Morgan Stanley & Co., In Re v.

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The Tax Publishers2006 TaxPub(DT) 1350 (AAR) : (2006) 284 ITR 0260 : (2006) 201 CTR 0067 : (2006) 152 TAXMAN 0001 Morgan Stanley & Co., In re INCOME TAX ACT, 1961 Double taxation relief - Agreement between India and USA -Where agreement exists - Assessee, a non-resident USA company, provides financial advisory services, corporate lending, and securities underwriting. One of its group companies was MSAS, an Indian company, which was set up by assessee for providing support services. Subsequently, MSAS entered into a service agreement with assessee and under said agreement, MSAS had undertaken to provide services to M group. In pursuant to agreement, assessee sent staff to MSAS (India) for stewardship activities and other similar activities and also on deputation in employment of MSAS. The issue arose as to whether MSAS could be treated as PE of assessee under provision of article 5(1) of Treaty. *Held:Considering facts, MSAS cannot constitute agency PE of assessee neither under article 5(1) nor under article 5(4) of Treaty. However, MSAS would be regarded as PE of assessee in India as per article 5(2)(l) of Treaty, if assessee would send some of its employees to India for undertaking stewardship activities on deputation in employment of MSAS for a period beyond ninety days. Therefore, under section 92C, it would be remunerated by assessee at ALP for its services and as long as all its actual income was brought to tax, no further income can be attributed in hands of PE of assessee. Income-tax Act, 1961,* Section 90 Decision: In partly favour of assessee. Case Law Analysis:CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146/ 15 Taxman 72(AP) [Para 8], Morgan Stanley & Co. International Ltd., In re [2005] 272 ITR 416/ 142 Taxman 630 (AAR-New Delhi) [Para 8], AAR No. 542 of 2001, In re [2005] 274 ITR 501 (AAR) [Para 8], Advance Ruling P. No. 8 of 1995, In re [1997] 223 ITR 416/ 90 Taxman 47 (AAR-New Delhi) [Para 9], P.No. 28 of 1999, In re [2000] 242 ITR 208/[1999] 105 Taxman 218 (AAR-New Delhi) [Para 9], Dun & Bradstreet Espana S.A., In re [2005] 272 ITR 99/ 142 Taxman 284 (AAR-New Delhi) [Para 15] and Jagtar Singh Purewal v. CIT [1995] 213 ITR 512/ 78 Taxman 600 (AAR-New Delhi) [Para 24]. Morgan Stanley & Co., In re SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2006 TaxPub(DT) 1350 (AAR) : (2006) 284 ITR 0260 : (2006) 201 CTR 0067 : (2006) 152 TAXMAN 0001

Morgan Stanley & Co., In re

INCOME TAX ACT, 1961

Double taxation relief - Agreement between India and USA -Where agreement exists -

Assessee, a non-resident USA company, provides financial advisory services, corporate lending, and securities underwriting. One of its group companies was MSAS, an Indian company, which was set up by assessee for providing support services. Subsequently, MSAS entered into a service agreement with assessee and under said agreement, MSAS had undertaken to provide services to M group. In pursuant to agreement, assessee sent staff to MSAS (India) for stewardship activities and other similar activities and also on deputation in employment of MSAS. The issue arose as to whether MSAS could be treated as PE of assessee under provision of article 5(1) of Treaty. Held:Considering facts, MSAS cannot constitute agency PE of assessee neither under article 5(1) nor under article 5(4) of Treaty. However, MSAS would be regarded as PE of assessee in India as per article 5(2)(l) of Treaty, if assessee would send some of its employees to India for undertaking stewardship activities on deputation in employment of MSAS for a period beyond ninety days. Therefore, under section 92C, it would be remunerated by assessee at ALP for its services and as long as all its actual income was brought to tax, no further income can be attributed in hands of PE of assessee.

Income-tax Act, 1961, Section 90

Decision: In partly favour of assessee.

Case Law Analysis:CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146/ 15 Taxman 72(AP) [Para 8], Morgan Stanley & Co. International Ltd., In re [2005] 272 ITR 416/ 142 Taxman 630 (AAR-New Delhi) [Para 8], AAR No. 542 of 2001, In re [2005] 274 ITR 501 (AAR) [Para 8], Advance Ruling P. No. 8 of 1995, In re [1997] 223 ITR 416/ 90 Taxman 47 (AAR-New Delhi) [Para 9], P.No. 28 of 1999, In re [2000] 242 ITR 208/[1999] 105 Taxman 218 (AAR-New Delhi) [Para 9], Dun & Bradstreet Espana S.A., In re [2005] 272 ITR 99/ 142 Taxman 284 (AAR-New Delhi) [Para 15] and Jagtar Singh Purewal v. CIT [1995] 213 ITR 512/ 78 Taxman 600 (AAR-New Delhi) [Para 24].

Morgan Stanley & Co., In re