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2023 (3) TMI 353 - AT - Income TaxIncome taxable in India - taxability of testing services as FTS - India-Finland DTAA - HELD THAT:- As decided in own case [2019 (6) TMI 777 - ITAT KOLKATA] 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 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. The assessee argues 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. The 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. In the result, this ground of the assessee is dismissed. Taxability of income earned from sale of designs and drawings - as contended by the assessee that these receipts are not taxable under the provisions of the Act and the India-Finland DTAA - HELD THAT:- As decided in own case [2019 (6) TMI 777 - ITAT KOLKATA] findings of the Hon'ble DRP was that the transactions is in the nature of FTS that (i)the assessee had access to a wide range of technologies for the purpose of setting up/construction of the plants, (ii) it was developed after research and after necessary modification and thereafter (iii) these designs and drawings were sold to Indian customers who used the same for internal business purpose of setting up of their plants. These findings were reversed and the ground of appeal of the assessee was allowed. Computation of tax liability - AO computing the tax liability at the rate of 40% plus surcharge and cess instead of 10% as per the tax rate available under India-Finland DTAA in the tax computation sheet annexed to the final assessment order - HELD THAT:- We hold that surcharge and education cess cannot be levied in respect of tax liability of the assessee computed under DTAA. Accordingly, ground taken in this respect is allowed. Short credit of TDS - HELD THAT:- As we find it proper to remit this matter to the file of the Ld. AO to allow the credit as claimed after due verification of documents relating to TDS claimed by the assessee. Due credit of TDS may be allowed by the Ld. AO based on the verification of documents and records. Accordingly, this ground of appeal is allowed for statistical purposes.
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