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2015 (4) TMI 503 - HC - Income TaxFees for technical services covered under section 9(1)(vii) or covered in DTAA between India and Thailand - transfer of know-how - technical advice in transferring all its present methods of manufacture relating to packing materials and containers - Treatment of consideration received under the DTAA as royalty or as business profits - Taxability of royalty u/s 115(1)(b) - Held that:- tribunal hold that art. 22 was concerned about miscellaneous income not covered under any of the provisions of DTAA. Thus holding that royalty and fee for technical services contemplated under the agreement were taxable under art. 12 and art. 7 respectively, the Tribunal held that art. 22 could not be invoked. Having stated so, surprisingly, in para 9 of the order, the Tribunal once again considered art. 22 only to hold that the portion of fee for technical services arising in India was to be taxed in accordance with section 115(1)(b). On going through arts. 2 and 3 of the agreement between the assessee and the Indian company, we agree with the view of the CIT(A) that the entirety of the payment cannot be considered as one falling for consideration under art. 12. Further, taking note of the fact that the assessee company was also involved in training Indian personnel in India and abroad and taking note of the clauses in the agreement as regards the payment and the additional payment depending on the period of training, over and above what was to be paid under the agreement for the duration specified therein, the CIT(A) rightly came to the conclusion that the component of technical services in India included the extra months of training, so too the training abroad. In computing the said amount, rightly the CIT(A) arrived at a finding that a sum of 1,12,500 USD and 69,750 USD would be the amount which would be treated as received for technical services rendered by the assessee and the amount of 4,79,640 USD relates to royalty payment, assessable as per art. 12. As far as the order in art. 22 is concerned, we do not find any justifiable ground to uphold this portion of the order after the discussion on the extent of income falling for consideration under royalty as defined under art. 12 and the amount paid as towards technical services falling for consideration under art. 7. Since the said income does not fall as miscellaneous income, the same cannot be brought under art. 22. Even though learned standing counsel made a submission that the fee paid towards technical services cannot be brought towards business income, yet in the absence of any material to show that the same is not related to the business of the assessee, we have no hesitation in rejecting the said contention. Even assuming for a moment that the assessee is an Indian company, given the nature of business of the assessee, if the income earned would qualify for consideration on the normal computation as business income, we do not find that the said character would undergo a change merely on the score that the assessee is not an Indian company. - Decided in favour of asessee.
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