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The Tax Publishers Cummins Ltd., In re [A.A.R. No. 1152 of 2011, dt. 12-1-2016] : 2016 TaxPub(DT) 0570 (AAR) Whether supply management services with mark-up is subject to TDS under section 195? Facts Assessee Cummins Ltd. a UK company had an Indian arm Cummins Technologies India Ltd. (CTIL), which was in the business of manufacturing of turbochargers. The UK parent provided supply management services to the Indian entity with a mark-up of 5% of the base prices of suppliers. The arrangement was a global procurement support by the parent (Cummins Ltd. UK) for a fee for all its group companies including India. Following questions were posed to the AAR :-- 1. Whether TDS is applicable on the supply management fees as per Indo-UK DTAA article 13 under royalties and fee for technical services? 2. Cummins Ltd. UK does not have any PE in India - nonetheless is there any income taxable in India arising out of this payout? 3. Based on above whether TP provisions need to be complied with? Held no TDS will apply on the supply management fee with mark up of 5% as the same did not make available any technical services as per the Indo-UK in India article 13(3)/(4). No TP provisions need to be complied with on the same by Cummins Ltd. Following decisions were applied for interpreting make available definition under Indo UK DTAA -- Raymond Ltd (86 ITD 791) Intertek Testing Services India (P) Ltd (307 ITR 418) De Beers India Minerals Private Ltd (346 ITR 467) CESC Ltd (80 TTJ 806) Invensys Systems Inc (317 ITR 438) Measurement Technologies Limited (AAR No. 966 of 2010) *Author's Note:* On TP the AAR has categorically ruled that it is not applicable on the applicant. The author is of the view on CTIL it will be applicable under the provisions of the act as a resident and it will need to be seen how the department treates this supply chain support management fee.

The Tax Publishers

Cummins Ltd., In re [A.A.R. No. 1152 of 2011, dt. 12-1-2016] : 2016 TaxPub(DT) 0570 (AAR)

Whether supply management services with mark-up is subject to TDS under section 195?

Facts

Assessee Cummins Ltd. a UK company had an Indian arm Cummins Technologies India Ltd. (CTIL), which was in the business of manufacturing of turbochargers. The UK parent provided supply management services to the Indian entity with a mark-up of 5% of the base prices of suppliers. The arrangement was a global procurement support by the parent (Cummins Ltd. UK) for a fee for all its group companies including India. Following questions were posed to the AAR :--

1. Whether TDS is applicable on the supply management fees as per Indo-UK DTAA article 13 under royalties and fee for technical services?

2. Cummins Ltd. UK does not have any PE in India - nonetheless is there any income taxable in India arising out of this payout?

3. Based on above whether TP provisions need to be complied with?

Held no TDS will apply on the supply management fee with mark up of 5% as the same did not make available any technical services as per the Indo-UK in India article 13(3)/(4). No TP provisions need to be complied with on the same by Cummins Ltd.

Following decisions were applied for interpreting make available definition under Indo UK DTAA --

Raymond Ltd (86 ITD 791)

Intertek Testing Services India (P) Ltd (307 ITR 418)

De Beers India Minerals Private Ltd (346 ITR 467)

CESC Ltd (80 TTJ 806)

Invensys Systems Inc (317 ITR 438)

Measurement Technologies Limited (AAR No. 966 of 2010)

Author's Note: On TP the AAR has categorically ruled that it is not applicable on the applicant. The author is of the view on CTIL it will be applicable under the provisions of the act as a resident and it will need to be seen how the department treates this supply chain support management fee.