Tax Authorities can’t Ignore Valid TRC Issued by Singapore Govt. | HC Allows DTAA Benefit to Alibaba

Case Details: Commissioner of Income International Taxation v. Alibaba.Com Singapore E-Commerce (P.) Ltd. - [2023] 152 taxmann.com 110 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram & Firdosh P Pooniwalla, JJ.
  • P.C. Chhotaray for the Appellant.
  • P.J. Pardiwalla, Sr. Adv. & Atul K. Jasani for the Respondent.

Facts of the Case

Assessee-Alibaba Singapore was a non-resident company incorporated in Singapore. During relevant assessment years, the assessee was availing of web hosting services from Alibaba.com, Hong Kong. Assessee provided said website facilities to Indian suppliers to do online business through a global trade marketplace for which assessee charged a subscription fee.

During the scrutiny proceedings, Assessing Officer (AO) contended that the assessee was merely an intermediary between the Indian subscribers and Alibaba.com Hong Kong Limited. The AO did not accept the certificate of incorporation and the Tax Residency Certificate (TRC) issued to the assessee by the authorities in Singapore. It was held that alibaba.com was the trademark of Alibaba Hong Kong, and the website was also registered in Hong Kong, not Singapore.

Accordingly, AO held that assessee would not be eligible for India- Singapore DTAA benefits because Alibaba.com Hong Kong-owned the website. Since India and Hong Kong had no DTAA, subscription income would be partly taxable as royalty, FTS and business receipts.

The Dispute Resolution Panel (DRP) reversed the order of AO, which the Tribunal subsequently confirmed. The matter then reached the Bombay High Court.

High Court Held

The Court held that the entire focus of the AO is that the website www.alibaba.com is registered in Hong Kong and is the trademark of Alibaba Hong Kong. AO has completely denied the existence of the assessee as an independent entity, as if the assessee was only a front or a shadow entity of Alibaba Hong Kong.

Considering various documentary evidence, including the Tax Residency Certificate of the assessee, it cannot be held that the assessee is either a non-existent entity or some kind of conduit of Alibaba Hong Kong, which is not even the parent company. A group structure of Alibaba.com was produced, and the conclusion was drawn that Alibaba.com Hong Kong is a separate entity from the assessee.

The tax residency certificate is sufficient to determine the proof of residency. The income-tax authorities cannot ignore the valid tax residency certificate issued by the Government authority of the other contracting state, Singapore. Thus, the assessee was entitled to avail the benefit of India-Singapore DTAA.