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2017 (2) TMI 779 - AT - Income TaxEligible for the benefits of India-UK DTAA - Held that:- There is no dispute on facts that ultimately tax has been paid either by the said firm or by its partners in UK. No distinction has been pointed out by the Ld. CIT-DR on facts or law. Under these circumstances, respectfully following the orders of the Tribunal in Linklaters’s case for earlier years, we hold that the assessee is entitled to claim benefits of India UK- DTAA. Taxability of income (fee) received by the assessee in terms of Articles of DTAA - income of the assessee is in the nature of ‘Fee for Technical Services’ - Held that:- None of the transactions, the Ld. CIT-DR was able to point out as to how there was transfer of technical knowledge, skill, experience or know-how, etc. in such a manner that these recipients were able to utilise and perform these tasks again on their own without falling back upon the assessee for its assistance. If any of these recipients would come up with a new project next time in future, whether identical to the previous projects or not, it would again need the services of assessee or any other legal advisor for availing advisory on new issues. The Revenue has taken help of few judgments which are not applicable on the facts of the case before us. We are not in a position to agree with the view taken by the Revenue and thus hold that the income of the assessee would not fall in the category of “Fee for Technical Services” as envisaged in Article 13 of India-UK DTAA. Further, since this amount is not taxable under DTAA as FTS, it cannot be brought to tax as FTS as per provisions of section 9 of the Income Tax Act, 1961, in view of section 90(2) of the Act. Liability to tax in India under Article 15 of India-UK DTAA - Held that:- Article 15 of DTAA deals with taxability of independent personal services. This Article starts with the words “Income derived by an individual..in respect of professional services or other independent activities of similar character.”It is noted by us that Article 15 shall be applicable for determining taxable income in the hands of individual and not other persons. The assessee is certainly not an Individual. Thus this Article cannot be made applicable on the assessee being not an individual. Similar issue had come up before the Tribunal in the aforesaid case of M/s Linklaters (for AY 1995-96) wherein the Tribunal held that Article 15 shall be applicable only when services are rendered by an individual. Thus, respectfully following the order of the Tribunal it is held that impugned amount of fee received by the assessee would not be liable to be taxed under Article 15 of India-UK DTAA Reimbursement of expenditure - AO treated the same as part of gross receipts and therefore, included the same as part of taxable income - Held that:- The perusal of chart containing details of the expenses clearly shows that all these items are in the nature of expenses. These are apparently not items of revenue. These are mostly expenses of routine nature incurred by the assessee in the normal course of business. It is noted from the perusal of orders passed by the lower authorities that AO did not bring anything on record to show that whether any element of mark-up was involved in the expenses, which have been reimbursed to the assessee. However, that is even not the case of the Revenue. Under these circumstances, it cannot just be presumed that income element was involved in the reimbursement of expenses. Therefore, respectfully following the orders of the Tribunal of earlier years, these grounds are allowed and decided in favour of the assessee. Change of assessee’s status to “Limited Liability Partnership” by AO as against the status of “Company” as was stated by the AO in the draft assessment order and was not disputed by the DRP - Held that:- Nothing is coming out as to how contradictions emerged in the orders passed by lower authorities. No reasoning has been given by the AO. Thus, this issue is remitted back to the file of AO to decide this issue after providing adequate opportunity of hearing to the assessee to file requisite details and documentary evidences and to raise any legal or factual issue in this regard. Non granting 5% deduction of expenses u/s 44C - It is noted that the AO has denied the benefit of deduction in the final assessment order without giving any reason. It is also noted that in the draft order such deduction was allowed, but in the final order, the same was not granted without giving any reasoning whatsoever. Therefore, we send this issue back to the file of the AO, who shall, after verifying the facts grant the deduction u/s 44C as per law. Levy of interest u/s 234B - Held that:- It is noted that this issue has already been decided by the Hon'ble Bombay High Court in the case of NGC Network (2009 (1) TMI 174 - BOMBAY HIGH COURT ). The Tribunal has consistently followed the said judgment and held that interest u/s 234B is not leviable in the case of Linklaters, on the facts and circumstances of the case.
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