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2010 (5) TMI 523 - AT - Income TaxDTAA - TDS – International charges – Whether Bauxite testing charges is a Fees for technical services - The basic thrust of assessee’s contentions is that, since no part of the testing services was rendered in India, the Chinese company did not have any tax liability in India in respect of the bauxite testing charges - The Assessing Officer thus concluded that in terms of the treaty provisions, the Indian company was to withhold tax @ 10% of the gross amount of remittance to the Chinese company - The concept of territorial nexus, for the purpose of determining the tax liability, is relevant only for a territorial tax system in which taxability in a tax jurisdiction is confined to the income earned within its border - It is no longer necessary that, in order to invite taxability under section 9(1)(vii) of the Act, the services must be rendered in the Indian tax jurisdiction - It is accordingly liable to be taxed in India under the domestic tax law whether or not the income earned by the Chinese company is liable to be taxed in India under Article 12 of the India China tax treaty - That’s a conscious choice by the respective Governments, and just because China Pakistan have negotiated a bilateral tax treaty in a particular manner, it does not mean that India China tax treaty should also be construed on the same basis - . In the case of Hindalco Industries Ltd Vs ACIT this Tribunal had an occasion to set out the principles on the basis of which tax treaties are to be interpretated The impugned payment to the Chinese company, therefore, is covered by the scope of “fees for technical services” within meanings assigned to that expression under Article 12 of the Indian China tax treaty, and is taxable in India as such – The appeal of the assessee is dismissed
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