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2015 (10) TMI 2830 - AT - Income TaxIncome accrued in India - fixed place Permanent Establishment (PE) in India under article5(1), 5(2)(a) and 5(2)(c), a Service PE under Article 5(2)(l) as well as a Dependent Agent PE under Articles 5(4)(a) and 5(4)(c) of the India -USA DTAA - Whether the CIT(A) was justified in holding that the assessee has a PE in India/ - HELD THAT:- Taking a consistent view, we hold that the assessee has a fixed place PE in India, but has no dependent agent PE in India. Accordingly, ground raised by the assessee and the only ground raised by Revenue in their respective appeals are dismissed. Attribution of profits to PE - We hold that since in the A.Y. 2002-03, the margin kept by assessee after payments to CIS is in loss, no profit attribution is available to PE in India. Ground No. 2 of assessee’s appeal is accordingly disposed of. Levy of interest under section 234B - The charging of interest is automatic under the Act if the assessee has defaulted in payment of advance tax. The income of the assessee was not liable for withholding tax under section 195 of the Act. In this case we have no option but to hold. that the assessee is liable to interest u/s 234B, as the income being assessed now cannot be held. to be income liable to TDS under Indian provisions. The same is being assessed in the hands of PEs who had not filed their return on the ground that this income was not attributed to Indian Business Connection. Provisions of section 234B are mechanical in nature. In view of the above this ground of appeal of the assessee is dismissed. Taxability on IPLC/link charges - As held payment is not taxable in the hands of the assessee as Royalty - We hold that there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. Therefore, it is held. that the said payments do not constitute Royalty under the provisions of Article 12 of the tax treaty and the ground is allowed in favour of assessee.
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