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2020 (2) TMI 1276 - AT - Income TaxReceipt of Fees for Technical Services (FTS) under the provisions of section 9(1)(vii) - Assessee is a foreign company having expertise in the mining activity - HELD THAT:- As in ABB FZ-LLC Vs. Income Tax Officer [2016 (11) TMI 368 - ITAT BANGALORE] held that in the absence of provision of DTAA to tax fee for technical services, the same would be taxed as per article 7 of DTAA as business profits and in the absence of PE in India, the said income is not chargeable to tax in India. The coordinate Bench in the case of M/s ABB FZ-LLC Vs. Income Tax Officer [2016 (11) TMI 368 - ITAT BANGALORE] held that once the income chargeable to tax as per the DTAA are categorized by excluding the Fees for Technical Services then the scope of taxing the said income cannot be expended by importing the said provision from the Income Tax Act. Payment made on account of FTS required to be taxed under Article 7 and in the absence of permanent establishment, the business receipts are not chargeable to tax in India In the instant case, there is no dispute that the payment made was in the nature of FTS and there is no article in DTAA for taxing the FTS separately. Therefore, the payment made to the non resident required to be taxed under article 7 under the head ‘business profits’. There is no PE in India to non resident. The AO has not made out a case of having PE to non resident in India. Therefore, the payment made to non resident are not to be taxed in India as business profits. Though the department has tried to distinguish the case laws, the fact remains that in the case laws referred above, the payment was made in the nature of Fee for Technical Services and the department has also accepted that the payment made to the non resident was in the nature of FTS. We hold that the lower authorities have erred in taxing the FTS separately u/s 9(1)(vii) of the Act. Accordingly orders of the lower authorities are set aside and the appeals of the assessee are allowed.
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