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2017 (3) TMI 1515 - AT - Income TaxTDS u/s 195 - payment on FTS - employees seconded to the assessee - Permanent Establishment in India - payment to non-resident entity - Held that:- What is relevant is that the income embedded in the payments in question is taxable in India under the head ‘Salaries’, and if that be so, there are no tax withholding obligations under section 195. That precisely is the undisputed position on the facts of this caseas duly accepted by the income tax authorities. The income embedded in the impugned payments being in the nature of income chargeable to tax under the head ‘income from salaries’, the assessee cannot be said to have any tax withholding obligations under section 195. For this short reason alone, we must hold that the impugned tax withholding demands, under section 201 r.w.s 195, are wholly devoid of any legally sustainable merits. A lot of emphasis has been placed on the fact that there was a service PE in the present case. Nothing, however, turns on the existence of the PE because admittedly whatever has been paid to Burt Hill Inc USA is, in turn, paid by Burt Hill Inc UA to its employees seconded to the assessee. There cannot be any profits, therefore, in the hands of the Service PE, and what is taxable in the hands of the PE under article 7(1) is not the gross receipt but the profits attributable to the PE. The existence of service PE, in the present case, will be wholly academic inasmuch as whatever is the aggregate of receipts said to be attributable to the PE, is exactly the same as aggregate of expenditure attributable to the PE. As for the payments made by the assessee being in nature of the fees for technical services, this stand of the Assessing Officer is equally frivolous. There is not even an effort to show as to how any technical knowledge, skills, knowhow or processes etc are “made available” by these services inasmuch as these services can be performed by the assessee without any recourse to the service provider. Unless this condition, under make available clause under article 12(4)(b), is satisfied the fees for technical services cannot be brought to tax in India in the hands of entities fiscally domiciled in United States. It is even more elementary that once these payments cannot be brought to tax under the provisions of the India US DTAA, there cannot be any occasion to invoke Section 9(1)(vii) of the Act either because it cannot be more beneficial to the assessee- as is the condition precedent, under section 90(2), for invoking the same. Thus he demands raised on the assessee under section 201 r.w.s 195 are wholly devoid of any legally sustainable merits. - Decided in favour of assessee
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