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2013 (4) TMI 643 - AT - Income TaxRoyalty / FTS – back-up services and IT support services for solving IT related problems - DTAA - Assessee is a non-resident company incorporated in Australia and appeal is on following grounds – (i) IT support services rendered by the Appellant are in the nature of Royalty/FTS within the meaning of article 12 of the India-Australia treaty and/or Section 9(1)(vii) of the Income Tax Act, 1961. (ii) services rendered by the Appellant fall within the ambit of Royalty/FTS and making an addition by treating such IT support services as chargeable to tax in India. Held that - In the present case, the assessee has not made available any technical knowledge or expertise to the recipient Indian company. In our opinion, the assessee has only provided the back-up services and IT support services for solving IT related problems to its Indian subsidiary. Hence, unless and until the services are not made available, same cannot be taxable in India. We, therefore hold that the services rendered by assessee company to its Indian group companies, though are in the nature of technical services, but is not covered in para (3)(g) to Article 12 of the India Australia Treaty and hence, the same is not taxable in India. We also hold that the amount received by the assessee cannot be treated as a Royalty even under the normal provisions of I.T. Act. But under the normal provision of the I.T. Act the same constitute consideration for rendering the technical services covered u/s.9(1)(vii) of the I.T. Act. Accordingly, Ground No. 1 is allowed and issue is decided in favour of the assessee. The assessee has taken alternative Ground by way of Ground No. 2. As we have decided the issue in favour of the assessee, the alternate Ground does not survive. In the result, the assessee's appeal is allowed.
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