9911796707
TMI Blog2024 (1) TMI 1181X X X X Extracts X X X X X X X X Extracts X X X X ..... resident corporate entity incorporated in Federal Republic of Germany and is a tax resident of Germany, hence, entitled to benefits under India - Germany Double Taxation Avoidance Agreement (DTAA). In the year under consideration, the assessee had earned an amount of Rs. 5,61,65,673/- from engineering services rendered to customers in India. For rendering such services, the assessee has set up a supervisory Permanent Establishment (PE) in India. In the return of income filed for the impugned assessment year, the assessee offered the income earned from engineering services at the hands of the PE and applied tax rate of 40% on net basis with surcharge at 2% and cess at 4%, in terms with domestic law. In addition, the assessee had earned an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bbed with the income chargeable under the domestic law. In this view of the matter, the income of the assessee does not exceed the threshold limit of Rs. 10 lakhs. Secondly, the assessee submitted that in terms with Article 2 read with Article 12(2) of India Germany DTAA, tax includes surcharge and has to be taxed at the rate of 10% on gross basis. Therefore, the assessee cannot be called upon to pay more than 10%, insofar as income from royalty and FTS is concerned. The aforesaid submission of the assessee did not find favour with learned first appellate authority. He observed that total income earned by the assessee during the year was to the tune of Rs. 10,39,03,100/-. Therefore, in terms with section 2(d) of Finance Act, 2019, surcharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be noted that the assessee, being a tax resident of Germany, is entitled to treaty benefits. Article 2 of India - Germany DTAA deals with taxes covered under the treaty. Article 2(3)(b) deals with taxes in India. It says, income tax includes any surcharge thereon and wealth tax. Therefore, as per the definition of income tax under the treaty provisions, it includes surcharge. Undisputedly, the amount of Rs. 4,77,37,428/- is offered as income from royalty and FTS. The Revenue has not disputed the nature and character of the income. Taxability of royalty and FTS has been dealt under Article 12 of India - Germany DTAA. As per Article 12(2) of the treaty, royalty and FTS can be taxed in the source state at a rate not exceeding 10% of the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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