02 November 2017
UK Firm is a non-resident with no PE in India. Under the Income Tax Act Section 5(2) needs to be examined to determine if this payment would fall within the scope of total income. 1. It is clear that the income is not received or deemed to be received in India by the UK Firm. 2. It needs to be examined whether the income can be said to accrue or arise or can be deemed to accrue or arise in India. In my opinion, this income cannot be said to be through or from a business connection in India. However, 9(1)(vii) states that Income by way of Fees for Technical Services (FTS) payable by a person that is resident i.e. your client is deemed to accrue or arise in India, unless such payment is in respect of a business or profession carried on by the payer outside india or for the purpose of making any income from any source outside India. So this is one thing that you need to clarify. (It is of course debatable whether the payment can be said to be a Fees for Technical Service) The explanation to section 9 further states that for FTS, among other items, it is not important for the services to be performed in India or for the services to have been rendered in India. So worst case scenario, the income can be considered as taxable in India under 9(1)(vii) Hence we can refer to the DTAA with UK. Here you can states that the payment for shooting is not FTS as it does not "make available" technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design. (Article 13). This can further be sealed by stating that the entity has no PE and therefore the income cannot be taxed even as Business Profits. Please obtain a Tax Residency Certificate and Form 10F as backups for your record and a declaration stating that the recepient has no PE. Accordingly no tax may be deducted from the payment to be made.
CAclubindia
