TMI Blog2010 (7) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... n Government of Austria and India dated. 4.The Commissioner failed to note that the notification No. 682( e ) dated 20,09,2001 251 ITR (ST) 97 under which tax is to be levied for services rendered from Austria comes to effect from 14,2002. Also this notification is dated 20-9-2001 and, accordingly, article 28 of the convention will come into force from 1-4-2002 only. 5.The ld. Commissioner failed to observe that the amended treaty between Government of India and Austria will come into effect from 1-4-2002 onwards and any technical fee accrued prior to 1-4-2002 will be governed by the old treaty and as per the old treaty the fees for technical services rendered from Austria is not liable to tax in India." For these and other grounds that may fee agitated at the time of hearing or earlier it is prayed that the Hon ble Tribunal may be pleased to allow the appeal and render justice. 2. It was submitted by the ld. AR that the assesses is engaged in the business of executing turnkey project of water/waste wafer treatment and sewerage treatment plants. For the year under consideration, the assesses filed its return of income on 31-10-2002 declaring, nil taxable income. The ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old treaty between India and Austria, article 7 provided for the taxation of the fee for technical services. It was the submission that as per the article 7 the fee for technical services paid by the Indian company to the Austrian company was not liable to tax in India. Consequently, no TDS was liable to be made. It was the submission that in view of the fact that no income of the Austrian company was liable to be taxed in India in view of the applicability of the DTAA between India and Austria as was applicable for 2002-03, the provision of section 40( a )( i ) of the Act could not be invoked to make the disallowance. The ld. AR drew our attention to the copy of the agreement entered into by the assessee with M/s. VA Tech Wahag Ltd., Austria, wherein it has been specifically provided that the Austrian company would provide the assessee technical support from their premises in Austria. He further drew our attention to clauses 1 to 5 of the said agreement, which is as follows : 1.The services provided to WABIND by WABAG VIENNA shall be from WABAG VIENNA s registered office at Siemensstrasse 89, A-1210. Vienna in connection with the Project, WABAG VIENNA shall obtain all relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid decision wherein it was clearly stated that the new DTAA was being considered in respect of the decision relied upon by the ld. CIT(A) in the case of IMT (Labs) (India) (P.) Ltd., In re [2006] 287 ITR 450 (AAR - New Delhi), it was the submission that the said decision was in respect of the DTAA entered into between India and USA, wherein the words were totally different. It was the further submission that both the decisions relied upon by the ld. CIT(A) was completely distinguishable from the facts of the assessees case. He further placed reliance of the Co-ordinate Bench of this Tribunal in the case of TVS Suzuki Ltd. v. ITO [2000] 73 ITD 91, which had considered the issue of the fee for technical services paid to a resident in Austria and which was also in relation to the old DTAA between India and Austria, which was applicable till the assessment year 2002-03. In the said decision, the Coordinated Bench of this Tribunal has held as follows : "Let us also consider the decision of the Patna Bench of this Tribunal by Dy. CIT v. Tata Yodogawa Ltd. [1999] 68 ITD 47 (Pat.). The facts of this case are that the assessee entered into technical collaboration agreement duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable in India. It was thus the submission that the orders of the ld. CIT(A) and the Assessing Officer are liable to be reversed and the disallowance made and confirmed is liable to be deleted. 3. In reply, the ld. DR submitted that the applicability of section 195(2) was mandatory and if the assessee did not want to deduct TDS on the payments to the non-resident, it was incumbent upon the assessee to make an application under section 195(2) of the Act. It was fairly agreed by the ld. DR, on a specific query by the Bench that the old treaty between India and Austria which was entered into in 1965 would be applicable for the relevant assessment year. It was the further submission that as per the provisions of section 40( a )( i ), the expenditure claimed was liable to be disallowed. It was the further submission that the decision of the Special Bench of this Tribunal in the case of ITO, International Taxation v. Prasad Production Ltd. [2010] 125 ITD 263 was not applicable in so far as it had not considered the decision of the Hon ble Karnataka High Court in the case of CIT (International Taxation) v. Samsung Electronics Co. Ltd. [2010] 320 ITR 209 1 (Kar.). It was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to be deducted. Here, what is important is the sum chargeable under the provisions of the Act. It is undisputed that the provisions of sections 90 and 91 would override the other provisions of the Act. Thus, when the transaction is covered under the provisions of the DTAA, it is to be first shown that the DTAA does not apply or that the particular income is taxable in India under the provisions of Act if the provisions of section 195 are to be invoked. The article 7 of the DTAA entered into between India and Austria relevant to the assessment year 2002-03 clearly held that the income of the Austrian enterprise is not taxable in India in view of the fact that no notice of the activities were performed by Austrian enterprise in India. In the circumstances as it is found that the income of the Austrian enterprise is not taxable in India on account of article 7 of the DTAA entered into between India and Austria relevant to the assessment year 2002-03, therefore can be no sum chargeable under the provisions of the Income-tax Act, 1961, which has been paid by the assessee to the foreign company on account of the fee for the technical services. In the circumstances, the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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