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2023 (7) TMI 164 - AT - Income TaxAccrual of Income in India - Fee for Technical Services (FTS) - taxability of an amount received from supply of drawings and designs - HELD THAT:- Undisputedly, though, AO has brought to tax the receipts from supply of plant and equipment by treating it as business profit of the assessee connected to the PE, however, learned first appellate authority has reversed the decision of the AO by holding that since the plants and equipments were supplied from outside India and the sale transaction has concluded outside India, the receipts cannot be taxed in India. Admittedly, against the aforesaid decision of the first appellate authority, the Revenue is not in appeal. Thus, when the supply of plant and equipment has been treated as sale transaction completed outside India, hence, not taxable in India, the sale and supply of drawings and designs being inextricably linked to sale and supply of plant and equipment has to be considered cumulatively and as a part of sale and supply of plant and equipment. Once the income from supply of plant and equipment is held to be not taxable in India, since, the sale transaction was completed outside India, the same logic applies even to the amount received from supply of drawings and designs. Thus, we hold that the amount received by the assessee from supply of drawings and designs is not taxable in India as FTS. This ground is allowed. FTS under Article 12 of India Switzerland DTAA - supervisory services relating to erection and commissioning - HELD THAT:- As assessee had entered into a contract for supply of electromagnetic stirrer. As per the scope of the contract, the assessee shall engineer, manufacture and deliver the plant and equipment. The scope of contract also included supervision, erection and commissioning of plant and equipment. As per assessee’s own admission, technical personnel were deputed to supervise the erection and commissioning of the plant and equipment. Thus, it is quite clear, in course of such supervisory activity, the qualified technical personnel deputed by the assessee must have imparted technical services for erection and commissioning of the plant and equipment. Therefore, in our considered opinion, the amount received clearly falls within the definition of FTS, both under the domestic law as well as under the treaty provision. Once the receipts fall within the definition of FTS u/s 12(4) of the DTAA as well as the domestic law, it becomes immaterial whether the assessee has a PE in India or not. Therefore, amount in dispute having qualified as FTS, has rightly been brought to tax at the hands of the assessee. This ground is dismissed.
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