BEFORE THE AUTHORITY FOR ADVANCE RULINGS (INCOME TAX) NEW DELHI

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P R E S E N T

Hon’ble Mr. Justice Syed Shah Mohammed Quadri (Chairman) Mr. K.D. Singh (Member)

Wednesday, the twentieth October two thousand four

A.A.R. NO. 615 OF 2003

Name & address of Dun & Bradstreet Espana, S.A. the applicant Juan de Mariana, 17

Madrid 28045 Spain.

Commissioner concerned DIT (International Taxation) Delhi

Present for the Department Shri Salil Gupta, Addl. DIT (International Taxation)

Shri Saad Kidwai CDDIT (International Taxation)

Present for the Applicant Shri Nishith Desai, Advocate

R U L I N G (By Mr. Justice Syed Shah Mohammed Quadri)

This application under section 245Q(1) of the Income tax

Act, 1961 (for short the “Act”), is by a non-resident company – Dun

& Bradstreet, Espana, SA- which was incorporated in Spain. The

applicant is an associate of Dun & 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.

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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

advent of E-commerce revolution which made e-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,

judgements etc..

After filing of this application D&B group has undergone a

change in shareholding pattern and the group companies as a

result of re-structuring with effect from 1st March, 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 the D&B and its

associates companies after the restructuring. Dun & Bradstreet

Espana, S.A. Spain (the applicant) continues to be a subsidiary of

Dun & Bradstreet International Limited, USA (D&B US), an

American company, and Dun & Bradstreet Information Service

India (P) Limited (DBIS), an Indian company has now become a

100% subsidiary company of Dun & Bradstreet SAME Limited (“DB

SAME), a company incorporated in Cayman Islands instead of

D&B US which was the holding company earlier but now it holds

10% equity shares of DB SAME and the balance of 90% equity

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shares are held by the employees DB SAME , DBIS and other

investors.

DB US is the leading seller of BIRs enabling business-to-

business commerce for about 160 years. The operating

subsidiaries and associates of D&B US in each country are

engaged in compilation and selling BIRs in their local markets and

to other associates companies worldwide as their core business.

Each associate company of D&B compiles the information in

respect of companies functioning in its country in the standardized

D&B format which is electronically uploaded on the server of the

associates companies and is copied (mirrored) on the Central data

base server situated in US. DBIS is also engaged in a similar

business of compilation and selling BIRs in respect of business

entities, either they are incorporated in their respective countries or

doing business in their country. The US server farm is owned and

operated by D&B US and it contains mirror servers of all the D&B

associate companies. The modus operandi of the business of

DBIS is that whenever an Indian customer places an order for a

BIR in respect of a company situated in Spain, DBIS would access

the master server of D&B US. Thereupon, the master server

would identify DBIS and would allow access to connect to the

mirror server of the applicant which is situated in US server farm.

It was then DBIS would request the applicant for a BIR of the

company for which the Indian customer has placed an order. On

locating the required BIR, DBIS would download, print and deliver a

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copy thereof to the customer. DBIS is under an obligation not to

take additional copies or reproduce the BIR in any manner or sell it

to any customer other than Indian customer on whose requisition

the BIR is ordered because the BIR is copyright protected with the

copyright vested in the applicant who prepares the BIR. There is

further obligation on the Indian customer to use the BIR for its own

purpose, the copyright in the BIR would neither be licensed nor

assigned to either the DBIS or the Indian customer. In regard to

the pricing of a BIR, DBIS is free to determine the price on

principal-to-principal basis and in that the applicant has no say.

The price at which the BIR is sold by the applicant to the DBIS

would be the applicant’s average domestic price at which it is sold

to local customers in Spain. It is specifically averred that the

applicant does not have any subsidiary, branch or office or place of

business in India. It is also stated that it does not have any

employee, advisor or agent in India nor is any employee deputed to

India.

2. 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 21st

April, 1995 (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

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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

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.

On these facts the applicant sought rulings of the Authority

on the following questions:

1. Whether on the facts and the circumstances of the case, Dun & Bradstreet, Espana (hereinafter referred to as the “Applicant”) will be entitled to the benefits of the Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains, dated January 12, 1995 entered into between the Government of the Republic of India and the Kingdom of Spain (hereinafter referred to as the “Treaty”).

2. Whether on the facts and the circumstances of the

case, the payments made by Dun & Bradstreet Information Services India Private Limited (hereinafter referred to as “DBIS”) for the electronic purchase of Business Information Reports (hereinafter referred to as the “BIRs”) to the Applicant will be treated as part of the Applicant’s business profits and hence be covered within the provisions of Article 7 of the Treaty.

3. Whether on the facts and the circumstances of the

case, the Applicant will be held as having a Permanent Establishment (hereinafter referred to as a “PE”) in India under the provisions of Article 5 of the Treaty.

4. Whether on the facts and the circumstances of the

case, and based on the provisions of Article 7 (read with Article 5) of the Treaty, the Applicant will be taxable in India in respect of the business profits?

5. Whether on the facts and circumstances of the case,

if the Applicant is not taxable in India, DBIS will be

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required to withhold any tax under section 195 of the Income Tax Act, 1961 (hereinafter referred to as “ITA”) while making remittances to the Applicant for the BIRs?

6. Whether on the facts and circumstances of the case,

the Applicant will be absolved from filing a tax return in India, under the provisions of section 139 of the ITA if its entire income is subject to tax only in Spain?

7. Whether on the facts and the circumstances of the

case, would any penal provisions of the ITA be invoked due to non-filing of tax returns by the Applicant under section 139 of the ITA?

It may be mentioned at the outset that the question Nos. 1, 6

and 7 are not pressed by Mr. Desai.

3. The Commissioner offered the following comments. It is not

disputed that the Government of the Republic of India and the

Kingdom of Spain have entered into treaty which was notified on

21st April, 1995. The provisions of section 90(2) of the Act will be

applicable if the applicant’s claim of being a tax resident of Spain is

established. The payments made by DBIS to the applicant for

electronic purchases of business information reports, are part of

applicant’s revenue receipts so the taxability will have to be

considered under article 7 read with article 5 of the Treaty. On the

facts and circumstances of the case, the applicant would be held as

having PE in India under article 5 of the Treaty. Many appellate

authorities held that the server located in India would constitute a

PE of the firm or company. The appellant categorically stated that

DBIS purchases BIRs on the server of the applicant. In the case of

Ericsson Telephone Corporation India AB, Sweden, the Authority

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held that the character of royalty or fees for technical services

would not change even if these were to be considered under article

7 of the treaty and that would mean section 44D read with section

115A of the Act would apply to the case of the applicant.

Therefore, DBIS would have to withhold tax in India after

calculating the tax liability under the Act. As BIRs are copyright

protected and the end-users are required to use BIRs for their own

purpose, this would give rise to ‘royalty’ and ‘fees for technical

services’ under article 13 of the Treaty. The analysis of raw data

provided in the BIRs would be similar of that of technical and

consultancy services, therefore, based on the provisions of article

7 read with article 5 and article 13 of the Treaty, the applicant will

be taxable in India.

4. The applicant filed the rejoinder and reiterated its stand in

the application.

5. It is a common ground that the Government of Republic of

the India and the Kingdom of Spain entered into a treaty for the

Avoidance of Double Taxation and the Prevention of Fiscal Evasion

with respect to taxes on income and on capital on January 12,

1995, which was notified on April 21, 1995. It is also not in dispute

that the payments made by DBIS to the applicant for electronic

purchases of BIRs are its business income covered by article 7 of

the Treaty. Indeed the applicant itself in Annexure III of application

says, “Further, the income generated by the Applicant from the

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preparation and sale of such BIRs is taxed in Spain as business income.

Accordingly, the sale of BIRs to DBIS, or any other D&B associate is an

activity forming part of the business activity of the Applicant, and hence

any income generated from such activity would be regarded as business

income in the hands of the Applicant”. It is on this premise the

applicant refers to article 7(1) of the Treaty to contend that the

business income of the applicant would be chargeable to tax in

India only if the applicant has a PE in India and categorically denies

that it has any PE in India as it does not have any subsidiary,

branch, office or place of business in India and that it does not have

any advisor or agent or any employee deputed by it to India. The

Commissioner’s plea on the other hand is that the applicant would

be having a PE in India within the meaning of article 5 of the Treaty.

The germane issue is whether the applicant has a PE in

India within the meaning of article 5 of the treaty.

Article 5 of the Treaty is in the following terms:-

Article 5 (Permanent Establishment )

1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:

(a) a place of management;

(b) branch; (c) an office;

(d) to (h) x x x x x x x x x x (i) a premises used as a sales outlet (j) to (k) x x x x x x x x x x x x

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3. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

(a) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display;

(c) the maintenance of a stock or goods or merchandise

belonging to the enterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely

for the purpose of purchasing goods and merchandise, or of collecting information for the enterprise;

(e) the maintenance of a fixed place of business solely for the purpose of advertising, for supply of information, for scientific research or for other similar activities which have a preparatory or auxiliary character, for the enterprise.

4. Notwithstanding the provisions of paragraphs 1 and 2,

where a person-other than an agent of an independent status to whom paragraph 5 applies- is acting in a Contracting State on behalf of an enterprise of the other Contracting State that enterprise shall be deemed to have a permanent establishment in the first-mentioned State, if

(a) he has and habitually exercises in that State an

authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise;

(b) he has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise,

5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.

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However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise itself or on behalf of that enterprise and other enterprises controlling, controlled by, or subject to the same common control, as that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph.

6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise); shall not of itself constitute either company a permanent establishment of the other.

A combined reading of paras 1 to 6 of article 5 brings out

the import of the expression ‘permanent establishment’. Whereas

para 1 defines the expression to mean a fixed place of business

through which a business of an enterprise is wholly or partly carried

on, para 2 enumerates eleven places specified in sub clauses (a)

to (k) to include them within the scope of the expression and para

3 which commences with a nonobstante clause contains deemed

exclusionary clause to exclude the use of facilities noted in clause

(a), maintenance of stock of goods mentioned in clauses (b) and (c)

and maintenance of fixed place of business for the purposes

indicated in clauses (d) and (e) from the scope of the expression

despite provisions of paras 1 and 2. However, para 4 contains a

deemed inclusion clause. It also commences with nonobstante

clause and says that notwithstanding the provisions of paras 1 and

2, a person acting in a contracting state on behalf of an enterprise

shall be deemed to have a permanent establishment in the first

mentioned state, if any one of clauses – (a) or (b) thereof –

applies. Clause (a) deals with a person who has and habitually

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exercises authority to conclude contract on behalf of the enterprise

in the first mentioned state unless the activities are limited to the

purchase of goods or merchandise for the enterprise; and clause

(b) deals with a person who acts without authority, but habitually

maintains a stock of goods or merchandise in the first mentioned

state from which he regularly delivers them on behalf of the

enterprise. Para 5 incorporates a deemed exclusion clause and

says that an enterprise of a contracting State shall not be deemed

to have permanent establishment in the other contracting State

merely because it carries on business in the other State through a

broker, general commission agent or any other agent of an

independent status provided that such persons are acting in the

ordinary course of business. Nonetheless when the activities of

such an agent are devoted wholly or almost wholly on behalf of that

enterprise itself or on behalf of that enterprise and other enterprises

controlling, controlled by, or subject to the same control, as that

enterprise, he shall not be considered as an agent of an

independent status within the meaning of the paragraph.

6. In support of the contention of the Commissioner that the

applicant has PE in India, the following grounds are urged:-

(i) The first ground is that DBIS is a branch or a sales outlet of

the applicant within the meaning of clauses (b) and (i) respectively

of para 2 of article 5. It is stated that the various operating

subsidiaries of D&B constitute co-branches and the nomenclature

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used to describe the entities and their corporate structure is not

determinative of their real relationship. There can be no denial of

the fact that in determining the real relationship between two

entities the nomenclature used to describe them, is not decisive.

What has to be looked into is the substance of the relationship in

the surrounding circumstances. In the Lexicon the word ‘branch’

is defined thus: “A division; a sub division; department; a

component portion of an organization or system. A sales

outlet of an entity has also the same attributes. In our view the

terms “branch” and “sales outlet” are projections of an entity

depict management and control of the entity over them. Apart

from the fact that, DBIS is a separate legal entity, there is nothing

on record to suggest that it is a part of or under the management

of or under the control of the applicant. It is not an unusual

feature of some foreign groups of companies that they are well

connected, perhaps, with a view to control the worldwide business

or minimize tax liability as a measure of tax planning. Whatever

may be the reason, without anything more, per se one associate

company of a group of companies can be branded as a branch or

sales outlet of another. To hold one associate company as the

branch or sales outlet of another, there must be some material

indicative of characteristic of ‘branch’ or ‘sales outlet’. On the

facts of the case it is difficult to uphold the contention of the

Commissioner that DBIS is a branch or a sales outlet of the

applicant.

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(ii) The second ground is based on paragraph 4 of article 5

which is extracted above. It has been noticed that para 4

contains a deeming provision to include within the meaning of the

expression ‘PE’ a person who acts on behalf of the enterprise in a

contracting state if one of the two conditions mentioned in clauses

(a) and (b) thereof, is satisfied. It is nobody’s case that DBIS has

and habitually exercises in India an authority to conclude

contracts on behalf of the applicant. Therefore, clause (a) does

not apply. The case of the Commissioner is that DBIS habitually

maintains stock of goods and delivers them on behalf of the

enterprise, as DBIS has a password protected access to the

website of the applicant to access the BIRs of the applicant’s

server farm which amounts to maintaining of stock of goods or

merchandise on behalf of the applicant and that receiving

payment and allowing access to the BIRs from the website of the

applicant amounts to delegation of sale function by the applicant

to DBIS. Though there can be no difficulty in accepting that in the

case of e-commerce, it is not necessary to maintain a physical

stock and inventory and that a line access to inventory would be

sufficient to equate it with maintenance of stock, yet it is not

possible to accept the contentions of the Commissioner. It is

necessary to remember that in this case to have access to the

server farm of the applicant, each time DBIS entertains a

customer for a BIR, it has to approach the applicant and it is only

after knowing the particulars of the BIRs required by DBIS, that

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the applicant grants access to its server farm by DBIS. This is

akin to sale rather than delegation of sale function to DBIS by the

applicant. It is clear case of the applicant permitting DBIS to take

a BIR from the stock maintained by the applicant and not

maintaining stock of BIRs by DBIS itself.

(iii) The last ground is based on para 5 of article 5. As per para

5 of article 5, noted above, an enterprise shall not be deemed to

have a permanent establishment in India merely because it

carries on business in India through a broker, general commission

agent or any other agent of an independent status, provided that

such persons are acting in the ordinary course of their business.

However, when the activities of such an agent are devoted wholly

or almost wholly on behalf of the enterprise itself or on its behalf

and other enterprises controlling, controlled by, or subject to the

same common control, as the enterprise, then he will not be

considered an agent of an independent status within the meaning

of this paragraph. To apply this paragraph it has to be shown

that the applicant is carrying on business through an agent whose

activities as agent are devoted wholly or almost wholly on behalf

of the applicant.

The word ‘agent’ is defined in the Concise Oxford English

Dictionary , inter alia, as under:

“1. a person that provides a particular service, typically one working transactions between to other parties. A person who manages financial or contractual matters for an actor, performer, or writer.

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2. a person who works in secret to obtain information for a government. 3. a person or thing that takes an active role or produces a specified effect. Grammer – the doer of an action. 4. Computing – an independently operating Internet programme, typically one set up to locate information on a specified subject and deliver it on a regular basis.”

The meaning of the term ‘agent’ is given in Black’s Law

Dictionary, inter alia, as follows:

“The etymology of the word agent or agency tells us much. The words are derived from the Latin verb, ago, agree; the noun agens, agentis. The agent denotes one who acts a doer, force or power that accomplishes things”

And, section 182 of the Indian Contract Act defines ‘agent’

as a person employed to do any act for another or to represent

another in dealing with third parties.

A close reading of the above extracts brings out the essence

of the term ‘agent’ ‘An agent’ works for another in accordance with

his authority while dealing with third parties. The record in this

does not justify the conclusion that DBIS is an agent of the

applicant. The DBIS is carrying on in its own business and is an

independent entity. It is not under the control and instructions of

the applicant in carrying on its business. Further, in regard to

purchase of BIRs it acts on its own, settles its own price depending

upon the market conditions, (which not controlled by the applicant)

and pays the purchase price to the applicant for BIRs, as fixed by

the applicant, which is the average market rate of BIR in Spain.

There is no material before us to conclude that DBIS itself is an

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agent of the applicant. The role of DBIS vis-à-vis applicant is that it

purchases BIRs from the applicant as and when a customer for

BIRs approaches DBIS it connects the applicant for purchasing the

required BIRs from the applicant. It would not also be a case of

DBIS wholly devoting itself to the applicant. In view of this

position, it is unnecessary to delve into any further aspects. In the

light of the above discussions, DBIS cannot be said to be the PE of

the applicant.

The last contention of the Commissioner is that the

payments made by DBIS to the applicant fall within the meaning of

royalty under article 13 of the Treaty. If payments made by DBIS

to the applicant are found to be royalties, they would be taxable in

India even if the applicant has no PE in India. The term royalties is

defined in Para 3 of article 13 of the Treaty in the following terms: -

Article 13: Royalties and fees for technical services

1. & 2 xxxxxxx

3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematographic films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

It is evident that the term “royalties” is defined in very wide

terms to mean payments of any kind received as consideration for

the use of, or the right to use, any copyright of literary, artistic or

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scientific work, ………………. or process, or for the use of, or the

right to use, industrial, commercial or scientific equipment, or for

information concerning industrial, commercial or scientific

experience.

7. It will be useful to refer to the ruling of the Authority in P.30

of 1999 dated 28th April, 1999 (238 ITR 296). There, an American

company was the applicant. It was an associated company of

group of companies which operated in the worldwide credit card

and travel business. The applicant was maintaining a centralised

computer in USA (referred to as CPU) to keep track of the

expenses incurred on a travellers’ credit card or purchase and

encashment of travelers cheques. The CPU was accessed and

used by various group entities located worldwide through a

consolidated data network maintained in Hong Kong. An Indian

company located in Delhi was also collecting information about the

use of credit card and travellers’ cheques by travellers all over the

country and were serving 13 group companies in Asia and the

Pacific. The information was being passed on to the Hong Kong

computer centre of the applicant by leasing lines from VSNL. For

the use of computer set up in Hong Kong and in USA, the American

company was charging fees to the Indian company. The question

posed by the applicant for seeking advance ruling of the Authority

was: whether payment due to the applicant under the transaction

with the Indian company was liable to tax in India under article

12(3)(a) or 12(3)(b) of the Treaty between India and USA. It was

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ruled by the Authority that the transmission of the information

through encryption as the data relating to clients by maintaining

strict confidentiality and it was for downloading of the software that

the royalty was paid. According to the agreement between the

applicant and the Indian company, the facilities were to be

accessed only by the Indian company and the consideration was

payable for the specific programme through which the Indian

company was to cater to the needs of the group of companies

located in Japan, Asia, Pacific etc. The transaction would,

therefore, relate to a “scientific work” and would partake of the

character of intellectual property. The software was customized

and secret. The use of CPU and the consolidated data network of

the applicant by the Indian company was not merely use of or right

to use in industrial, commercial or scientific experience as

envisaged in article 12(3)(b) of treaty, but the use of modern

technological designs or models involving customized

communication and computation with application of sophisticated

informational technology requiring constant upkeep and updating

so as to meet the challenge of the advance technology in this area

which would clearly fall within the ambit of article 13(3)(a) of the

Treaty. The payments received in such transactions are for the use

of intellectual property and partake of the character of royalty.

The instant case it is not a case of paying consideration for

the use of or right to use any copyright of literary, artistic or

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scientific work or any patent trade mark or for information of

commercial experience. The Commissioner sought to bring the

payments under royalty/fees for technical service for the reason

that the BIRs are copyright protected and end-users are required to

use for their own purpose and the analysis of raw data provided in

the BIRs would be similar to that of providing a technical or

consultancy services. We have already mentioned above that a

BIR is a standardized product of D&B, it provides factual

information on the existence, operation, financial condition,

management and experience line of business, facility and location

of a company; it also provides special events like any suit, lien,

judgement or previous or pending bankruptcy. Further, banking

relationship and accountants, information like whether it is a patent

company or authority concerned, has any branches etc. It also

gives a rating of the company. The informations that are provided

in a BIR are said to be publicly available; they are collected and

complied by D&B associates. A BIR is accessible by any

subscriber on payment of requisite price with regular internet

access for which no particular software or hardware is required.

The applicant states that access to data base of the applicant is

available to public at large at a price as in case of buying a book

and it is not a pre-requisite, that BIR must be downloaded by DBIS

only and in fact some clients, such as Expert credit guarantee

corporation , in fact, access the server themselves to download

BIR. The applicant does not have any server in India for the use of

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DBIS. Indeed the applicant has specifically averred that the

copyright in the BIR would neither be licensed nor assigned to

either the DBIS or the Indian customer. From these aspects it is

clear that the aforementioned ruling of the Authority is

distinguishable on facts. If a group of companies collects

information about the historical places and places of interest for

tourists in each country and all informations are maintained on a

central computer which is accessible to each constituent of the

Group in each country, can a supply of such information

electronically on payment of price be treated as royalty or fee for

technical services? We think not.

The next case relied upon by the Commissioner is also a

ruling of the Authority in Ericsson Telephone Corporation India AB

(224 ITR 203). In that case the applicant was a company

incorporated in Sweden. It provided, inter alia, services within radio

and telecommunication. It entered into contracts with three Indian

companies for the introduction of the cellular system of

telecommunication in India and opened branch offices in India at

New Delhi, Bombay and Madras. The Indian company informed

applicant that while making payments under the agreement they

would withhold income tax at 55% as provided in the Finance Act

1995. According to the applicant tax deduction could not have

exceeded 5.5% of the gross payments, as the net profit on the

contract would not be more 10%. It was, therefore, not a case of

whether the amount paid could be termed as fee for technical

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services. It was admittedly a case of payment of fee for technical

services.

For the above-mentioned reasons, payments made by the

DBIS to the applicant for purchases of BIRs do not answer the

description of “royalties” within the meaning of para 3 of article 13

of the treaty. So payments made by the DBIS to the applicant

cannot be regarded as royalty payment. In our view, the applicant

has rightly equated the transaction of sale of BIRs to sale of a book,

which does not involve any transfer of intellectual property or a

book.

For the aforementioned reasons, we rule on:

1. question No.1 that this question is not pressed, therefore, no

ruling is pronounced on this question;

2. question No.2, that on the facts and circumstances of the

case, the payments made by Dun Bradstreet Information

Service India (P) Limited (referred to as DBIS), for the

electronic purchases of Business Information Reports

(referred to as BIRs) to the applicant will be treated as part

of applicant’s business profits and hence covered within the

provision of article 7 of the Treaty;

3. question No.3, that on the facts and circumstances of the

case, the applicant will be held as not having permanent

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establishment (referred to as “PE”) in India under the

provision of article 5 of the Treaty;

4. question No. 4, that this is a consequential question and in

view of our ruling on question No.3, on the facts and

circumstances of the case and based on the provisions of

article 7 (read with article 5) of the Treaty, the applicant will

not be taxable in India in respect of the business profits;

5. question No.5, that on the facts and circumstances of the

case as the applicant is held not taxable in India, DBIS will

not be required to withhold any tax under section 195 of the

Income Tax Act while making remittances to the applicant for

the BIRs.

6. questions No.6 and 7, that inasmuch as these questions are

not pressed by the applicant, no rulings are pronounced on

them.

Pronounced by the Authority in the presence of the parties on this 20th day of October, 2004

(JUSTICE S.S.M. QUADRI)

CHAIRMAN

(K.D. SINGH) MEMBER

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