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2016 (3) TMI 501 - AT - Income TaxIncome accrued and arisen in India - whether the services rendered by the assessee could be termed FIS as per the provisions of Article 12 of the DTAA? - Held that:- Services rendered by the assessee cannot be taxed u/s.9(1)(vii)of the Act as unless the services were rendered and utilised in India the income could not be taxed in India Perusal of the contracts, entered into by the assessee with JTPCL,reveal that the services provided by it under the contracts did not in any way make available technical knowledge and experience skill or know-how to the Indian Compnay. It had supplied the equipments to Indian company outside India,so the payments made by JTPCL to the assessee would not constitute FIS, as per Article 12 of the Treaty. Services mentioned in Examples 4 and 7 of the MoU are more or less similar to the services rendered by the assessee.We have also taken note of Article 12 (5)of the Treaty which stipulates that FIS would not include the amounts if same are inextricably and essentially linked to the sale of property. In the case under consideration, in our opinion, the services provided by the assessee were linked inextricably and essentially to the start-up services and sale of equipment to JTPCL. Therefore, the payment received by it cannot be treated as FIS. In our opinion,payment received by the assessee under the contract constituted business profit within the meaning of article 7 of the Tax-treaty. As per article 7(1) of the treaty business profit of an assessee can be taxed in India only if it has a PE in India. In the case under consideration the assessee is not having PE in India whether fixed or otherwise. Considering the above, we are of the opinion that the order of the FAA cannot be sustained. So, reversing his order,we decide effective ground of appeal in favour of the assessee.
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