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2014 (9) TMI 605 - AT - Income TaxDetermination of income – Royalty under Article–12(3), Indo-Thailand Tax DTAA - Whether the payment received by the assessee in lieu of services rendered to GEMFSl is taxable as “royalty” under Article–12(3) or not – Held that:- The royalty payment received as consideration for information concerning industrial, commercial, scientific experience alludes to the concept of knowhow - There is an element of imparting of knowhow to the other, so that the other person can use or has right to use such knowhow - In case of industrial, commercial and scientific experience, if services are being rendered simply as an advisory or consultancy, then it cannot be termed as “royalty”, because the advisor or consultant is not imparting his skill or experience to other, but rendering his services from his own knowhow and experience - All that he imparts is a conclusion or solution that draws from his own experience. The thin line distinction which is to be taken into consideration while rendering the services on account of information concerning industrial, commercial and scientific experience is, whether there is any imparting of knowhow or not - If there is no “alienation” or the “use of” or the “right to use of” any knowhow i.e., there is no imparting or transfer of any knowledge, experience or skill or knowhow, then it cannot be termed as “royalty” - The services may have been rendered by a person from own knowledge and experience but such a knowledge and experience has not been imparted to the other person as the person retains the experience and knowledge or knowhow with himself, which are required to perform the services to its clients - it cannot be held that such services are in nature of “royalty” - if the services have been rendered de–hors the imparting of knowhow or transfer of any knowledge, experience or skill, then such services will not fall within the ambit of Article–12 - Since neither the AO nor the DRP has examined the nature of service rendered by the assessee from this angle therefore, the matter should be restored back to the file of the AO to examine the nature of services – Decided in favour of assessee.
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