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2019 (5) TMI 1686 - AT - Income TaxIncome accrued in India - treating the receipt as fees for included services as Article-12 of India-US DTAA - HELD THAT:- The service agreement executed between the assessee and the service provider. For services the assessee has not executed any contracted to make available any technical expertise so as to use those services independently by the licensee. All the services under taken by the assessee are either support services, IT enable services, coordination or tax services as referred above are not such which require transfer of technology, skill to the receipt company. The Hon’ble Karnataka High Court in CIT Vs De Beers India Minerals (P) Ltd. [2012 (5) TMI 191 - KARNATAKA HIGH COURT] while considering the similar question of law while considering the provisions of India- Netherland Double Tax avoidance Agreement (India- Netherland DTAA), while considering the facts that where a Netherland Company rendered technical services to the assessee, without making available any technical expertise so as to enable assessee use those services independently in future, payment made for such services cannot be termed as ‘fee for technical services’ We hold that the assessing officer erred in taxing the service agreement receipt as ‘fee for included services’ as per Article 12(4) of India USA DTAA for such services as mentioned in para 4 (supra), in absence of clause in the service agreement dated 09.01.2009, that the recipient would be able to perform these services of its own without any further assistance of the assessee. - Decided in favour of assessee Reimbursement of expenses as fee for included services - Revenue receipts - HELD THAT:- The agreement is basically to share the product without paying the royalty but by paying the consideration which occurs only on the use of the product and not otherwise. The assessing officer taxed the said receipt as consideration for the use of process or formula and fall under the definition of royalty. CIT(A) confirmed the action of the assessing officer holding the assessing officer has assigned valid reason while taxing the receipt. AO has not examined the facts as per the reply and the explanation furnished by the assessee. Considering the facts that we have already allowed the Ground No. 2 holding that assessing officer erred in taxing the service agreement receipt as ‘fee for included services’ as per Article 12(4) of India USA DTAA. Thus, on the same principles the receipt cannot be treated as royalty as there is no transfer of process or formula. In CIT Vs Siemens Aktiongesellschaft [2008 (11) TMI 74 - BOMBAY HIGH COURT] while relying on the judgment of Industrial Engineering Projects (P.) Ltd.'s case [1992 (7) TMI 38 - DELHI HIGH COURT] held that reimbursement of expenses can, under no circumstances, be regarded as a revenue receipt. Interest under section 234B and 234C - HELD THAT:- We direct the assessing officer to compute the interest by taking in consideration of decision of Bombay High Court in Ngc Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] - In the result the Ground No. 5 of the appeal is allowed.
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