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2010 (3) TMI 111 - AAR - Income TaxCost contribution agreement – Withholding tax u/s 195 – DTAA with Government of the Swiss Confederation - Whether pursuant to the Cost Contribution Agreement proposed to be entered by the Applicant with ABB Research Limited, Zurich, (“ABB Zurich”), the payments to be made to ABB Zurich, representing the Applicant’s share of the costs incurred towards basic Research and Development (“R&D”) activities, constitutes “income” in the hands of ABB Zurich within the meaning of the term in Section 2(24) of the Income-tax Act, 1961)? Held that - The payments made to ABB Research Ltd., Zurich towards the applicant’s share of the cost incurred in respect of R&D activities are not liable to be taxed under the Income Tax Act, 1961 as business income in the absence of permanent establishment in India, having regard to Art.7 of the Tax Treaty. Nor can it be subjected to tax as royalty or fees for technical services under Article 12 of the Treaty. - The applicant is not under an obligation to withhold the tax under Section 195 of the Act as the ‘income’ is not chargeable to tax.
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