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2014 (4) TMI 529 - AT - Income TaxScope of the term business connection u/s 9(1)(i) of the Act – Indo -German treaty - Whether assessee's Indian subsidiary constitute its business connection in India u/s. 9(1)(i) of the Act or a Permanent Establishment ('PE') in India under India-Germany Tax Treaty – Held that:- The decision in Assistant Commissioner Of Income-Tax. Versus Epcos Ag, Germany [2008 (6) TMI 288 - ITAT PUNE-B] followed - Nothing contrary was brought to our knowledge on behalf of revenue - the assessee did not have any PE in India, much less a PE to which subject royalties and fees for technical services could be attributed - In terms of India-German DTAA, India does not have right to tax these receipts as business profit under Article 7 - no revenue earned by the assessee could be said to be attributable to PE, even if one was to come to the conclusion that a PE existed, no taxability could arise under Article 7 - The assessee has offered the royalties and fees for technical services for taxability in India under Article 12A and to that extent, admitted tax liability exists – Decided in favour of Assessee. Non attribution of income deemed to accrue or arises in India – Taxability @ 20 per cent u/s 44DS r/w s.115A in case PE is found to be in existence - Held that:- The decision in Assistant Commissioner Of Income-Tax. Versus Epcos Ag, Germany [2008 (6) TMI 288 - ITAT PUNE-B] followed - the amounts received by the assessee company meet the definition of 'royalties' and of fees for technical services' u/s 44D which, in turn, refers to Expln.2 to s. 9(l)(vi) respectively - the taxability of amounts received by the assessee company on account of 'royalties' and 'fees for technical services' will be @ 20 per cent on gross basis - Nothing contrary was brought to our knowledge on behalf of revenue - taxation at gross basis at higher rate of 20% under section 115A r.w.s. 44D of Act are unwarranted and taxation has to be at 10% on gross basis under article 12(2) of the Tax Treaty as offered in the return of income – Decided in favour of Assessee.
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