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2016 (4) TMI 590 - AT - Income TaxTDS u/s 195 - payments to non-resident entities - Taxability in India - withholding tax - payments made to Liftech as Royalty / Fees for Technical Services under Article12(3)(a) /12(4) of the India-USA Double Tax Avoidance Agreement ('DTAA') - Held that:- The definition of royalty under the DTAA under art. 12(3) useed the expression "or for information concerning industrial, commercial or scientific experience",that there was no parting of information concerning industrial, commercial or scientific experience by GIA when it issued the grading certificate,that under sub-cl. (4) the payments received must be in consideration for services of managerial, technical or consultancy nature,that it would include the application or enjoyment of the right, property or information,that it was not making available technical knowledge, experience, skill, etc.to enable the person acquiring the service to apply the technology contained therein,that GIA was not imparting its technical knowledge, experience, skill, etc. to its customers,that when there was no transfer of right to use, payment cannot be treated as royalty within the meaning of art. 12 of the DTAA,that payment received by the petitioner a Singaporean company, as a subparticipant of GIA’s network from Indian clients for collecting and shipping diamonds and certification thereof by GIA did not fall within the expression royalty. Respectfully following the judgment of Diamond Services International (P)Ltd. (2007 (12) TMI 182 - BOMBAY HIGH COURT ),we reverse the order of the FAA.We hold that the payment made to Liftech was not royalty or FIS or FTS and the assessee was not supposed to deduct tax at source for making the payment to Lifetech and therefore cannot be treated as assessee in default. - Decided in favour of the assessee. Existence of PE in India - AO held that part of the basic installment and purchase agreement included element of service contract also,that the job done under the basic agreement could be termed FIS - Held that:- Dervices rendered in setting up of machine could not be treated as personal service even if the agreement for rendering the services was embodied in a separate agreement,that the German Company had no PE in India,that in view of the Indo-German DTAA no income had accrued in India,that there was no liability to deduct tax source.Finally,we would like to refer to the order of the Special Bench of the Chennai Tribuanl,delivered in the case Prasad Production Limited (2010 (4) TMI 784 - ITAT MADRAS-B).In that matter the assessee had purchased Considering the above,we hold that the FAA was not justified in holding that services rendered in pursuance of the purchase agreement can be taxed as FIS/FTS. FAA had held that UBCB had performed activities on behalf of ZPMC, that it was an agent of Chinese co. in India, that UBCB constituted agency PE of ZPMC in India.It is found that UBCB was sub contractor of ZPMC,but it had no authority to conclude any contract on behalf of ZPMC,that it had rendered services relating to the installation and commissioning of crane not only to assessee but to other parties also.Therefore, in our opinion there was no agency PE in India under Article-5(4) of the India China DTAA of the non-resident entity-i.e. ZPMC. - Decided in favour of the assessee.
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