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2018 (8) TMI 1905 - AT - Income TaxTDS u/s 195 - development fees and royalty paid by the assessee to a non –resident entity for want of deduction of tax at source - DTAA with Korea - Whether term ‘’paid’’ used in clause (1) will include ‘’payable’’ amount also ? - HELD THAT:- Terms used in treaties are not to interpreted in the manner which terms are used in a legislative edict in the form of a statute or law. Hon’ble Apex Court had noted as under in its judgment in the case of UOI vs. Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT], which throws light on the manner which a treaty is to be interpreted. We feel that the word ‘’paid’’ cannot be construed in a manner to include in it payable amounts also. ‘’Paid’’ indicates a past event and not one which is to happen in future. Hence, we cannot say that the Korean entity was liable to tax on these amounts under clause (1) of Article 13 of the DTAA. Whether clause (2) of Article 13 would apply? - Said clause says that royalties and fees for technical services might also be taxed in that contracting state in which they arose. We find that the decision of Ahmedabad Bench of the Tribunal in the case of Saira Asia Interiors Pvt. Ltd [2017 (4) TMI 242 - ITAT AHMEDABAD] elucidates the manner in which this clause has to be interpreted. Ahmedabad Bench was considering application of Article 13 of DTTA between India and Italy, in a more or less similar fact circumstances. Said article was pari materia to Article 13 of the India and Korea, DTAA For triggering the taxability under article 13 of the Indo-Italian DTAA, mere credit of amount of the royalty payable to the non-resident concerns account would not be sufficient. According to them, it was imperative that actual payments were effected. . Hence we are choosing to follow the Co-ordinate Bench view. Ld. Commissioner of Income Tax (Appeals) has at para 4.1.3 clearly observed that amounts stood outstanding on 31.03.2010. Ld. Commissioner of Income Tax (Appeals) also observed that when payments were effected, assessee had remitted the tax to the exchequer. In such circumstances, we are of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in deleting the disallowance made u/s.40(a)(i)
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