SPA vs. ITAT & Ors. (Mad)
62. S. 9(1)(vi) of IT Act, 1961, art. 12 of DTAA between India & Nether land—Royalty—The applicant is a company incorporated in the Nether land and it is engaged in the business of supplying special purpose computer software to be used in the explanation and production of mineral oils. The applicant sent software by air and received consideration in us $ out side India. Therefore, the amount payable under the “software licence terms and conditions” contract to the applicant does not amount to “royalty” within the meaning of S. 9(1)(vi) of the Act or art. 12(4) of the DTAA and nor it can be treated as “fees for technical services”—Geoquest Systems B.V., Inre. In re. (2010) 327 ITR 1 (AAR)
63. S.  9(1)(vii), Expln. 2, 44BB of IT Act, 1961—Non-resident—All operations concerning “extraction of mineral oil” need not be physical operations inside the crust of the earth. The study carried out by non-resident company was in connection with the implementation of cycle steam stimulation. Cycle stem stimulation enhanced recovery of oil from oil fields by thinning of oil, thereby reducing its viscosity or density or specific gravity, so that the oil moved from the oil formation to the bore of the oil well. Hence, the study is substantilly and directly connected with the extraction of mineral oil. Extraction or production of mineral oil is included under mining operation in terms of instruction No. 1862 dt. Oct., 22, 1990. The consideration received for such services is taxable under the provisions of s. 44BB of the Act and the services rendered by the non-resident company is covered under the exclusion clause of Explanation 2 to s. 9(1)(vii) of the Act. Therefore, the consideration for “mining or like project” undertaken by non-resident company is specifically excluded from fees for technical services within the meaning of Expln. 2 to s. 9(1)(vii) of the Act —ONGC vs. Jt. CIT (2010) 6 ITR (Trib) 54 (ITAT-Trib)
64. S. 9(1)(vii), Expln. 2 44AB, 44D, 50, 90(2), 115A, 147, 195, 234B, 234D of IT Act, 1961, art. 7, 12(2), 13, 26 of DTAA between India & UK—Reassessment—As per S. 147 of the Act, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, may assess or reassess such income, within four years from the end of the relevant assessment year. However, beyond four yours, the interdiction provided in the proviso appended to the section would come in the way of the Assessing Officer—Rolls Royce Industrial Power Ltd. vs. ACIT. In re. (2010) 6 ITR (Trib) 722 (ITAT-Del.)
65. S. 9(1)(vii), Expln. 2, 44DA, 115A(1)(b)(bb), 144C(1) of IT Act, 1961, art. 5,7 of DTAA between India & Russia—Non-resident—It is settled that if the provisions of the Income-tax Act, 1961 are more favorable when compared to the provisions of the DTAA the assessee can opt for assessment under the  provisions of the Act. From the provisions of S. 9(1)(vii), 44DA  and 115A of the IT Act, 1961, under Explanation 2 to S. 9(1)(vii) of the Act, fees for technical services will not include consideration for any construction assembly, mining or like project undertaken by the recipient or consideration of the income chargeable under the head “Salaries”—JT. Stock Company Zangas vs. Addl. DZT. In re. (2011) 12 ITR (Trib) 57 (ITAT-Ahd.)
66. S. 9(1)(vii), 44BB & 90 of IT Act, 1961, art. 23 & 25 of DTAA between India and Norway—Non resident—Applicant is engaged in the business of providing services or facilities in connection with extraction or production of oil, a mining activity. The activities of providing sea logistics services viz., transportation of cargo, material and personnel required at the rig, by the applicant, to ONGC are not technical services and therefore, the income derived by the applicant for such activities is out of the preview of S. 9(1)(vii) and is liable to be taxed under S. 44BB of IT Act. Since the applicant company in the present case having shiffed its managerial control to Norway in January, 2010, it is liable to be taxed in India in terms of art. 23 of the said DTAA w.e.f. 1st Jan., 2010—Siem Offshore Inc., In re. (2011) 242 CTR 625 (AAR)
67. S. 9(1)(vi) & 40(a)(i) of IT Act, 1961—Business expenditure—The payment made by assessee to a foreign company for the services rendered for loading and display of the banner advertisement of the Department of Tourism of India on its portal is not in the nature of royalty but the same is in the nature of business profit and further in the absence of any PE of said foreign company in India, it is not chargeable to tax in India. Assessee thus, is not liable to deduct tax at source from the payment made to foreign company for such services and the payment so made cannot be disallowed by invoking the provisions of S. 40(a) for non-deduction of tax—Yahoo India (P) Ltd. vs. Dy. CIT. In re. (2011) 140 TTJ 195 (ITAT-Mum.)
68. S. 9(1)(i), (vii)(b) of IT Act, 1961—Legislative powers—Parliament is empowered to make laws with respect to aspects or causes that occur, arise or exist, or may be expected to do so, within the territory of India, and also with respect to extra-territorial aspects or causes that have an impact on or nexus with India. Such laws would fall within the meaning purport and ambit of the grant of powers to Parliament to make laws “for the whole or any part of the territory of India”, and they may not be invalidated on the ground that may require extra-territorial operation. Any laws enacted by Parliament with respect to extra-territorial aspects or causes that have no impact on or nexus with India would be ultra vires Parliament and would be laws made for a foreign territory—G.V.K. Industries Ltd. vs. ITO (2011) 332 ITR 130 (SC)
69. S. 9(1)(vii), 234B, 234C of IT Act, 1961, art. 12(4) of DTAA between India and Singapore—Advance tax—Where the entire income is liable to deduction of tax at source, the assessee is not liable for advance tax and no interest is leviable under S. 234B and 234C of the Act—Nimbus Sport International PTE Ltd. vs. Dy. DIT. In re. (2011) 12 ITR (Trib) 709 (ITAT-Delhi)
70. S. 9(1)(vi) & 90 of IT Act, 1961, art. 12 of DTAA between India & USA—Double taxation relief—The payments made by end users for granting of licence in respect of copyright in computer software are in the nature of royalty. In the present case the assessee i.e. a US company, having supplied micro soft software products to end users through distributors in India its terms and conditions attached to the end user licence agreement with clear stipulations that the product is protected by copyright and other intellectual property laws and that the product is licensed and not sold, the payments made by the end users for granting of licence in copyright and other intellectual property rights in the product and therefore, within the meaning of S. 9(1)(vi), it is held royalty and under art. 12 of said DTAA, same is taxable in India—MICROSOFT CORPORATION  vs. A. Director of IT. In re. (2010) 134 TTJ 257 (ITAT-Delhi)
71. S. 9(1)(vi) & 90 of IT Act, 1961, art. 12 of DTAA between India & USA—Double taxation relief—The payments made by end users for granting of licence in respect of copyright in computer software are in the nature of royalty. In the present case the assessee i.e. a US company, having supplied micro soft software products to end users through distributors in India its terms and conditions attached to the end user licence agreement with clear stipulations that the product is protected by copyright and other intellectual property laws and that the product is licensed and not sold, the payments made by the end users for granting of licence in copyright and other intellectual property rights in the product and therefore, within the meaning of S. 9(1)(vi), it is held royalty and under art. 12 of said DTAA, same is taxable in India—MICROSOFT REGIONAL SALES CORPORATION  vs. A. Director of IT. In re. (2010) 134 TTJ 257 (ITAT-Delhi)
72. Agent of non-resident—S. 9(1)(vii)—IT ACT, 1961—Commissioner of Income-tax v. ONGC. In re. (2012) 343 ITR 267 (UTTARAKHAND)
73. S. 9(1)(vii), 90, 195, 201(1) & 201(1A) of IT Act, 1961, art. 12 of DTAA with USA art. 13 of DTAA with UK, art. 7 of DTAA with Thailand—Double taxation relief—The assessee is engaged in the hotel business made payments to UK based interior and landscaping consultant M Grp. What was being done by said interior and landscaping consultant was basically inspection of the hotel, receiving the facilities, comparing the same with its standards and suggesting improvements/changes required to meet its standard which did not amount to technical services and thus, no tax is to deducted at source—ACIT vs. Viceroy Hotels Ltd. In re. (2012) 143 TTJ 627 (ITAT-Hyd.)
74. S. 9(1)(i) & 163 of IT Act, 1961—Non-resident—Under the provision of S. 163(2)(c), agent includes a person from or through whom the non-resident is in receipt of any income, whether directly or indirectly. It is not a case where the non-resident is in receipt of income “through” the appellant but “from” the appellant. There is no qualification that income so received by the non-resident from the resident in India is treated as agent of non-resident. The non-resident has business connection in India and therefore, income accrued and arisen to the non-resident in India is chargeable to the tax in the absence of any treaty with India—WSA Shipping (Bombay) (P) Ltd. vs. Addl. DIT. In re. (2012) 143 TTJ 423 (ITAT-Mum.)
75. S. 9(1)(vi) & 195 of the IT Act, 1961—TDS—Non-resident—Lease amount paid by Govt. of India to non-resident having no permanent establishment in India will not be treated as Royalty and thus the lease amount will not be taxable in hands of non resident. Since the applicant is not chargeable to income tax under the provisions of the treaty the applicant is under no obligation to deduct tax at source.
76. S. 9(1)(vii), 194C & 194J of IT Act, 1961—TDS—Any payment for technical services in order to be covered under S. 194J, should be a consideration for acquiring or using technical know-how simpliciter provided or made available by human element. There should be a direct and live link between payment and receipt/use of technical services/information. If the conditions of S. 194J r/w S.9(1)(vii), Expln. 2 are not fulfilled, the liability under this section is ruled out. Thus, the payments made by the assessee to security services are covered under S. 194C and there is no scope for applying the provisions of S. 194J of the Act—Glaxosmithkline Pharaceuticals Ltd. vs. ITO. In re. (2012) 145 TTJ (UO) 9 (ITAT-Pune)
77. S. 9(1)(i), (vii)(b) of IT Act, 1961—Legislative powers—Parliament is empowered to make laws with respect to aspects or causes that occur, arise or exist, or may be expected to do so, within the territory of India, and also with respect to extra-territorial aspects or causes that have an impact on or nexus with India. Such laws would fall within the meaning purport and ambit of the grant of powers to Parliament to make laws “for the whole or any part of the territory of India”, and they may not be invalidated on the ground that may require extra-territorial operation. Any laws enacted by Parliament with respect to extra-territorial aspects or causes that have no impact on or nexus with India would be ultra vires Parliament and would be laws made for a foreign territory—G.V.K. Industries Ltd. vs. ITO. In re. (2011) 332 ITR 130 (SC)
78. S. 9(1)(vii), Expln. 2, 90(2), 115A(1)(b)(AA), 195, 209, 234B of IT Act, 1961, art. 13 of DTAA between India & UK—Advance Tax—The powers of the Tribunal while dealing with an appeal are quite wide and it can consider any other argument connected with a ground even if not considered by the lower authorities. Any information of industrial, commercial or scientific nature arising from past experience which is a confidential information whether patented or not has to be considered as know-how. While computing advance tax payable for the purpose of computation of interest under S. 234B tax dedutible at source in relation to royalty and fees for technical services has to be deduced—DE Beers U.K. Ltd. vs. Dy. CIT. In re. (2012) 13 ITR (Trib) 1 (ITAT-Mum.)
79. S. 9(1)(vi), 90, 195 & 201(1) of IT Act, 1961, art. 12 of DTAA between India & Switzerland—Double taxation relief—The assessee who is engaged in the business of banking in India made payment to a Swiss Company for obtaining licence to use a software and such payment is in the nature of royalty both under the IT Act as well as the DTAA between India and Switzerland. Thus, the assessee was required to deduct tax at source before making the remittance but since the assessee was failed to do so and therefore, it has to be treated as an assessee in default under S. 201(1) of the Act—ING Vysya Bank Ltd. vs. Dy. DIT. In re. (2012) 143 TTJ 249 (ITAT-Bang.)
80. S. 5(2), 9(1)(i), Expln. 1 of the IT Act, 1961—Non-resident—Where the income is actually received or has accrued in India resort to the deeming provision is not warranted, the provision contained in S. 5(2) is sufficient to create a charge in respect of the non resident’s income—Mustaq Ahmed.
81. S. 9(1)(vii), Expln 2, 90(2), 115A(1)(b)(AA), 195, 209, 234B of IT Act, 1961, art. 13 of DTAA between India & UK—Advance Tax—The powers of the Tribunal while dealing with an appeal are quite wide and it can consider any other argument connected with a ground even if not considered by the lower authorities. Any information of industrial, commercial or scientific nature arising from past experience which is a confidential information whether patented or not has to be considered as know-how. While computing advance tax payable for the purpose of computation of interest under S. 234B tax deductible at source in relation to royalty and fees for technical services has to be deduced—DE Beers U.K. Ltd. vs. Dy. CIT. In re. (2012) 13 ITR (Trib) 1 (ITAT-Mum.)
82. S. 9(1)(vii), 40(a)(i) & 195 of IT Act, 1961—Business expenditure—The initial onus under S. 9(1)(vii)(b) lies on the assessee to prove that the exemption available there under is in fact available to the assessee. Since the assessee has been amply successful in discharging this onus by establishing that the testing and certification services provided to it by CSA were utilized only for its export and thus, S. 9(1)(vii) is not applicable and no dis-allowance under S. 40(a)(i) is called for—Havells India Ltd. vs. Addl. CIT. In re. (2011) 140 TTJ 283 (ITAT-Delhi)
83. S. 9(1)(vi), 195 of IT Act, 1961—Non-resident—The applicant, incorporated under the laws of the British Virgin Islands, conceived, designed and developed software technology relating to payment processing platforms and services. The applicant outsourced the development of software for an advanced intelligent processing platform to an Indian company under a MoU, which provided that said Indian company would develop certain operation support systems software which included, inter alia, products that come to be know as “call manager” and “net manager”. Latter on a settlement of dispute arose out of breach of covenant as to inventors assignment by India company. The Authority held that consideration paid for granting of a license in respect of a patent or obtaining the right to use the patent or a process protected by copyright, is a royalty as defined in the Income-tax Act—Upaid Systems Limited, In re. (2011) 338 ITR 517 (AAR)
84. S. 9(1)(vi), 195(2), 263 of IT Act, 1961—Revisions—Where the Assessing Officer had failed to conduct the required inquiry and also failed to apply his mind before accepting the return of income of the assessee on the face of it, the question of there being a plausible view taken by the Assessing Officer does not arise. Therefore, it is a reasonable fit case for exercising revisionary jurisdiction under S. 263 of the Act—P.B. Asia Ltd. vs. Director of IT. In re. (2012) 14 ITR (Trib) 229(ITAT-Delhi)
85. S. 9(1)(vi), Expln. 195 of IT Act, 1961, art. 5,7,12(3)(a) of DTAA between India and Singapore—Non-resident—The appellant, a non-resident company engaged in the business of banking in India though established in the different states of India, entered into a hubbing agreement with a company incorporated in Singapore, for the provision of data processing support to the appellant for its business in India. Raw input bank transaction dates were sent by bank through telecommunication lines to Singapore for Processing and the processing was done at Singapore according to banks requirement and processing out put generated as reports according to banks specifications transmitted to India through telecommunication lines. Since there was no use or right to use process involved and no right was also to use any equipment and therefore, the payment made by the appellant to said company incorporate in Singapore is not royalty within the meaning of art. 12(3)(a) of the DTAA with Singapore—Standard Chartered Bank vs. Dy. Director of IT. In re. (2011) 11 ITR (Trib) 721 (ITAT-Mum.)
86. S.9(1)(i),(vii), 40(a)(ia) of IT Act, 1961, art. 7 of DTAA with UK, art. 7, 12 of DTAA with Russia, art. 7 of DTAA with South Africa—Deduction of tax at source—The assessee is engaged in the business of manufacture of insulators and bushings. The assessee made payments to non-residents in foreign currency on account of  “sale commission”, “subscription”, “insulators testing”, “technical consultancy”, advertising”, etc. without withholding tax under S. 195. The service were rendered outside India. The commission so earned by the non-resident is business profit. According to art. 7 of DTAAs with U.K. and U.A.E., business profits can be taxed in the other contracting State if the enterprise of a contracting state has a PE in the other contracting state. Hence, even if the commission has been received by the non-residents on account of business connection mentioned in S. 9(1)(i) of the Act it is not chargeable in India because such non-resident companies do not have any PE in India—ACIT vs. Modern Insulator Ltd. In re. (2011) 10 ITR (Trib) 147 (ITAT-Jaipur)
87. S. 5(2) & 9(1)(i) of the IT Act, 1961—Deemed Income—While arriving at the deemed income accruing or arising directly or indirectly through a business connection in India, no part of the income shall be attributed to the operations limited to the purchase of goods for the purpose of export—Ikea Trading (Hong Kong) Ltd.
88. S. 9(1)(vii) & 90 of the IT Act, 1961, art. 15 of DTAA between India & UK—Double Taxation Avoidance Agreement—Since as per art. 15 of DTAA between India & UK, the assessee-UK firm remained present in India for 90 days or more, the fee received by assessee UK firm from its client against providing the legal service in India is chargeable to tax under S. 90(1)(vii)(c) only to the extent referable to service provided in India to the exclusion of service provided from abroad—Clifford Chance vs. DCIT.
89. S. 5(2), 9(1)(vii), 90 & 195 of the IT Act, 1961 r/w art. 13 of DTAA between India and UK—Double taxation relief—The training fee paid by the assessee is the income of M/s Corus Consulting Ltd., UK, by way of fee for technical services which is deemed to accrue and arise in India under S. 9(1)(vii) of the Act, is chargeable to tax in terms of provisions of S. 5(2) of the Act—Steel Authority of India Ltd. vs. ITO.
90. S. 9(1)(vii) of IT Act, 1961—Deduction of tax at Source—Assessee providing internet services to subscribers and no technical services provided by non-resident to assessee. Therefore, the assessee need not deduct tax at source in respect of payment made to the non-resident as the assessee is merely providing internet services to its subscribers and the provisions of S. 9(1)(ii) of the Act are applicable—CIT vs. Estel Communications P. Ltd. In re. (2009) 318 ITR 185 (Delhi)
91. S. 9(1)(vii), 40(a)(i) & 195 of IT Act, 1961—Deemed income—For finalizing its design or removing the defects in its power project design used to be used in India, assessee obtained specific technical information from non-resident. Therefore, the payment made by assessee to non-resident for said service is ‘fee for technical service’ deemed to accrue or arise in India and not deductible at source in view of Explanation to S. 9(1)(vii) inserted by Finance Act, 2007, retrospectively w.e.f. 1st June, 1976—Dr. Hutarew & Partner (India)(P)Ltd. vs. ITO. In re. (2009) 123 TTJ 951 (ITAT-Delhi)
92. S. 9(1)(vii), 194J, 201(1) & 201 (1A) of IT Act, 1961—TDS—As per Explanation to S. 9(1)(vii), the fees for technical services means any consideration for rendering of any managerial, technical or consultancy services and it would not include purchase of material by the assessee for the purpose of imparting computer education at their center, hence, provisions of S. 194J and for that purpose, S. 201(1) and 201(1A) are not attracted —ACIT vs. Front line Software Services (P) Ltd. In re. (2009) 124 TTJ 369 (ITAT-Indore)
93. S. 9(1)(vii), 40(a)(ia) & 194J—Business expenditure—The CBDT in Circular No. 5 of 2005 dt. 15th July has clarified that the provision of S. 40(1)(ia) is to augment compliance of TDS provisions in the case of resident and curb bogus payments to them. Assessee-an electricity company, entered into transmission service agreement” with the transmission company RPVN in terms of the mandate of the Electricity Act, 2003. In any case since assessee has made actual payment of the wheeling/ SLDC charges as per the evidence placed on record, provision of S. 40(a)(ia) are not applicable—Jaipur Vidyut Vitran Nigam Ltd. vs. Dy. CIT. In re. (2009) 123 TTJ 888 (ITAT-JP)
94. S. 9(1)(vii), 194J, 201(1) & 201(1A) of IT Act, 1961—TDS—The assessee company is engaged in the business of providing internet access services to its corporate clients and consumers. For providing the sales service, the assessee needs bandwidth network operating infrastructure and same was availed against the payment. Therefore, availing of such services against payment cannot be said to be technical services within the meaning of S. 194 r/w Expln. 2 to cl. (vii) of S. 9(1) of the Act—Pacific Internet (India)(P)Ltd. vs. ITO. In re. (2009) 125 TTJ 966 (ITAT-Mumbai)
95. S. 9(1)(i), 90(2), 234B of IT Act, 1961—Interest—Since the payment made to the assessee-a non-resident company, is subjected to tax deducted at source, then the assessee is not liable to pay any advance tax and no question arises to levy of interest under S. 243B of the Act—LG Cable Ltd. vs. Dy. Director IT. In re. (2009) 314 ITR 301 (ITAT-Delhi)
96. S. 9(1)(vii)(b), Expln. 2,44BB of IT Act, 1961,art. 12(3)(g) of DTAA between India & Australia—Presumptive-tax—The assessee, a non resident company incorporated in Australia entered into a contract with RIL where under the 2D and 3D seismic data processing based on the data collected by RIL and training of employees of RIL on Geolog software was to be undertaken as the contract was one of services. The assessee did not have permanent establishment in India. The amount received by the assessee company from RIL under the contract does not represent consideration for any technical services rendered to RIL which made available the technical knowledge, experience, skill etc. or consisted of the development and transfer of any technical plan or design within meaning of art. 12(3)(g) of the Indo-Australian agreement. The consideration would continue to be viewed as business profits under art. 7 of the agreement. Since the assessee did have PE in India, the business profits cannot be taxed in India—ACIT vs. Paradigm Geophysical P. Ltd. In re. (2010) 1 ITR (Trib) 178 (ITAT-Delhi)
97. S. 9(1)(vi) of IT Act, 1961, art. 7 & 13 of DTAA between India & UK—Double taxation relief—The license granted to the licensee by the assessee-company to use the software is a non-exclusive and non-transferable license as stipulated in cl. 2(a) of the license agreement. The amount received by the assessee under the license agreement for allowing use of the software is not ‘royalty’ either under the IT Act or under DTAA and other receipts on account of maintenance charges and training fee being incidental to the software receipts assume the same character as that of software receipts and the same are liable to be taxed. The payment received by the assessee company against software license is not in the nature of royalty but is in the nature of business profits chargeable to tax in its hands under art. 7 of the DTAA—Infrasoft Ltd. vs. A. Director of IT. In re. (2010) 1 ITR 390 (Trib) (Delhi)
98. S. 9(1)(vii), 32, 40(a)(i)(iii) 43A of IT Act, 1961—Communication charges for VSAT up-linking are not covered in the definition of “fees for technical services” as given in Explanation 2 below S. 9(1)(vii). No tax from the payment of said charges is deductible at source and the dis-allowance made by the Assessing Officer by invoking the provisions of S. 40(a)(i) is not sustainable—Expeditors International (India) P.Ltd. vs. Addl. CIT. In re. (2010) 2 ITR (Trib) 153 (DELHI)
99. S. 9(1)(i), Expln. 1(b) of the IT Act, 1961—Deemed Income—Assessee purchasing the goods for the purpose of exports and in absence of there being any prima facie contract between the assessee and local manufacturer the only relationship is that of buyer’s agent and the local manufacturer knows the assessee only as the agent of the buyers, the local manufacturer know that the agent of the buyer, viz., the assessee, has placed the orders on it with a view to buy the goods in the course of export and as directed, export is to various affiliates of the assessee, therefore, the Expln. (1)(b), regarding purchase for the purpose of export, clearly applies and no income is derived by it in India through its operation of the liaison office in India—Nike Inc. vs. ACIT (2009) 122 TTJ 201 (ITAT-Bang)
100. S. 9, r/w S. 5 of IT Act 1961—Income—As per conjoint reading of S. 5(2) and S. 9(1)(i), only if the income is arising directly or indirectly through or from any business connection in India, it can be taxed in India—Galileo International Inc. vs. Dy. CIT, Non-resident Circle, New Delhi. In re. (2009) 116 ITD 1 (ITAT-Delhi)
101. S. 90, 9(1)(vi), 195-Double Taxation Relief-IT ACT, 1961-DY. DIRECTOR OF IT (INTERNATIONAL TAXATION) vs. DHARTI DREDGING & INFRASTRUCTURE LTD. In re. (2012) 147 TTJ 238 (ITAT-HYDERABAD)
102. S. 009(1)(vii)—Non resident—IT ACT, 1961—GUY CARPENTER & CO. LTD. vs, ADIT. In re. (2012) 18 ITR (Trib) 333 (ITAT-DELHI)
103. Deemed Dividend—S. 9(1)(i), 44BB—IT ACT, 1961—Roxar Maximum Reservoir Performance WLL, In re. (2012) 250 CTR 4 (AAR)
104. S.9(1)(i) & 90 of the IT Act, 1961, art. 5, 7 & 13 of DTAA between India & Finland— Double Taxation Relief —Liaison Office is prohibited in engaging itself in any business activities in India on behalf of the foreign enterprise, which cannot be considered to furnish a business connection in India. Hence the LO set up by the assessee a Finnish company, in India does not constitute a business connection under S.9(1)(i) or a PE of the assessee in India within the meaning of art. 5 of the treaty with Finland.—DIT Vs. Nokia Networks OY. In re. (2012) 253 CTR 417 (Delhi)
105. S. 9(1)(vii), 44D, 90(2),115A of IT Act, 1961, art. 7, 12 of DTAA between India & Australia—Non-resident—Since the income earned by the assessee is taxable as fee for technical services, S. 44D of the IT Act, 1961 is applicable—DIT vs. Rio Tinto Technical Services. In re.  (2012) 340 ITR 507 (Delhi)
106. Assessment—S. 2(31)(v),5(2), 9(1)(i)—IT ACT, 1961—ABC,INRE. In re. (2012) 249 CTR 329 (AAR)
107. S. 9(1)(vii), 44DA & 90 of IT Act, 1961, art. 5, 7 & 13 of DTAA with France—Double taxation relief—Under the IT agreement, the French company is to provide support services through a central team in the area of information technology to the applicant i.e. Indian subsidiary and to its other subsidiaries in the world. The provision of support services by the French company would itself make available the technical knowledge/experience to the applicant. Hence, information technology relating to design, engineering, manufacturing and supply of electric equipment that help in transmission and distribution of power, commissioning and servicing of transmission and distribution system is provided to the Indian entity which is applied in running the business of the applicant and the employees of the applicant would get equipped to carry on these systems on their own without reference to the French Company, When the IT agreement comes to an end. It is not as if for making available, the recipient must also be conveyed specifically the right to continue the practice put into effect and adopted under the agreement on its expiry. Thus, the services provided under the IT agreement are in nature of fees for technical services and taxable under the DTAA as well as under the Income-tax Act. Since the applicant has a PE in India, the income by way of FTS will be taxed under S. 44DA at the rate provided under the Finance Act for the relevant year and tax withheld accordingly and, therefore, the payment to it would not fall under the provision of art. 13 of the DTAA with France—Areva T & D India Ltd., In re. (2012) 249 CTR 1 (AAR)
108. Deduction of tax at source—S. 9(1)(vii), 90, 195—IT ACT, 1961—MERSEN INDIA (P) LTD. In re. (2012) 249 CTR 345 (AAR)

Reference:

As Per Section 9(1), Of the Income Tax Act, 1961-

9. (1) The following incomes shall be deemed to accrue or arise in India :—

(i)  all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.

[Explanation.—

For the purposes of this clause—

(a)  in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India ;

(b)  in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export ;

(c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India ;

 (d)  in the case of a non-resident, being—

(1)  an individual who is not a citizen of India ; or

(2)  a firm which does not have any partner who is a citizen of India or who is resident in India ; or

(3)  a company which does not have any shareholder who is a citizen of India or who is resident in India,

no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations which are confined to the shooting of any cinematography film in India.

Explanation .—

For the removal of doubts, it is hereby declared that “business connection” shall include any business activity carried out through a person who, acting on behalf of the non-resident,—

(a)  has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or

(b)  has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or

(c)  habitually secures orders in India, mainly or wholly for the non-resident or for that non-resident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident:

Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business :

Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other non-residents which are controlled by the principal non-resident or have a controlling interest in the principal non-resident or are subject to the same common control as the principal non-resident, he shall not be deemed to be a broker, general commission agent or an agent of an independent status.

Explanation.—

Where a business is carried on in India through a person referred to in clause (a) or clause (b) or clause (c) of Explanation 2, only so much of income as is attributable to the operations carried out in India shall be deemed to accrue or arise in India.

Explanation.—

For the removal of doubts, it is hereby clarified that the expression “through” shall mean and include and shall be deemed to have always meant and included “by means of”, “in consequence of” or “by reason of”.

Explanation.—

For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.]