IN RE: PERFETTI VAN MELLE HOLDING B.V. Vs. STATE

JUDGEMENT

(1.) APPLICANT submits that it is a company based in Netherlands and is in the business of manufacture and sale of sugar confectionary and gum. It also provides operational and other support services for the benefit of companies of Perfetti Van Melle Group (Perfetti Group) situated in various countries. It has entered into a Service Agreement with its group company, Perfetti Van Melle India Pvt. Ltd. (Perfetti India), which is effective from 1.4.2010. Under the agreement, the Applicant will incur cost in providing various operational and other support services for the benefit of group companies by drawing its own resources as well as on those available from other Group Companies or third parties and will invoice the cost incurred for providing such services on cost to cost basis without charging any mark up. The employees and other personnel engaged by the Applicant for providing these services will not visit India. Applicant submits that being a tax resident of the Netherlands, the provision of India -Netherland Double Taxation Avoidance Convention (DTAC) will apply to the extent they are more beneficial when compared to the provisions of the Income -tax Act, 1961 (Act). Under para 5(b) of Article 12 of the DTAC, any service to qualify as fees for technical services (FTS), the service should be technical or consultancy in nature and the services should 'make available' technical knowledge, experience, skill, know -how or processes, or consist of the development and transfer of a technical plan or technical design. The definition of FTS under the DTAC is more restrictive than under the Act and hence being invoked. Applicant submits that the term 'make available' has not been defined under the DTAC, but an inference may be drawn from India -USA DTAC which has an identical definition in paragraph 4(b) of Article 12 for defining "fees for included services". Under the memorandum of understanding of India -USA DTAC, 'make available' means that the person acquiring the services is enabled to independently apply the technology, that there should be transfer of technical knowledge, skill etc. from the service provider to the recipient in order for the services to qualify as making available technical knowledge, skill etc. [Ref.: Intertek Testing Services India (P) Ltd., in re, [2008] 307 ITR 418 :, 175 Taxman 375 (AAR - New Delhi), National Organic Chemicals Industries Ltd. v. Dy. CIT, [2006] 5 SOT 317 (Mum.), C.E.S.C. Ltd. v. Dy. CIT, [2003] 87 ITD 653 (Kol.) (TM).

(2.) APPLICANT seeks advance ruling on the following questions: -

(3.) ASSUMING that the Applicant has no other taxable income in India, on the facts and circumstances of the case;