DUN AND BRADSTREET ESPANA S A Vs. STATE

JUDGEMENT

(1.) SYED Shah Mohammed Quadri, J. (Chairman) 1. This application under Section 245Q(1) of the Income-tax Act, 1961 (for short "the Act"), is by a non-resident company--Dun and Bradstreet, Espana, SA--which was incorporated in Spain. The applicant is an associate of the Dun and Bradstreet group (referred to as "D&B") which has the largest and the most comprehensive database available, with information on 79 million business entities worldwide for making credit, marketing and purchasing decisions. D&B provides various products to various businesses worldwide. Among these products are Business Information Reports (BIRs). A BIR is similar to a book which is available, both in electronic form as well as in hardcopy which used to be delivered physically till the advent of the e-commerce revolution which made c-delivery possible. A BIR provides information in respect of a company on various aspects, e.g., its existence, operations, financial condition, management's experience, line of business, facilities and location of the prospect and also information about any suits, liens, judgments, etc.

(2.) After filing of this application the D&B group has undergone a change in shareholding pattern and the group companies as a result of restructuring with effect from March 1, 2004. The applicant was permitted to bring on record the changes in shareholding of associates and to amend annexures to the application. We shall refer to the position of D&B and its associates companies after the restructuring. Dun and Bradstreet Espana, S.A. Spain (the applicant), continues to be a subsidiary of Dun and Bradstreet International Limited, USA (D&B US), an American company, and Dun and Bradstreet Information Service India (P) Limited (DBIS), an Indian company has now become a 100 per cent, subsidiary company of Dun and Bradstreet SAME Limited ("DB SAME"), a company incorporated in the Cayman Islands instead of D&B US which was the holding company earlier but now it holds 10 per cent, equity shares of DB SAME and the balance of 90 per cent, equity shares are held by the employees DB SAME, DBIS and other investors.

(3.) THE applicant being a tax resident of Spain is entitled to the benefit of the Double Taxation Avoidance Agreement entered into between the Government of the Republic of India and the Kingdom of Spain effective from January 12, 1995 vide Notification dated April 21, 1995, see [1995] 214 ITR (St.) 197 (for short "the treaty"). As per Section 90(2) of the Act, the provisions of the Act would apply to the extent they are more beneficial to the applicant. Article 7 of the treaty deals with taxability of the business profits. THErefore payments made by DBIS for the electronic purchase of BIRs to the applicant would be its business income and taxable in India only if the applicant has a permanent establishment (PE) in India within the meaning of the Article 5 of the treaty and it is asserted that it does not have a PE in India.