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2018 (8) TMI 1817 - ITAT DELHITDS u/s 195 - Disallowance u/s 40(a)(i) - Fees for Technical services (FTS) - amount pertaining to payment made to Dr. Thiele for technical rendered - Scope of Work - recipient of the income is a resident of Germany - Whether the tax is required to be deducted on the above sum or not? - India - Germany DTAA - It is undisputed facts that services have been provided by an individual which are in the nature of “Independent scientific services‟. According to the assessee it falls under article 14 of the DTAA whereas Revenue is of the view that it falls under article 12 of the DTAA. HELD THAT:- As Dr. Theile does not have any Fixed Base and does not satisfy the condition of the minimum stay in India, his income cannot be taxed in India but in Germany only as per Article 14 of the DTAA. - such services are covered by the provision of section 9(1)(vii) and also by virtue of Article 14 of the DTAA such sum are chargeable to tax in Germany and hence, no tax is required to be withheld u/ 195. For the similar reasons, we direct the AO to delete the disallowance of ₹ 268980/- u/s 40(a)(i) with respect to payment made to Dr. U Thiele. Disallowance u/s 40(a)(i) - Payment made to Dr. Werner Stibal who is resident of Swiss Confederation who provided professional services to the assessee - Personal services in the nature of independent scientific services - Indo Swiss DTAA - Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State - HELD THAT:- According to Article 12 (5) (b) meaning of the Term “fees For Technical Services” specifically excludes income covered under Article 14 and 15 of the DTAA. Therefore, issue in this year is specifically covered in favour of the assessee by the decision of the coordinate bench in case of Graphite India [2002 (10) TMI 232 - ITAT CALCUTTA-C] wherein identical issue with respect to Indo US DTAA was in question. There are also similar condition in Indo Swiss DTAA in article 12 (5) (b) excluding professional services under article 14 and 15 of that DTAA. Therefore, it is apparent that the services are covered under Article 14 of the DTAA and not under Article 12 of DTAA. Further it is not the case of the revenue that the services provided by the Swiss resident is not professional services as defined under Article 14(2) of DTAA. Further, it is not the case of the revenue that such services are provided by him from its fixed base in India or he has stayed for more than 183 days in India. Therefore, we hold that no tax is required to be deducted on payment made to Dr. Werner Stibal who is a resident of Swiss Confederation and rendered the professional services with respect to the similar services as provided by Dr. U Thiele, therefore, those services are independent, personal services in the nature of independent scientific services which shall be taxable only in Swiss confederation. Hence, no tax is required to be deducted on sum paid by the assessee to Dr. Werner Stibal u/s 195 Disallowance u/s 14A - assessee has earned exempt income as dividend - AO rejected the explanation of the assessee stating that the assessee is keeping consolidated accounts of its income and further the assessee is also using administrative, managerial and infrastructure set up for earning such income. - HELD THAT:- According to us proper satisfaction has been recorded by AO. Further when the assessee has made a huge investment of ₹ 3.80 crores in a company it cannot be said that there no efforts of the board and other committee members were used. However, with respect to disallowance of interest expenditure of ₹ 234769/-, we hold that assessee has own fund and non interest bearing funds amounting to ₹ 38 crores which is more than the investment of ₹ 3.8 crores it could have been presumed that the investment is made out of interest free funds available with the assessee. Therefore, respectfully following the decisions of HDFC BANK LTD. [2014 (8) TMI 119 - BOMBAY HIGH COURT] we direct the ld AO to delete the disallowance on account of interest. With respect to the expenditure disallowance we find no force in the argument of ld AR and hence same is confirmed. Disallowance u/s 40(a)(i) - payment made to Swiss National holding it to be covered under Article 12 of DTAA, whereas, claim of the assessee is that same is covered under Article 14 of the DTAA - HELD THAT:- Identical issue has been decided by us in appeal of the assessee for AY 2009-10 wherein, payment to the same individual Dr. Werner Stibal was in issue. We have held that no tax is required to be deducted on payment made to such person as same falls under Article 14 of the DTAA. According to that same is not chargeable to tax in India. For similar reasons given thereunder we delete the disallowance
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