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2011 (8) TMI 295 - AT - Income TaxPayment of royalty or business profit - Disallowance - Under section 40(a)(i) - whether the assessee indeed had an obligation to deduct tax at source from the remittance of Rs 11,71,826 to British Dental Health Association UK - Held that: When an expression has been defined in law, and the impugned payment is not covered by such a specific definition, it cannot be open to us to look at normal connotations of this expression in business parlance. Simply because assessee is benefited by this accreditation, and the assessee uses the same for its marketing purposes, the character of payment cannot be classified as 'royalty'. The expression 'royalty' is neatly defined under Article 13(3) of Indo UK tax treaty, and unless the payment fits into the description set out in Article 13(3), it cannot be termed as 'royalty' for the purposes of examining its taxability under the tax treaty - The impugned remittance is in the nature of business profits in the hands of the UK based recipient, and since the recipient admittedly did not have any permanent establishment in India, the same is not taxable in India - Therefore, the recipient did not have any primary tax liability in India, as a corollary thereto, the assessee did not have tax withholding obligations from this remittance - Decided in favour of assessee.
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