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2012 (7) TMI 220 - AT - Income TaxIndo German DTAA - ISO 9000 certification income - Revenue contended part of the income to be taxable as per Article 12 of DTAA as royalty and "fees for technical services" and other part of income and expenses reimbursed which are linked with FTS, to be taxable, being part of gross receipts - applicability of Section 44D - assessee( German company) having a branch in India, engaged in the business of audit and procedure of norms for ISO 9000 Certification - Held that:- The assessee's case does not in any manner comes within the meaning of 'royalties', as there is no right to use of any other items described therein. Further, services are mostly in the nature of 'audit work' on basis of which certificate is granted. Nowhere from such services, it can be inferred that the assessee has been providing technical, managerial or consultancy services. Technical services require expertise in technology and providing the client such technical expertise which in this case no technology is transferred. Managerial services is used in the context of running and management of the business of the client, which herein this case, there is no management of client's business, but evaluation of standards as per international guidelines. Consultancy is to be understood as advisory services wherein necessary advise and consultation is given to its clients for the purpose of client's business. In an audit work there may be some incidence of advise at the time of evaluation but certainly it cannot be termed as pure consultancy services as in the audit work the auditor has to only evaluate the quality system and environmental system. Thus, the entire nature of services and activities carried out by the assessee comes within the realm of 'professional services' and not within the meaning of 'FTS' as provided in the Article 12(4) and Section 9(1)(vii). Consequently income cannot be determined by applying the provision of Section 44D. It has to be computed in view of the Article 7(1) and resultantly as per Section 28 to 43 of I tax Act - Decided in favor of assessee. Interest u/s 234B - Held that:- When a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the assessee.
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