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2016 (4) TMI 41 - AT - Income TaxBusiness income/profits taxable in India as per the DTAA - payment made towards BEDS package for the refinery at Visakhapatnam - tds liability - whether payment is towards purchase of capital asset, that it was not for FIS, as contemplated under Article -12 of DTAA - Held that:- If an assessee makes payment for basic engineering program or basic design to a non-resident entity and the supplier does not have a PE in India, such payments would not be taxed in India. If the assessee purchases BEDP out rightly it would amount to purchase of capital asset. But, if the payment is made for use of property rights the payments has to be taxed as Royalty. There is conceptually difference in payment made for use of certain rights for a certain period and payment made for acquiring basic designing. In the case under consideration, it is clear that the assessee had treated other two payments as Royalty and had deducted tax at source, that the American-company had provided the assessee basic engineering design to set up a plant, that designing work was not carried out in India and the payment was also made outside India. Therefore, in our opinion, the assessee was not liable for deducting tax at source for the said payment. The agreements cannot be treated a part of a composite agreement-one agreement is for supply of basic designing to set up a plant and others are for use of property-rights. Reversing the order of the FAA, we hold that payment in question was neither royalty nor FTS. - Decided in favour of assessee
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