• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/6/2013

India - Services not taxable in India under U.S. treaty 

September 6: The KPMG member firm in India prepared a report on the following development (read the September 2013 report by clicking on the hyperlink provided below):

Marketing and management services provided outside India are not taxable in India under provisions of the India-United States income tax treaty - The Mumbai Bench of the Income-tax Appellate Tribunal found that marketing and management services were provided outside India and thus held that the income from such services did not accrue or arise in India and was not taxable in India.

The tribunal observed that one of the conditions for applying the “Force of Attraction” rule under the India-United States income tax treaty is with respect to a business activity conducted in the treaty-partner country where the permanent establishment (PE) is situated. The tribunal found that this condition was not satisfied, and that the existence of a service PE in India did not cause the related income to be subject to tax in India under the tax treaty.

Further, it was noted that the taxpayer had not “made available” any technical knowledge, experience, skill etc., to its PE in India by rendering the marketing and management services; therefore, the amounts were not subject to tax as “Fees for Included Services” under Article 12 of the treaty.

The case is: WNS North America Inc. Read a September 2013 report [PDF 488 KB]

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