a) The Regents of the University of California (‘UCLA’) entered into an agreement with Northwest Universal Education Private Ltd (‘NUEP’) to launch a Management Program in India which would train the senior executives of the companies.
b) It agreed to send its professors for training the senior executives working in India in respect of management techniques.
c) The applicant raised following questions:
- Whether program fee received by the Applicant is chargeable to tax in India as ‘fees for included services’ under Article 12 of the India-US DTAA?
- Whether the activities undertaken by it in India, viz., teaching would constitute its PE in India in terms of Article 5 of the India-US DTAA?
The Authority held as under:
1) Since the nature of the activity by the applicant in that case was educational activity, it could not amount to fees for included services particularly because of the provision of Article 12(5)(C).
2) The activity of the applicant could not be said to be a business activity particularly because the applicant was registered in USA as a non-profit public benefit corporation formed for the purpose of providing education. This was not disputed by the Revenue.3) If the applicant was registered as a non-profit benefit corporation in USA then its activities,
i.e., providing education could not be said to be business activity. The reliance of Revenue, therefore, on Article 7 of the DTAA was completely uncalled for as Article 7 specifically dealt with business income.
4) It is to be seen that every time the program is undertaken in India, it is NUEP which has arranged for the place for conducting the programs. NUEP need not every time arrange for a same place. It may happen that Northwest may arrange different location for conducting the program. On this ground also there cannot be any fixed place of business on the part of the applicant. Thus, there could not be a PE of the applicant in India under DTAA. –  73 taxmann.com 113 (AAR - New Delhi)