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2012 (4) TMI 351 - AAR - Income TaxPayments made for managerial services in terms of paragraph 4 of Article 13 of the DTAC between India and France - Applicant is a 100% subsidiary of a French company – service agreement on an automatic renewal of its terms for one year at a stretch – assessee contested that managerial services were not included in the concept of “included services” under the India–US Convention and the payments could be understood only as the business income of the French company and the payments to it could not be taxed in India in the absence of that company having a permanent establishment in this country – Held that:- managerial services, within the meaning of paragraph 13 of India- France DTAC, are provided by the French Company to the applicant for a consideration equivalent to the cost incurred by the French Company plus 5% thereof as mark up - services rendered on marketing, on strategy and the training provided to optimize sales techniques all would come within the purview of consultancy services – The services are enduring and they help in promoting the business of the applicant, knowledge and know-how are made available to the applicant. Hence the services agreement are held to be consultancy services are made available to the applicant - in terms of paragraph 2 of Article 13, the tax charged is not to exceed 10% of the gross amount of the fees and the deduction under section 195(1) of the I.T. Act has to be on that basis - contention of assessee on existence of a permanent establishment does not arise in view of the finding that the payments are liable to be taxed as fees for technical services - applicant is required to deduct tax at source under section 195(1) of the Income Tax Act - against assessee.
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