New Delhi: The income foreign universities earn by providing consultancy services to industry chambers or other non-profit organisations in India is not taxable, a tax authority ruled.
"UT(IC2) (a wing of University of Texas) is not liable to
pay income tax in respect of the payments received by it from
FICCI as per the Agreement entered into between FICCI and the
University of Texas," the Authority of Advance Ruling (AAR)
This means industry body FICCI is not required to deduct
tax at source while making payments to the University of Texas
for the consultancy services the university provided to it.
FICCI had sought the ruling of the AAR to know the tax
liability of the university and the amount of tax which the
chamber had to deduct while making payments to the foreign
The industry chamber had entered into an agreement with a
wing of the University of Texas for certain work and services
to complete a Defence Research and Development Organisation
FICCI is assisting DRDO laboratories in identification
and business development of competitive global technologies
from its inventory of existing defence-related innovations.
The authority pointed out that the payment made in this
respect by FICCI to the University of Texas cannot be treated
as fee for technical services, which are taxable under the
Income Tax Act, 1961.
"They cannot be subjected to tax as business profits in
view of the undisputed and undeniable fact that Texas
University has no permanent establishment (PE) in India and
the services were not carried out through a PE in India," the
AAR ruling said.
FICCI, a leading industry chamber is a non-profit company
registered under the Companies Act, 1956 and its income is not
taxable in India while the University of Texas has been
granted exemption from tax under the provisions of Internal
Revenue Code (IRC).
Although the AAR decision is binding only on the
applicant seeking an order on a tax query, it does set a
persuasive precedence for similar cases.