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2017 (6) TMI 876 - HC - Income TaxTDS u/s 195 - Taxability as royalty or FTS - outright purchase - payment made towards supply of design and drawings to a nonresident architect firm - DTAA - P.E. in India - Held that:- Payment has been made by assessee to M/s. Naimisha directly for supply of drawings and design as per clause / Article 4.3 of the agreement dated 5.6.2000 and different amounts were required to be paid / paid with respect to different designs and drawings for different components of the project viz. InfotowerI, Infotower II etc. It is required to be noted that even "Bob Snow & Associates is not signatory to the agreement dated 5.6.2000 and agreement / contract dated 5.6.2000 is between the assessee and M/s. Naimisha only. Under the circumstances, the payment made by the assessee towards supply of design and drawings to M/s. Naimisha and the payment made under the agreement dated 5.6.2000 is rightly held to be outright purchase and not as a Royalty taxable under Section 9(1) of the Income Tax Act on which, the TDS was required to be deducted. Decided in favour of the assessee Payment to non resident for marketing activity as a reimbursement expenses - expenses were part and parcel of technical service related to income earned in India - Held that:- From the agreement, it appears that there is no service rendered by CII to the assessee. The assessee has not received any service and therefore, the question of utilization of service does not arise. The assessee was only to reimbursement expenses incurred by the CII. Therefore, when CII has not rendered any service to the assessee there is no question of treating the concerned expenses as if it is for rendering service by CII to assessee. Therefore, learned Tribunal as such has not committed any error in not treating the same as if it is for providing service by CII to assessee. The provision of Section 9(1) (vi)(vii) shall not have any application as the amount paid is neither Royalty nor fees for technical service (FTS) but is a business income. Therefore, the provision of Section 9 of the Income Tax Act also shall not be applicable as no income arise in India to CII and / or income does not accrue or arise in India. Tribunal has not committed any error in holding that the payment was made towards reimbursement of expenses and not reimbursement of service. We see no reason to interfere with the view taken by the learned Tribunal while holding that the payment in question made was towards reimbursement or expenses and not reimbursement of service. - Decided in favour of assessee
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