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2023 (6) TMI 173 - AT - Income TaxIncome deemed to accrue or arise in India - amounts received by the assessee from its Indian subsidiary towards IT and SAP charges - Whether can be treated as Fees for Technical Services (FTS) under India – Israel Double Taxation Avoidance Agreement (DTAA) read with India- Portugal DTAA? - assessee is a non-resident corporate entity incorporated in Israel - HELD THAT:- FAA while coming to the conclusion that the services rendered under IT and SAP Services Agreement are ancillary and subsidiary to royalty agreement, has completely misconceived the facts, as, he was under an impression that the Technical Collaboration Agreement existed prior to IT and SAP Service Agreement. Whereas, factually, it is not so. FAA aso fell into such factual error because while invoking Article 12(4)(a) of India – Portugal DTAA, he did not afford any opportunity to the assessee to have his say. As examining the nature of services rendered under the IT and SAP Service Agreement and the Technical Collaboration Agreement, we are convinced that the services rendered under IT and SAP Services Agreement are not ancillary and subsidiary to the services rendered under the Technical Collaboration Agreement. Moreso, when the IT and SAP Services Agreement was in existence much prior to the Technical Collaboration Agreement. The receipts in dispute cannot be treated as FTS under Article 12(4)(a) of India – Portugal DTAA and made taxable at the hands of the assessee in India. Accordingly, the disputed additions in both the assessment years are deleted. Assessee appeal allowed.
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