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2023 (2) TMI 1107 - AT - Income TaxPermanent Establishment (PE) in India - Article 5 of Indian - Japan Double Taxation Avoidance Agreement (DTAA) - attribution of profit to the PE - assessee is a non-resident corporate entity incorporated in Japan - HELD THAT:- There cannot be any dispute that factually the impugned assessment year stands in identical footing to assessment years 2014-15 and 2015-16. [2022 (3) TMI 660 - ITAT DELHI] - This is further evident from the fact that, both, the AO and learned DRP have acknowledged that the factual position in the present assessment year is identical to the preceding assessment years. Thus, respectfully following the decision of the Coordinate Bench, as discussed above, we hold that the assessee had no PE in India in any form whatsoever. Therefore, the addition made by attributing a part of the income of the assessee to the alleged PE has to be deleted. Accordingly, we do so. Grounds are allowed. Levy of Surcharge and cess - to be computed over the rate of tax as per DTAA or not - HELD THAT:- We accept assessee’s contention that levy of surcharge and cess cannot exceed the tax rate of 10% as per India – Japan DTAA. Article 12 of India – Japan tax treaty provides that the tax to be charged on royalty and FTS shall not exceed 10% of the gross amount of royalty or FTS. Article 2 of the tax treaty defines tax in India as income tax including any surcharge thereon. Therefore, Article 12 read with Article 2 of the tax treaty makes it clear that the rate of tax at 10% would encompass surcharge and education cess as it is also in the nature of surcharge. Therefore, we hold that levy of surcharge and cess over and above the taxable rate of 10% on royalty and FTS is not permissible as per the treaty provisions. Decided in favour of assessee.
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