Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 478 - AT - Income TaxTaxability of Fees for Technical Services (FTS)/Royalty - Indian - Netherland DTAA - applicability of Article 12 of the tax treaty - income accrued to the assessee from India - consultancy fees received - services rendered outside India - Held that:- No taxable income was received by the assessee during the year under appeal. It is a fact that services were rendered outside India to a nonresident i. e. ZMPC and that same were utilised in manufacturing the cranes outside India i. e. in China. In the circumstances consultancy fees received by the assessee from the Chinese entity for rendering services outside India cannot be deemed to accrue or arise in India, as per the provisions of section 5 read with section 9 of the Act. Consequently the same would not be taxable in India. India has signed the DD AA with the Netherlands and taxability of consultancy services had to be examined first as per the provisions of the tax treaty. In the case under consideration the AO, without referring to the treaty, had applied the provisions of the Act. In our opinion, the stand of the AO/FAA cannot be endorsed, as the provisions of tax-treaties have to be given preference over the provisions of the Act. The consultancy was rendered outside India and even if same has to be taxed it would be chargeable to tax in that country and not in India. The AO/FAA has failed to prove that services rendered by the assessee to ZMPC were in the nature of Royalty. Nothing has been brought on record to prove that the assessee had made available any technical knowledge, experience, skill to Indian company. We also agree with the argument of the AR that in the case under appeal, consultancy fees were rendered to a person who was nonresident i. e. to ZMPC. As per the provisions of Article 12 of the treaty, FTS arising in India and paid to a tax-resident of the Netherlands can be taxed in India. In the case under appeal the payment was paid to a Chinese company. Considering the above, we are of the opinion that consultancy fees received by the assessee from ZMPC cannot be held to be FTS and that same is not chargeable to tax in India. So, reversing the order of the FAA we decide the effective ground of appeal in favour of the assessee.
|