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2012 (6) TMI 18 - AAR - Income TaxDTAA between India & USA - contract for repair and overhauling services of turbines - whether Fees for Technical Services(FTS) - assessee (USA company) in addition to contract for supply and installation of turbines had entered into yet another contract for repair and overhaul services of the turbines - scope of work included inspection and boroscoping periodically - liability for withholding taxes - Held that:- Portion of the consideration must be assigned to the inspection and the boroscoping activity that takes place in India and part of the amount has to be ascribed to the modifications incorporated by the applicant in respect of which it grants a non-exclusive license to ONGC for its own use directly or through its contractors. Those parts of the receipts attributable to inspection and boroscoping activity carried on at the site in Mumbai though arise in India are not taxable as included services under Article 12 of the DTAC, but if the applicant is found to have a permanent establishment in India, taxable as its business income, but that part of the receipts attributable to the services rendered in modifications and replacement of parts covered by engineering, designs, data and specifications delivered to ONGC in terms of the contract, are taxable as included services in India under Article 12 of the DTAC between India and USA as provided for therein. Therefore, payments are not taxable under the Income-tax Act, but only under the DTAC between India and USA. Also, tax has to be withheld u/s 195 on that part of the apportioned payment.
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