Playing by the rules…No double taxation please!

The applicant, a foreign company incorporated and based in Singapore, offers a full range of real estate services to its local and international clients. It has also developed certain international client relationships and in accordance with the global policy, various offices provide referral services to other group offices, wherein one group Office would refer client to other group office, depending on the requirements of the clients. In respect of such referrals, as per the applicant, each serving group Company is liable to pay a ‘referral fee’ to the referring group company in accordance with the international fee-sharing rules of the group.

The AAR on the facts and in the circumstances of the case held that the receipt on account of the referral fee arising to the applicant would not be taxable in India, having regard to the provisions of the Income Tax Act and the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and Singapore. No tax is attracted either under the head business income, or royalty income or income by way of FTS. Consequently there will be no obligation to withhold any tax under section 195 of the Act, while making remittance abroad.