TMI Blog2008 (7) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the assessee as a "firm". The AO noted that the suffix "KG" stands for "Kommandit Gesellschaft" in Germany, which was a term used for "limited partnership". On being confronted on this aspect of the matter, the assessee stated that it was a limited partnership firm incorporated under the law of Germany. Till 2003, it was known as Chiron Behring GmbH Co. However, with effect from the year 2003, all limited partnership firms were required to include "KG" in their name as per German law. The assessee was asked to show cause as to why the benefit of the DTAA should not be denied to it as it was not a 'resident' in terms of art. 4 of the DTAA. The assessee stated that it was chargeable to "trade tax" in Germany, which was a tax covered under DTAA vide para 3 of art. 2. The AO observed that "limited partnerships" are not liable to tax in Germany. He further noted in the OECD publication: "The Application of OECD Model Tax Convention to Partnership" published as publication No. 6 under "Issues in International Taxation", the reply was submitted by Germany. which has been reproduced on pp. 2 and 3 of the assessment order. After perusing this reply. the AO observed that the "limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt period, whose translated copy has also been placed in the paper book at page No. 70. He further referred to the copy of certified translation from German Tax Office at p. 16 of the paper book to indicate that the assessee was registered inter alia, for the payment of trade tax. It was, therefore, pleaded that the learned CIT(A) was correct in holding that the assessee was resident of Germany and the lower rate of tax on the royalty and fees for technical services, would apply. 7. We have heard the rival submissions and perused the relevant material on record. From the facts set out above, it is clear that there is no dispute on the liability of the assessee to pay the tax as it had itself offered the amount of income for taxation. Further the quantum of income is also not the subject-matter of dispute. What is agitated before us is the rate at which the tax should be charged on the amount of royalty and fees for technical services earned in India. Whereas the assessee is claiming itself to be the resident of Germany and hence entitled to the benefit under art. 12 of DTAA by which 10 per cent tax on the gross amount of the royalties or the fees for technical services is payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is resident of Germany as the AO has accepted that the assessee is a "limited partnership" under the German law. Accordingly, the first two hurdles are crossed on the acceptance of the assessee as a person, who is resident of Germany. The third stipulation is that it should be liable to pay tax as per German law. It is here that the controversy has arisen inasmuch as the AO has held that the payment of "trade tax" by the assessee does not tantamount to the assessee becoming "liable to tax" in Germany, because such trade tax, in his opinion, is a type of tax on the turnover. Article 2(3)(a) clearly describes the taxes to which DTAA shall apply. The fourth item under this article, as extracted above includes the Gewerbesteuer (i.e., trade tax). Thus, the German tax includes trade tax also to which this treaty applies. The AO came to hold that the trade tax is a type of tax on turnover and hence the assessee is not 'liable to tax' in Germany. There is no reference to any material whatsoever for reaching this conclusion. On the contrary, the learned CIT(A) has relied on translated version of arts. 6 to 11 of German Trade Tax Act at pp. 6 and 7 of the impugned order. Article 6 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dead) Through LRs (2004) f 89 CTR (SC) 193 : (2004) 267 ITR 654 (SC) in which it has been held in the penultimate para that "taxation policy is within the power of the Government and s. 90 of the IT Act enables the Government to formulate its policy through treaties entered into by it and even such treaty treats the fiscal domicile in one State or the other and thus prevails over the other provisions of the IT Act. It would be unnecessary to refer to other terms addressed in the OECD or in any other decision of foreign jurisdiction or in any other agreements". The review petition filed against this judgment also stands dismissed in CIT vs. P.V.A.L. Kulandagan Chettiar (2008) 300 ITR 5 (SC). It, therefore, clearly transpires that when the language of the treaty is unambiguous and does not admit of any doubt whatsoever, there is no need to make a reference to the commentaries and other foreign decisions. Such commentaries deal with the model clauses generally without any reference to the specific provisions of the treaty. The ambit of various articles of treaties with different countries is distinct. When we have a treaty in our hand, the provisions of which leave nothing to doubt, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at 20 per cent as against 10 per cent as provided by art. 12 of DTAA. The assessee being a person to whom the agreement applies, has rightly subjected itself to taxation at the reduced rate of 10 per cent as per DTAA. We, therefore, uphold the impugned order on this score. 15. The last ground taken by the Revenue is against the chargeability of interest under s. 234B. The AO charged interest under this section. The learned CIT(A) held that the assessee could not be subjected to interest as it was not liable to pay advance tax. After considering the rival submissions and perusing the relevant material on record we observe that s. 195 provides that any person responsible for paying to a non-resident, any sum chargeable under the provisions of this Act, shall at the time of credit of such income to the account of the payee or at the time of payment thereof, deduct income-tax thereon at the rates in force. The assessee in the instant case is a non-resident and hence any person responsible for paying to it is under obligation for deducting tax at source. Sec. 208 provides that the advance tax shall be payable during a financial year in every case where the amount of such tax paya ..... X X X X Extracts X X X X X X X X Extracts X X X X
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