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2011 (7) TMI 392 - AT - Income TaxWhether or not the Commissioner (Appeals) was justified in holding that only 10% of the fee received by the Head Office for services rendered in India through independent surveyors is attributable to PE ignoring the facts that such services are not effectively connected with the PE as required under Para-5 of the Article 12 of the treaty between India and Japan and whether the same is taxable at the rate of 20 per cent on gross receipt under Article 12(2) - Held that:- find that Article-12(5) of the DTAA, excludes the entire receipt from Article-12(1) and 12(2), if the receipt has an effective connecting with the P.E - The argument that Port is to be taxed under Article-7 and balance under Article-12, is devoid of merit - The DTAA does not contemplate the same - Such an interpretation said to be placed by learned Departmental Representative is incorrect and, hence, we reject the same. When certain FTS is effectively connected with the P.E., then so much of the fees i.e., directly or indirectly attributable to the P.E. is to be taxed under Article-7. In view of the above discussion, we uphold the findings of the first appellate authority and dismiss this ground of the Revenue in all the appeals. Advance Rent - Capital or Revenue expenditure - Assessee terminated the agreement leading to a litigation and this litigation was ultimately resolved by way of consent terms agreed to on 7th October 2003, before the Hon'ble Bombay High Court - ON entering on these terms, the assessee has, in its return of income, for assessment year 2004-05, offered the amount received from the landlady to tax - The Revenue has also taxed this amount - What is paid was advance of leave and licence fee and no enduring benefit accrues to the assessee - Advance Rent paid, is not capital expenditure - As to whether the expenditure is contingent in nature, held that the loss is real and it does not depend on the happening of any event, as in the case of contingency - Thus, appeals of the Revenue are dismissed.
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