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2019 (6) TMI 777 - AT - Income TaxIncome accrued in India - income earned from sale of designs and drawings to Indian customers - addition in nature of royalty under the provisions of the Act as well as under the DTAA - India-Finland DTAA - PE in India - HELD THAT:- Copies of other Agreement for sale of drawings and designs have also been placed on record. A perusal of the same demonstrates that the designs and drawings, in question, are not embedded in the plant and machinery. They are separate items which were sold to the assessee. The fact that these were sold outside India is not disputed. Similar issue was decided in OUTOTEC GMBH AND OUTOTEC INDIA PVT. LTD. VERSUS DEPUTY DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION) -2 (1) , KOLKATA [2015 (6) TMI 609 - ITAT KOLKATA] we hold that the income from sale of designs and drawings cannot be classified, either as royalty or as FTS. The income has to be considered as business income and as the assessee does not have PE in India, it cannot be brought to tax in India. - Decided in favour of assessee. Taxability of income from testing and other services - HELD THAT:- In the case on hand, the income in question becomes taxable as royalty or fees for technical services, is deemed to arise in the contracting state where the payer is a resident of that contracting state, which is in India, in our case. The income, in question, is also taxable in India as the right or property for which the royalty was paid, is used within India and hence, it is deemed to arise in India, i.e. the state in which the right or property is used. Referring to Assessee's argument that the technical services of testing is performed outside the country, i.e. in Finland and hence cannot be taxed in India in view of the exception curved out to Article 12(5) of the India-Finland DTAA exception in question is, when the fees is paid for technical services which are performed within a contracting state, then the income therefrom is deemed to accrue or arise within the state in which the services were performed. In our view, this Clause does not apply as the payment in question was made for the test results which were used within the contracting state, India. It may be true that the process of testing may have been conducted outside India. But the payment in question is not for the process but was for the results of testing which is used in India. The argument of the ld. D/R that these services were availed in India and hence are taxable in India has to be upheld. Hence, we agree with the finding of the Assessing Officer as upheld by the DRP on this issue. Ground of the assessee is dismissed.
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