Justice P.V. Reddi, Chairman. - The applicant (BAGI) is a company incorporated in India on 13-7-2007 to undertake the business of general insurance. AXA Asia Regional Centre Pvt. Ltd., (AXA ARC) is a company incorporated in Singapore and it is a part of the AXA group of companies. It acts as a Central service organization which caters to the requirements of AXA group companies in the region. The applicant entered into a Service Agreement with AXA ARC for receiving assistance such as business support, marketing information technology support services and strategy support etc., from AXA ARC. The applicant states that these services are merely advisory in nature and are procured with the intention of carrying on business in line with the best practices followed by other AXA group entities globally.

2. The applicant submits that the ‘services provided by AXA ARC are not “a one off transaction” but they are meant to support the applicant’s functioning on a continuous basis’. For providing these services no employee of AXA ARC will physically visit India. AXA ARC has no business establishment in India. The applicant has stated that for the services rendered by it, AXA ARC charges a fee based on the actual cost incurred plus a markup of 5 per cent. As per service agreement, the “actual costs and expenses” includes cost incurred directly or indirectly by AXA ARC in providing the services and includes labour cost, office expenses, utilization of IT hardware and software, telecommunications, training and printing and stationery, professional services, depreciation of assets etc. The total cost is apportioned amongst various affiliate entities :

3. The applicant desires to know if AXA ARC has any liability to pay tax in India in respect of the fee received from the applicant. The following questions are framed for seeking advance ruling :

1.Whether the payments made by the applicant to AXA ARC for various services under the terms of the Service Agreement is in the nature of “fees for technical services” within the meaning of the term in Article 12 of the ‘Convention between the Government of Republic of India and the Government of Republic of Singapore for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income’ (“the India-Singapore Tax Treaty”)?

2.Whether the payments made by the applicant to AXA ARC for providing access to applications and to the server hardware system hosted in Singapore and related support under the terms of the Service Agreement is in the nature of “royalty” within the meaning of the term in Explanation 2 to clause (vi) of section 9(1) of the Act?

3.Whether the payments made by the applicant to AXA ARC for providing access to applications and to the server hardware system hosted in Singapore and related support under the terms of the Service Agreement is in the nature of “royalty” within the meaning of the term in Article 12 of the India-Singapore Tax Treaty?

4.Based on the answers to questions (1), (2) and (3) above, and in view of the facts as stated in Attachment III and also in the light of the declaration provided by AXA ARC and it does not have a permanent establishment in India in terms of Article 5 of the India-Singapore Tax Treaty, whether the payments received by AXA ARC are chargeable to tax in India?

5.Based on the answer to question (4) above, would the receipts by AXA ARC from BAGI suffer withholding tax under section 195 of the Act, and at what rate?

4. The applicant has summarized the nature of services covered under the Service Agreement as follows (vide written submissions dated 12-7-2010).

Business Line Support

AXA ARC provides underwriting, HR support and marketing support to member entities. The services specifically procured by BAGI from AXA ARC in this regard are given below :

uProduct approval process - When a new insurance is developed by the applicant or an existing product requires development or review, BAGI makes a formal submission in a prescrib