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2012 (6) TMI 717 - AT - Income TaxDTAA between India and Singapore - taxability - consultancy charges @ 1% of the total transacted volume of forex derivatives, futures and options paid to Singapore Company - dis-allowance u/s 40(a)(i) on ground of non deduction of tax at source u/s 195 - Held that:- There is no dispute with the factual position that the GMPL did not have any permanent establishment in India, and with the legal principle laid down in the applicable tax treaty that, in the absence of the PE of GMPL, its business profits could not be taxed in India. The taxability under the source state under Article 7 of the applicable tax treaty, therefore, clearly fails. Further, services were simply consultancy services which did not involve any transfer of technology. Unless there is a transfer of technology involved in technical services extended by Singapore company, the ‘make available’ clause is not satisfied and, accordingly, the consideration for such services cannot be taxed as FTS under Article 12(4) of India Singapore tax treaty. Therefore, the income from consultancy services, which cannot be taxed under article 7, 12 or 14 because conditions laid down therein are not satisfied, cannot be taxed under article 23 either. It is also only elementary that when recipient of an income does not have the primary tax liability in respect of an income, the payer cannot have vicarious tax withholding liability either. Hence, CIT(A) was justified in holding non-taxability of such fees in India and non-existence of assessee's tax withholding obligation - Decided against Revenue.
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