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2014 (4) TMI 529 - ITAT PUNEScope of the term business connection u/s 9(1)(i) of the Act Indo -German treaty - Whether assessee's Indian subsidiary constitute its business connection in India u/s. 9(1)(i) of the Act or a Permanent Establishment ('PE') in India under India-Germany Tax Treaty Held that:- The decision in Assistant Commissioner Of Income-Tax. Versus Epcos Ag, Germany [2008 (6) TMI 288 - ITAT PUNE-B] followed - Nothing contrary was brought to our knowledge on behalf of revenue - the assessee did not have any PE in India, much less a PE to which subject royalties and fees for technical services could be attributed - In terms of India-German DTAA, India does not have right to tax these receipts as business profit under Article 7 - no revenue earned by the assessee could be said to be attributable to PE, even if one was to come to the conclusion that a PE existed, no taxability could arise under Article 7 - The assessee has offered the royalties and fees for technical services for taxability in India under Article 12A and to that extent, admitted tax liability exists Decided in favour of Assessee. Non attribution of income deemed to accrue or arises in India Taxability @ 20 per cent u/s 44DS r/w s.115A in case PE is found to be in existence - Held that:- The decision in Assistant Commissioner Of Income-Tax. Versus Epcos Ag, Germany [2008 (6) TMI 288 - ITAT PUNE-B] followed - the amounts received by the assessee company meet the definition of 'royalties' and of fees for technical services' u/s 44D which, in turn, refers to Expln.2 to s. 9(l)(vi) respectively - the taxability of amounts received by the assessee company on account of 'royalties' and 'fees for technical services' will be @ 20 per cent on gross basis - Nothing contrary was brought to our knowledge on behalf of revenue - taxation at gross basis at higher rate of 20% under section 115A r.w.s. 44D of Act are unwarranted and taxation has to be at 10% on gross basis under article 12(2) of the Tax Treaty as offered in the return of income Decided in favour of Assessee.
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