Case nº A.A.R. Nos. 1075 of 2011 of Authority for Advance Rulings, December 06, 2013 (case Endemol India Private Limited Vs Commissioner of Income Tax-XI)
| Judge | For Appellant: Mr. Rajan R. Vora, C.A., SRBC & Associates, Mr. Ashish Gupta, Endemol India, Mumbai Mr. Sachin Shah, C.A., SRBC & Associates, Mr. Aditya Modani, C.A. and Ms. Priyanka Minawala and For Respondents: Mr. R.S. Rawal, CIT-DR, AAR, ND and Mr. Rajkumar ACIT-II (I) |
| President | Arijit Pasayat, J. (Chairman) and T.B.C. Rozara, Member |
| Resolution Date | December 06, 2013 |
Order:
T.B.C. Rozara, Member
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The applicant M/s. Endemol India Private Limited (EIPL) is a resident company incorporated under the Companies Act, 1956. It is engaged in the business of providing and distributing television programmes. It mainly produces reality shows and has also ventured lately into soap operas. The company started its operation in 2006 with the non-fiction format show Big Boss (Big Brother) and has also other reality shows in India such as Fear Factor - Khatron Ke Khiladi etc. Endemol Holding B.V (Endemol Holding) is a non-resident company incorporated in Netherlands and is a tax resident of Netherlands.
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Endemol Group has adopted a lean organization structure and relies on the concept of centralized shared services which provide services to group companies across the world. The applicant EIPL also has a lean organization in India and requires assistance from Endemol Holding to carry out its business efficiently and in a profitable manner and for that purpose entered into an agreement, hereafter referred to as Consultancy Agreement, with Endemol Holding on 10.01.2011 to be effective from 1st January, 2011. The agreement was for procuring certain consultancy services from Endemol Holding. The agreement would allow the applicant to consult Endemol Group on various issues. As per the Schedule 1 of the agreement, Endemol Holding will provide the following services to the applicant:--
(a) General Management
(b) International Operations
(c) Legal advisory
(d) Tax Advisory
(e) Controlling and Accounting & 'reporting
(f) Corporate Communications
(g) Human Resources
(h) Corporate Development, Mergers & Acquisitions
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Projecting aforesaid facts and circumstances of the case, the applicant seeks ruling from the Authority for Advance Rulings on the following questions:--
1) Whether the payments made by the applicant to Endemol Holding for availing routing administrative services under the terms of the Consultancy Agreement would be in the nature of Fees for Technical Services (FTS) within the meaning of the term in Article 12 of Convention between the Government of Republic of India and the Kingdom of Netherlands for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on incoming and capital (India-Netherlands Tax Treaty)
2) If the answer to the question above is in negative, will such payment be treated as Business Income, and in view of the facts as stated in Annexure III, and also in light of the declaration provided by Endemol Holding, since it does not have a Permanent ('PE') in India in terms of the India-Netherlands Tax Treaty, whether the payments made by the Applicant to Endemol Holding would be chargeable to tax in India?
3) If the answer to Question 1 is in negative, would the payments made by the Applicant to Endemol Holding suffer withholding tax under section 195 of the Act, and at what rate?
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The application was admitted under section 245R(2) of the Income-tax Act, 1961 (in the short the "Act") and while admitting the application the Authority reserved for consideration the question whether the transaction is designed for avoidance of tax in India. The applicant was also directed to take out notice of the application along with a copy of the admission order to Endemol Holding and to file an affidavit affirming service of such notice on Endemol Holding. A No Objection Certificate was accordingly filed from Endemol Holding BV which stated as under:--
We refer to the application for an advance ruling filed with the Authority for Advance Rulings by Endemol India Private Limited for the determination of withholding tax in India on various amounts received by us from Endemol India Private Limited towards administrative services rendered under the Consultancy agreement dated 10 January 2011.
In connection with the same, we Endemol Holding B.V., with our office at Medi Arena 1, 1099 CZ Amsterda Zuidoost, The Netherlands, wish to certify that we do not have any objection to the filing of such application for the advance ruling in relation to the afore-stated payments and acknowledge that the information contained in such application is true to the best of our knowledge.
The above statement is certified on the understanding that the same is required to proceed with the advance ruling as stated above and is provided on the specific request of the Authority for Advance Rulings and in no manner whatsoever, will impact any existing contractual obligations between Endemol Holding B.V and Endemol India Private Limited or create any other liability whatsoever under any other existing agreements.
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The main submission of the applicant is that the...
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