TMI Blog2014 (1) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... ' and is hence not chargeable to tax because of the absence of any PE in India - the amount of Rs. 79.99 lakh falls under Article 7 and not under Article 12 or Article 22 of the DTAA. If a particular item of income is taxable under the Income-tax Act, 1961, then it shall cease to be taxable in India, if the DTAA provides exemption in respect of such income - The core of the matter is that the DTAA overrides the regular provisions of the Act, insofar as it is more beneficial to the assessee - India has entered into a DTAA with Thailand and the nature of receipt is covered under Article 7 but in the present circumstances it is not chargeable to tax in India, patently the consideration of the provisions of the Act is ruled out - the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to Rs. 79,99,272 in the instant year for such services rendered by the assessee to its Indian counterpart were claimed as having been performed outside India and since these were rendered in the ordinary course of business, the same qualified to be a 'business receipt'. In the absence of the assessee having any Permanent Establishment (PE) in India, it was argued that no incidence of tax arose in India on this account. In the draft order u/s 143(3) read with section 144C(1), the Assessing Officer did not dispute about the nature of receipts and the assessee having no PE in India. However, he treated this amount as 'Fees for technical services' and hence chargeable to tax under Article 12 of the DTAA. The Dispute Resolution Panel (DRP), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount of royalties is taxable not only in Thailand but also in India. Other paras of this Article deal with the meaning of the term 'Royalties' and the rate at which such income is to be taxed. Obviously, there is no reference to the "Fees for technical services" in Article 12 of the DTAA. Thus it is evident that the fee for technical services does not fall within the purview of Article 12. 5. As the business of the assessee is admittedly of rendering such services and the present receipt arises on account of providing such services to the Indian branch, the income would initially fall under Article 7, being the 'Business profits'. Para 1 of Article 7 of the DTAA makes it clear that : "The income or profits of an enterprise of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are perusal of Article 22 makes it abundantly clear that it deals with residual items of income which are not covered in any of the earlier Articles of the Treaty. To put it differently, if an income is covered under one of the Articles then application of Article 22 is ousted on such income. 7. Presently we are dealing with a situation in which the assessee earned income by rendering the services which are in the course of its business. Ordinarily, such income would remain under Article 7, unless specifically dealt by other Articles. The case of the AO is that Article 12 is applicable. We have noticed that such Article deals only with 'Royalties' and not 'Fees for included services'. Obviously, the application of Article 12 is ruled out. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to an agreement with the Government of any country outside India or specified territory outside India, inter alia, for granting of relief in respect of income on which tax is payable both in India and the other country. Sub-section (2) of section 90 provides that where the Central Government has entered into an agreement with the Government of any country outside India or a specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. In other words, if a particular item of income is tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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