Authority For Advance Rulings (Income Tax), New Delhi
Oxford University Press, In re
Section : 9
Justice Dr. Arijit Pasayat, Chairman And T.B.C. Rozara, Member
A.A.R. No. 1110 Of 2011
April 30, 2014
1. The applicant, Oxford University Press, is an Indian branch of Oxford University Press, U.K., a Department of Oxford University U.K. It is engaged in publishing, printing and reprinting of educational books for schools, Universities, Professional and other educational institutions or scholarly books. The applicant has appointed Ms Geetha Kumararaja (hereinafter referred to as “Ms Geetha”), a resident of Colombo, Sri Lanka and designated her as “Resident Executive” as per letter of appointment dated 31st May, 2011, with duties and responsibilities contained in communication dated 6th June, 2011 for a period of 12 months commencing on 1st June, 2011. She is being paid remuneration and reimbursement of expenses as per the said letter of appointment and is carrying on duties and responsibilities exclusively for the applicant as per the said communication dated 6th June, 2011. The monthly remuneration and reimbursement of expenses are set out in the said letter of appointment dated 31st May, 2011. These are remitted to Ms Geetha’s Bank account in Colombo, Sri Lanka from the Applicant’s bank Account in India.
2. Presenting the above facts, the applicant seeks ruling of this Authority on the following questions:—
‘(1) Whether on the facts and in the circumstances of the case and in law payment to Ms Geetha Kumararaja (hereinafter referred to as “Ms Geatha”) in her bank account in Sri Lanka, of monthly remuneration of retainer fees for services rendered in ‘Sri Lanka should be subjected to tax deduction under the income tax act, in India?
(2) Whether on the facts and in the circumstances of the case and in law fixed monthly sum paid to Ms Geetha in reimbursement of expenses on storage space, telephone and internet should be subjected to tax deduction under the income tax act, in India?
(3) Whether on the facts and in the circumstances of the case and in the law fixed monthly sum paid to Ms. Geetha in reimbursement of expenses for local conveyance should be subjected to tax deduction under the income tax act, in India?
(4) Whether on the facts and in the circumstances of the case and in the law payment of fixed sum to Ms. Geetha outstation tours towards Dearness Allowance for overnight stay outside Colombo should be subjected to tax deduction under the income tax act, in India?
(5) Whether on the facts and in the circumstances of the case and in the law payment of fixed sum to Ms Geetha in reimbursement for outstation tours conveyance, in addition to reimbursement of actual train/bus fare should be subjected to tax deduction under the income tax act, in India?
(6) Whether on the facts and in the circumstances of the case and in the law, upon Ms Geetha being appointed as a regular employee on applicant’s payroll, the salary and other payments made to her and paid into her bank account in Sri Lanka will be subjected to tax deduction under the income tax act, in India?’
3. It was submitted that Ms Geetha is a resident of Sri Lanka and all the activities undertaken by her are entirely in Sri Lanka and no part of activities are to be taken by her in India. The role of Ms Geetha was basically marketing executive that involves promotion of sale of books published by the applicant. No managerial, technical or consultancy services are involved in her work and, therefore, provision of section 9(1)(vii) of the Income-tax Act, 1961(hereinafter referred to as the Act) is not applicable. It was further submitted that Ms Geetha is also entitled to claim the benefit of Article 14 of the DTAA in respect of income derived from her professional services and activities of an independent character. As per Article 14 of the India-Sri Lanka DTAA, her income is taxable only in the country in which she was rendering the services as a resident in Sri Lanka. Being resident of Sri Lanka and non-resident the remuneration received by her is not taxable in India both under section 5(2) and section 9(1)(vii) of the Act and Article 14 of the DTAA of India-Sri Lanka DTAA. It is urged that as her income is not taxable in India there is no liability on the applicant to deduct tax at source over making payment of the remuneration to Ms Geetha.
4. The Revenue contested the submission made by the applicant. According to the Revenue, the nature of duties assigned and the job profile is in the nature of fees for professional and technical services. The job requires providing services relating to marketing development, brand image enhancement and establishment of Oxford University Press and a respected brand in the minds of teachers, students and University in Sri Lanka. By virtue of the contract of retainship, it is clear that the income of the recipient is not chargeable under the head ‘salaries’. It is submitted that payment will be deemed to accrue or arise in India according to the express provision of section 9(1) of the Act.
5. We have considered the rival contentions of both the applicant and the Revenue. There is no dispute regarding the services rendered by the applicant, details of which are given both at the time of application and in the course of hearing. The job descriptions of Ms Geetha are as under:—
Job Title Sales Executive Grade
Department Sales Division
Reports to (title, not name) Regional Sales Director (South) Date compiled 06.06.2011
Purpose of the Job
To be responsible for achieving the sales & collection budgets in the territory assigned through planning & aggressive promotion of the relevant titles covering Indian School books, OXED and allocated HE titles.
To achieve the given sales & collection targets on time.
To grow existing market share by maximizing adoptions and developing new markets.
To enhance OUP’S Brand image.
To maintain & develop good relations with customers & trade.
To ensure effective use of all marketing resources & tool to maximize sales.
Main duties and responsibilities
To grow school business by promoting Oxed AND Indian school books in international and Sri Lankan Board schools across Sri Lanka.
To cover higher education universities across the island & promote OUP books.
Providing value added services in terms of workshops and other educational activities.
To create OUP as respected brand in the mind of Teachers, students and traders through books, workshop and other promotional activities.
To maintain good relations with traders and other customers to get more business and collection within the credit limit.
To ensure faster collection.
To be aware of competitor’s product.
To use reporting tools efficiently in order to maintain & update information on the SMART OUP.
To communicate regularly with the centre for effective reporting.
6. On examination of the details we are of the view that the services rendered are basically for promotion of sales and brand name of the applicant in Sri Lanka. They are basically sales promotion.
7. As per the appointment of Ms Geetha, she was designated as resident executive for Sri Lanka operating from Colombo. The job description fits in more with a marketing executive than anything else. There is no definition of technical services in India-Sri Lanka Tax Treaty and, therefore, in order to examine whether the payment is fees for technical services, we have to resort to provisions of the Act. Fees for technical services is defined in explanation 2 to section 9(1)(vii) of the Act that states:
‘9(1)(vii) Explanation 2 – For the purposes of this clause, “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of the services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.’
The services rendered by Ms Geetha do not fall under any of the items mentioned in the explanation namely, managerial, technical or consultancy services. The services rendered by her are, therefore, not technical services as defined in the Act. There is no dispute regarding status of Ms Geetha that is resident in Sri Lanka and non-resident in India and the services rendered outside India. The payments are made in Sri Lanka. We agree with the learned counsel for the applicant that the payment made to Ms Geetha is not taxable either under the Act or the India-Sri Lanka Tax Treaty. We also find that the payments falls under Article 14 of the India-Sri Lanka Tax Treaty and even on that account the same is not taxable in India.
8. Regarding the reimbursement of expenses as mentioned in question No.4 & 5, they are directly linked with her services in Sri Lanka for the applicant. For the same reason as discussed above reimbursement of those expenses will also not be taxable in India under the provision of the Act or under India-Sri Lanka Tax Treaty.
9. The questions are, therefore, answered in negative.
[Citation : 364 ITR 251]