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2010 (7) TMI 535 - AT - Income TaxScrutiny - DTAA - whether or not a partnership firm based in United Kingdom is entitled to the benefits of the India UK tax treaty - the income of the assessee from projects in India is taxable in India, the Assessing Officer turned to quantification of the income so liable to be taxed in India - in a situation when assessee is in appeal, Tribunal cannot give a finding adverse to the appellant so as to place him in a position worse than what it was before the appeal - the partnership firm is eligible for treaty benefits in the source country even as it is not taxable in its own right in the residence country - The remedy to unintended consequence of a treaty provision in the said report has been rejected, and, therefore, the treatment accorded to the said provision, in the same report, cannot be accepted either whether or not the assessee had a permanent establishment in India - Article 5(2) of India UK tax treaty is a mixture of what is usually contained in Article 5(2) and Article 5(3) in all major model conventions i.e. UN Model Convention, OECD Model Convention an UN Model Convention - the present case, is like this. In addition to taxability of income in respect of services rendered by the PE in India, any income in respect of the services rendered to an Indian project, which is similar to the services rendered by the permanent establishment, is also to be taxed in India in the hands of the assessee – irrespective of the fact whether such services are rendered through the permanent establishment, or directly by the general enterprise - The twin conditions to be thus satisfied for taxability of related profits are (i) the services should be similar or relatable to the services rendered by the PE in India; and (ii) the services should be ‘directly or indirectly attributable to the Indian PE’ i.e. rendered to a project or client in India - the appeals filed by the assessee as also by the Assessing Officer are partly allowed in the terms indicated above
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