Section 9(1)(vii) — Income Deemed to Accrue or Arise in India

Section 9(1)(vii) of the Income-tax Act, 1961, deals with income by way of fees for technical services that are deemed to accrue or arise in India. This section applies when a non-resident provides technical services to an Indian resident, and the income from such services is considered to have its source in India. The significance of this section lies in its role in determining the taxability of cross-border transactions involving technical services. The statutory test involves assessing whether the services rendered fall under the definition of 'fees for technical services,' which includes managerial, technical, or consultancy services. The burden of proof typically lies with the taxpayer to demonstrate that the income does not fall under this category. In practice, this section is crucial for multinational companies and foreign service providers, as it impacts their tax liabilities in India.

Common Litigation Flashpoints

1. Classification of services as technical services
2. Determination of source of income
3. Applicability of Double Taxation Avoidance Agreements (DTAAs)
4. Interpretation of 'make available' clause in treaties

Judgments on Section 9(1)(vii) — Income Deemed to Accrue or Arise in India

• Myntra Inc. vs Assistant Commissioner of Income Tax — ITAT,
  The 'make available' condition under Article 12(4)(b) of the India-US DTAA is not satisfied if the services do not involve a transfer of technical knowledge or skills.
• Vodafone International Holdings B.V. vs Union of India & Anr. — SC,
  Section 9 of the Income Tax Act does not cover indirect transfers of capital assets situated in India.
• The Authority for Advance Rulings (Income Tax) and Others vs Tiger Global International II Holdings — SC,
  The DTAA between India and Mauritius allows capital gains to be taxed only in Mauritius, provided the entity holds a valid TRC.
• Hyatt International Southwest Asia Ltd. vs Additional Director of Income Tax — SC,
  A Permanent Establishment exists if the enterprise has a fixed place of business at its disposal through which it carries on its business activities.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.