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2015 (4) TMI 578 - AT - Income TaxDisallowance u/s. 40(a)(i) of share of Technical expenses of head office - whether the same was reimbursement of actual expenses incurred by the head office - CIT(A) considering the reimbursement of actual expenses as fees for technical services without considering the definition of “Fees for included services” as per Article 12(4) of India-USA France Tax Treaty - Held that:- Assessee was not required to deduct tax at source from the impugned payment, consequently no disallowance could be made of the said amount of fee for technical services paid by the assessee to its Head Office, therefore, disallowance under section 40(a)(ia) of the Act was not called for. The connotations of fees for technical services under the Indo-French tax treaty were confined to payment for such services ‘as make available’ technical knowledge, skill, experience, etc. or consisted of development and transfer of technical plan or design. Generally speaking, technical services are treated as having been ‘made available’ when recipient of such technical services is enabled to perform such services without recourse to the service provider. In the instant case, the payment for technical services, which was sought to be brought to tax in the hands of the assessee was in the nature of reimbursement of technical expenses to the head office. The Assessing Officer had observed that ‘the head office expenditure allocated to the Indian division was in the nature of technical and administrative expenses’. Thus, this amount was not on account of any specific technical services having been ‘made available’, in the sense in which this expression was employed in the tax treaties, the amount could not be brought to tax in the hands of the assessee under article 13 of the Indo- French tax treaty. This amount could not also be taxed in the hands of the assessee under article 7 as it was not an income ‘attributable to PE’. Hence, the taxability of the impugned sum in the assessee’s hand was indeed incorrect. The Tribunal in assessee’s own case in respect of very same year, i.e. for A.Y 2002-03, it has to be held that the aforementioned amount could not even be assessed in the hands of the assessee on account of applicability of Article -13 and 7 of DTAA. - Decided in favour of assessee
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