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2017 (3) TMI 30 - AT - Income TaxTDS u/s 195 - TDS liability - Held that:- Undisputedly made for acquiring certain equipments and appliances for the purpose of research. This aspect of the matter is beyond any dispute or controversy in the light of invoice dated 20.05.2010, a copy of which is placed before us at page no.16 of the paper Book. It is also not the case of the Revenue that this invoice is a sham invoice or that the description given in the invoice is incorrect. Yet, the stand of the Revenue authorities is that since the payment was made under an agreement which was aimed at carrying out research activities on behalf of the assessee, the payment must be treated as royalty. That argument does not appeal to us. While examining taxability of income in the hands of the recipient, embedded in foreign remittance, all that is required to be seen is whether or not that particular income is taxable in India. In the present case, the payment is made for purchase of equipments and appliances and these equipments and appliances under the agreement belonged to the assessee and clearly, therefore, the income embedded in these payments is not exigible to tax in India in the absence of permanent establishment of the vender on such equipments and appliances. While it is true that the contract for the purpose of which these equipments and appliances were purchased, relates to a taxable activity i.e. royalty, it is equally correct that no such taxable event i.e. carrying out of research activity has taken place during the course of this transaction. In this view of the matter, in our considered view, authorities below were completely in error in holding that the income embedded in the remittance of NOK 7,50,000 which was beyond any dispute or controversy for the purpose of purchase of equipments and appliances for research, was not taxable in India. We, therefore, vacate the orders of the authorities below and hold that the assessee was not liable to deduct any tax from this payment. Since we have cancelled the impugned tax withholding liability itself, all other points such as grossing up or invocation of section 206AA or even interest liability under section 201(1A) are not more than academic. These grievances must be dismissed as infructuous.
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