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2016 (9) TMI 503 - ITAT AHMEDABADNature of services rendered - whether were professional services in nature - what constitutes ‘independent personal services’ for the purpose of article 15 of Indo-US tax treaty and whether the services rendered by the assessee can fall in this category of services? - Held that:- Software development service rendered by an individual, which essentially requires predominantly intellectual skill, dependent on individual characteristics of the person pursuing software development, and based on specialized and advanced education and expertise, is also a professional service. As regards the objection of the Assessing Officer that software development is not specifically covered by article 15(2), as evident from the opening words of this provision to the effect “the term ‘professional services' includes (emphasis, by underlining, supplied by us)”, the specific professions set out therein are only illustrative and not exhaustive. The emphasis is essentially on the nature of services, but then, as we have noted above, that test is satisfied on the facts of this case. While dealing with the scope of services which are covered by article 15, it is important to bear in mind the fact that there could indeed be overlapping effect of the scope of services covered by the other articles but as long as the services are rendered by an individual or group of individuals, generally rendition of such services is covered by article 15. The exclusion clause set out in article 12(5)(e) typically exemplifies this approach. The applicability of article 15, therefore, is also substantially influenced by the status of the recipient- i.e. whether he is an individual or whether he is a corporate entity. In the light of all these discussions, in our considered view, the services rendered by the assessee are in the nature of professional services but then since the conditions set out in article 15(1) are admittedly not satisfied on the facts of this case, the taxability under article 15 does not arise. As a corollary to our finding that the services in question are in the nature of professional services, and by the virtue of exclusion clause in article 12(5)(e), which provides that the income from professional services rendered by an individual or group of individuals (other than a company) cannot be subjected to tax under article 15, the consideration for these services cannot be taxed under article 12(4) either. Revenue’s case for taxability under article 12(4) is thus clearly unsustainable in law and on the facts of this case. Learned CIT(A) was thus quite correct in this conclusions. We uphold his conclusions and decline to interfere in the matter.
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