TMI Blog2017 (9) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, the stand of the AO/FAA cannot be endorsed, as the provisions of tax-treaties have to be given preference over the provisions of the Act. The consultancy was rendered outside India and even if same has to be taxed it would be chargeable to tax in that country and not in India. The AO/FAA has failed to prove that services rendered by the assessee to ZMPC were in the nature of Royalty. Nothing has been brought on record to prove that the assessee had made available any technical knowledge, experience, skill to Indian company. We also agree with the argument of the AR that in the case under appeal, consultancy fees were rendered to a person who was nonresident i. e. to ZMPC. As per the provisions of Article 12 of the treaty, FTS arising in India and paid to a tax-resident of the Netherlands can be taxed in India. In the case under appeal the payment was paid to a Chinese company. Considering the above, we are of the opinion that consultancy fees received by the assessee from ZMPC cannot be held to be FTS and that same is not chargeable to tax in India. So, reversing the order of the FAA we decide the effective ground of appeal in favour of the assessee. - ITA No. 3621 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of income from a source in India and was liable to tax in India under the head royalty as per the Double Taxation Avoidance Agreement (DTAA) with Netherlands, that routing the payment through an entity would not transfer the source from India, that there was a diversion of income by overriding title to the assessee, that the income accruing to it in respect of sale of cranes in India by ZMPC was ₹ 1. 67 crores as calculated in order dated 24/07/2008 in the case of GPPL by the AO of that assessee. He further observed that the design for the crane was decided by APMM and ZPMC, that the group companies didn t have any say in change of design of the crane, that all the technical activities were carried out by APMM on behalf of its group companies worldwide, that the payment was actually in the nature of FTS. Referring to Article 12 of the DTAA, he held that he held that income had accrued to the assessee from India and was chargeable to tax as fees for technical services. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA) and made elaborate submissions. It also relied upon certain case laws. After considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. APMM and ZPMC, that there was no privity of contract between the assessee and GPPL(the Indian entity), that the assessee had rendered consultancy services to ZPMC in China in designing basic specification and improvement in crane performance, that it did not relate to transfer of information concerning industrial commercial or scientific experience, that it was not in nature of royalty, that the designing basic specification and improvement in crane performance was only to equipment which was manufactured by ZMPC in China. Alternatively, it was argued that even if it was admitted that there was transfer of information concerning industrial, commercial or scientific experience the said information was transferred to ZPMC and not to an entity in India, that if any tax had to be paid for the said transaction it would have to be paid in China. It was further argued that even if it was presumed that the assessee had indirectly received the consultation fees from GPPL and that such payment was in the nature of FTS the disputed amount could not be subject to tax in India under the treaty. He referred to the provisions of articles 12(1)and 12(2) of the treaty and stated that FTS arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns Aktiengesellschaft, NOCIL, Uhde GMBH(supra), the Tribunal has clearly held that royalty and FTS should be reckoned for taxation only when it is received and not otherwise. In the matter of Seimens Aktiengesellschaft, following question was raised by the Revenue (I. T. Appeal No. 124 of 2010, )before Hon'ble Bombay High Court: i) Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the Royalty and fees for technical services should be taxed on receipt basis without appreciating the fact that the Hon'ble Supreme Court has held in the case of Standard Drum Motors Private Limited V/s. CIT, 201 ITR 391 that the credit entry to the account of the assessee non-resident in the books of the Indian Company amounted to receipt by the non-resident? The Hon ble Court decided the issue, on 22. 10. 2012, as under : 2. As regards first question is concerned, the Income Tax Appellate Tribunal referring to para-1 to 3 under Article IIX-A of the Double Taxation Avoidance Treaty with the Federal Germany Republic as per Notification dated 26th August 1985 held that the assessment of royalty or any fees for technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X
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