What would be the impact of the AAR ruling?
A favourable ruling on referral fee Sometimes having something permanent can be a drawback. The Authority for Advance Rulings (AAR) in a recent ruling held that where a non-resident company had referred a potential customer to its Indian group company and received referral fees, the fees received being business income, would be liable to tax in India - only if it has a permanent establishment (PE) in India.
This means the absence of a PE may work out in an entity's (in this case Cushman & Wakefield Pte - CWS) favour as it doesn't have a permanent shop in the country. Says Mr Girish Mistry, Executive Director, PricewaterhouseCoopers Pvt Ltd, "The AAR ruled that referral fee was not royalty or fees for technical services and was not taxable in India as business income since CWS did not have a PE in India. Under the tax treaty provisions a non-resident's business income would be taxable in India only when it has PE in India."
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posted by padmaja | 3:03 AM
1 Comments:
Attn : Mr. D Murali
This is in reference to your article ‘ DETAXIFICATION ‘ in the July 19 edition of Business Line, Kolkata. The article was very informative and interesting to read. There is always a dispute regarding taxability of international transactions.
While, reading the article, I wondered about the implication of service tax on referral fees. CWS is engaged in the business of real estate consulting and in accordance with its global policy refers clients to its group companies based on their geographical locations. CWI is an Indian subsidiary of CWS, which is engaged in the same business as its parent in India. As per the contract entered outside India, CWS was required to refer clients to CWI either through e-mail or telephone. This information was used and exploited by CWI in India for promoting its business. Whenever the deal fructifies, CWI receives commission from the client, 30% of which is remitted to CWS as referral fees.
Will this arrangement of using the information by CWI not amount to Business Support Services under Sec. 65(104c) and thereby attract service tax ?
The article would have been more informative had this aspect been covered.
Regards,
P.J. Bhide, FCA
Kolkata
pjbhide@yahoo.com
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