I came accross a unique judgement given by the Income Tax Appelate Tribunal which drew my attention. I am sure it would interest you too.

A company in India (Indian Hotels Company, the owners of Taj group of hotels) hired a Architectural and Project Management company (Hirsh Bender Associates)based in Singapore to redesign its hotels based in Mumbai and agreed to pay it a certain fees.
The designs were handed over by the company in Singapore itself and the Indian company remmited the fees to the Singapore based company and did not deduct TDS on it.

But the Income Tax department asked the Indian Company to pay TDS for remmiting the fees to the Singapore based company. The company objected to it and filed an appeal with the Commissioner of Income Tax – Appeals seeking exemption under the Double Avoidance Treaty. But the Plea was rejected and it approached ITAT where its counsel Dinesh Vyas argued that HBA did not have a PE in India and the payment was made outside of a country with whom India has signed a Treaty for Avoidance of Double Taxation.

The principal bench of ITAT in Mumbai held that since the foreign firm had no Permanent Establishment (PE) in India and all designs, drawings and presentation material were drafted in Singapore, it was not taxable. Providing relief to the Taj group of hotels, the Income Tax Appellate Tribunal (ITAT) has exempted it from paying tax on the fee it paid to a Singapore-based design consultancy firm.

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