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2018 (8) TMI 1264 - HC - Income TaxTDS u/s 195 - Taxability of management fees paid by the appellant to UST Global - DTAA between India and USA - Fee for included services - Article 12 of the said DTAA - definition of “make available” as per the India-USA DTAA - Held that:- There can be no dispute that the income generated by the US Company under the agreement entered into with the Indian Company as remuneration for the services provided is brought within the scope of total income under Section 5(2) of the Act. The services which come under the 'included services', meaning a technical and consultancy service as understood by the DTAA, have further been elaborated in sub-clauses (a) and (b) of Clause 4 under Article 12. We are concerned with sub-clause (b) of Article 12(4), which speaks of technical knowledge, experience, skill, know-how, or processes, or consist of development and transfer of a technical plan or technical design. The same has to be read along with the MOU which has been entered into on May 15, 1989 and is a part of the notified DTAA. The MOU and the narrow definition given to 'included services' takes the services availed by the appellant herein, out of the 'included services' as per the DTAA. The non-resident Company only assists the Indian Company in making the correct decisions on such aspects as is specifically referred to in the agreement, as and when such advise is required. There is no transfer of technology or know-how, even on managerial, financial, legal or risk management aspects; which would be available for the Indian Company to be applied without the hands-on advise offered by the US Company. The advise offered on such aspects would have to be on a factual basis with respect to the problems arising at various points of time and there cannot be found any transfer of technical or other know-how to the Indian Company. The remuneration received by the US Company for the services offered to the Indian Company being not a technical or consultancy service as defined under the DTAA, would also not be a fee for included services. The remuneration so obtained by the US Company definitely being an income accruing within India would not, hence, be taxable in India under the DTAA. - Consequently no TDS liability u/s 195 AO is directed to consider the claim of expenditure afresh without looking at the application of Section 195(1), which is not applicable. - Decided in favor of assessee.
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