Treaty between India and Australia – Indian decision that data processing costs neither taxable as "royalty" nor "business profit"

The Indian Income Tax Appellate Tribunal (ITAT) delivered a ruling dated 13 October 2006 in the case of Kotak Mahindra Primus Ltd. v. Deputy Director of Income Tax ([2007] 11 SOT 578(Mum.)) on whether payments for data processing costs was taxable in India under the India-Australia tax treaty (the Tax Treaty).

(a) Facts. The Appellant (i.e. Kotak Mahindra Primus Ltd.) was a "Non-Banking Finance Company" engaged in the business of providing financing for the…