INFOSYS TECHNOLOGIES LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE applicant is an Indian company incorporated under the Companies Act, 1956. It is engaged in the business of development and export of computer software and related services. It has customers across the world. The applicant undertakes the work of software development and related services for its clients across the world. The work would be either onsite work or offshore work. The applicant has clients in Australia. In the year 1999, it set up a branch office in Australia. Since the applicant felt that it would be more profitable to have a local presence in Australia, the applicant acquired 100% equity of an Australian company. The Expert Information Services Pty. Ltd. The transaction was completed effective from 2.1.2004. That acquired company was re -named Infosys Technologies (Australia) Pty. Ltd. That overseas subsidiary of the applicant is now engaged in the business of development of computer software and related services.

(2.) THE applicant undertakes work in Australia. It then sub -contracts a part of the work to its subsidiary, Infosys Australia. Infosys Australia performs the work wholly in Australia. The applicant makes payment to Infosys Australia for such work. The applicant wanted a ruling essentially on the question whether the payments made by it to Infosys Australia as consideration for the sub -contract work, is chargeable to tax in India, either under the Income -tax Act, 1961 or under the Double Taxation Avoidance Convention between India and Australia.

(3.) WHETHER on the facts and in the circumstances of the case and law applicable, payments to overseas subsidiary does not constitute fees for technical services under DTAA between India and Australia as it does not 'make available' technical knowledge, experience, skill, know -how, or processes, or consist of the development and transfer of a technical plan or technical design?