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2018 (6) TMI 1278 - AT - Income TaxWithholding of tax u/s 195 - section 40(a)(i) disallowance - scope of taxation of fee for technical services - Benefit of Most Favoured Nation (MFN) in the absence of correspondence notification - entitled to claim benefit of India Portugal Double Taxation avoidance agreement restricting the scope of taxation of fee for technical services to be automatically applicable in Indo-Sweden DTAA - whether or not the CIT(A) has rightly held the relevant restricted assessment of fee for technical services in India-Sweden DTAA as stipulated in India Portugal DTAA even in absence of a corresponding notification? - Held that:- A coordinate bench in DCIT vs ITC Ltd [2001 (12) TMI 196 - ITAT CALCUTTA-A] has already held that a protocol to DTAA is indispensable part of the treaty in question with same binding force as the main clauses carry Hon’ble Delhi high court’s recent decision in Steria (India) Ltd vs CIT [2016 (8) TMI 166 - DELHI HIGH COURT rejects Revenue’s similar grievance in terms of India and France DTAA importing relevant corresponding articles of Indo-UK DTAA regarding taxation fee for technical services. The Revenue’s plea therefore that such benefits can be imported from Indo-Portugal DTAA to Indo-Sweden DTAA only after necessary notification u/s 90(1) of the Act is devoid of merit since the protocol itself makes it clear that the said ‘MFN’ clause “shall apply” in India-Sweden DTAA. Issuance of a notification has nowhere been stipulated as a condition precedent therein. Section 90(1) is very clear that only a DTAA would be notified and not the application of such a ‘MFN’ clause. The Revenue’s next argument seeking to place reliance on section 9(1)(vii) Explanation does not carry any substance since the assessee is already covered under the relevant beneficial provisions of a DTAA . The Revenue has therefore failed to prove that assessee’s recipient was assessable to tax in India qua the impugned payments under Chapter-XVII of the Act. Hon’ble apex court’s landmark decision in GE India Technology Centre Pvt. Ltd. Vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] settles the law that liability to deduct TDS applies only in case the payment in question is assessable to tax in overseas recipient’s hands in India under the provision of the Act. CIT(A) has rightly deleted the impugned disallowance u/s 40(a)(i) of the Act. - decided in favour of assessee
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