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2012 (1) TMI 5 - HC - Income TaxDTAA with AUSTRALIA – Fees for technical services (FTS) or inclusive contracts of technical nature - applicability of Articles 7 or 12 of the DTAA – assessee having PE in India – whether income to be construed as 'business income' or gross receipts to be taxed without any deduction – assessee opted to be taxed as per the provisions of the DTAA - Held that:- The payment in the present case is for furnishing of evaluation report. The assessee undertook certain tests, mapping and studies. Drilling for tests as to evaluate is to gain information and knowledge. The payment made is to acquire technical information. Therefore, it is fee for technical services. As per articles of DTAA, once an assessee has a PE in the contracting state of which he is not resident, then paragraphs 1 and 2 of the Article 12 of DTAA would not apply. In such cases Article 7 or 14 would apply. Thus, it is held that Article 12 of the DTAA is not applicable. Article 7 deals with business profits and will apply. Expenses incurred by the assessee can be claimed as a deduction but only in accordance with and subject to limitation stipulated in the Act. Section 44D postulates non-applicability of Sections 28 to 44C in case of foreign company earning income by way of royalty or fees from technical services. Thus, Section 44D is applicable to compute taxable Income. - Decided against the Revenue
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