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2016 (5) TMI 371 - HC - Income TaxFees for technical services received - computation of period of stay - whether taxable by reason of article 12(2) of the Double Taxation Avoidance Agreement with Japan? - Held that:- On examination of the purchase orders, a common feature which emerged was that the supervisors were to come from Japan and Maruthi Udyog Ltd. had to bear the cost of their air tickets as well as their boarding and lodging in India. The period of supervision in the case of the individual contracts did not exceed the period of 180 days. In other words, they did not constitute a supervisory permanent establishment in terms of article 5(4) of the Double Taxation Avoidance Agreement. Fees for technical services paid to the assessee for the supervisory services is concerned, there was no effective connection between the execution of the purchase orders for supply of equipment and supervision of their installation, and, the project office for the paint and assembly shop of the YE2 car project of Maruthi Udyog Ltd. Additionally, as pointed out by Mr. Aggarwal, the supervisory fee paid by Maruthi Udyog Ltd. was on the basis of "man days". The number of days per supervisor was calculated by dividing "man days" by the "number of supervisors". If 10 supervisors had stayed for 100 man days, the supervision period would be 10 days only, though the "man days" are 100. Thus, the period of stay would be only of 10 days and not 100 days. A comparison of the relevant portions of article 5 of the Double Taxation Avoidance Agreement between India and Japan with the corresponding clause in some of the double taxation avoidance agreements entered into by India with other countries shows that where it is intended that the computation of the six months period for determining whether an assessee can be said to have a permanent establishment should be in the aggregate, i.e., not "continuous", the double taxation avoidance agreement itself provides for it. From the wording of the article 5 of the Double Taxation Avoidance Agreement in question, it is not possible to accept the plea of the Revenue that the supervisory activities need not have been carried on for six continuous months. The court concurs with the views of ITAT that in the present case the fees for technical services was liable to be taxed at 20 per cent. under article 12(2) of the Double Taxation Avoidance Agreement. - Decided in favour of the assessee and against the Revenue.
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