eBay International’s India profits out of tax net

eBay International AG, a Swiss tax resident,

need not pay any income-tax on the profits earned from its two India-specific websites, the Mumbai Income-Tax Appellate Tribunal has ruled. The tribunal ruled that the fees received from customers for use of an online platform cannot be characterised as fees for technical services (FTS) under income-tax law. Such fees are in the nature of ‘business profits’, it said.

The tribunal concluded that eBay International had no permanent establishment (PE) in India and, therefore, the ‘business profits’ earned here were not taxable. eBay International operates two India-specific web platforms to facilitate the purchase and sale of goods and services to users in India. Both are operated from outside India.

The e-tailer earned revenues from the sellers of goods who were required to pay a user fee on every successful sale on the website. It had engaged its Indian affiliates — eBay India and eBay Motors —for getting certain support services in connection with the said platforms through a marketing support agreement.

Both eBay International and the Indian tax authority had filed an appeal before the Mumbai Tribunal raising two issues: One, whether the user fee from sellers in India would be in the nature of fees for FTS under the income-tax law. And, whether the Indian affiliates constituted PE for eBay International under the India-Switzerland double taxation avoidance agreement.