Tech Mahindra Limited v Commissioner of Taxation [2015] FCA 1082

FEDERAL COURT OF AUSTRALIA

Tech Mahindra Limited v Commissioner of Taxation [2015] FCA 1082 Citation: Tech Mahindra Limited v Commissioner of Taxation [2015] FCA 1082

Parties: TECH MAHINDRA LIMITED v COMMISSIONER OF TAXATION

File number: NSD 2587 of 2013

Judge: PERRY J

Date of judgment: 7 October 2015

Catchwords: TAXATION – international taxation – double taxation agreement between Australia and the Republic of India (the Indian agreement) – appeal against the Commissioner's objection decision allowing the taxpayer/company's objection only in part – where company resident in India provided software products and information technology services to customers in Australia partly by employees located in Australia and partly by employees located in India – where Australian offices comprised a "permanent establishment" in Australia under the agreement – whether company is liable to tax in Australia under the Income Tax Assessment Act 1997 (Cth) in respect of income earned from the services performed by employees in India STATUTORY INTERPRETATION – interpretation of double taxation agreement between Australia and India as enacted by the International Tax Agreements Act 1953 (Cth) – discussion of principles of construction applying to interpretation of an international convention enacted into domestic law – where purpose of enacting the double taxation agreement is to give effect to that agreement subject to the Act – where the application of international principles of treaty interpretation gives effect to the requirement in s 15AA of the Acts Interpretation Act 1901 (Cth) to prefer a construction of the Act that best promotes its purpose – whether domestic extrinsic materials at time of enactment relevant to construction of international convention enacted into Australian law TAXATION – where limited force of attraction rule in Article 7(1) of the Indian agreement allows for taxation by Australia of profits "attributable to" the permanent establishment or other business activities of a same or similar kind as those carried on through permanent establishment – where Article 12 allows for both contracting States to tax royalties where they arise in the other contracting State subject to a cap in the case of the State of which the company is not a resident – whether income is "effectively connected" with the permanent establishment for the purposes of Article 12(4) so as to require the question of whether it is taxable by Australia to be dealt with exclusively under Article 7 – where income is not "effectively connected" with the permanent establishment for the purposes of Article 12(4) because income is not attributable to the permanent establishment – whether payments taxable as royalties under the Indian agreement because payments are for services which "make available" technical knowledge, experience, skill, knowhow or processes or consist of the "development and transfer" of a technical plan or design – whether the income must derive from services which not only involve the use or application of technical knowledge, but also the supply of the technical knowledge itself – where some categories of the services provided by employees in India to Australian customers meet definition of royalties – where, in the alternative, payments for services undertaken by employees in India do not constitute business profits under Article 7 which are taxable by Australia – where Australia has capacity to tax profits under the limited force of attraction rule in Article 7 only where the services are undertaken in Australia