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Issues Involved:
1. Whether the payment made to LTC Ltd., UK should be treated as "Fees for Technical Services" taxable in India. 2. Whether the payment should be considered as "Business Profits" not taxable in India due to the absence of a permanent establishment of LTC Ltd. in India. Issue-wise Detailed Analysis: Issue 1: Fees for Technical Services The primary issue in these appeals is whether the payments made by TVS Motor to LTC Ltd., UK, for the assessment years 2001-02 and 2002-03 should be classified as "Fees for Technical Services" under the Double Taxation Avoidance Agreement (DTAA) between India and the UK. The assessee contended that LTC Ltd. did not provide any technical know-how, plan, or design to TVS Motor, and thus the payments should not be treated as fees for technical services. The assessee argued that LTC Ltd. merely conducted tests on motorcycles and provided reports, which is part of LTC's business and does not constitute technical services as defined in the DTAA. The Revenue, however, argued that the payments fell under paragraph 4(c) of Article 13 of the DTAA, which defines fees for technical services as payments for making available technical knowledge, experience, skill, know-how, or processes. The Revenue emphasized that LTC Ltd. provided training and shared technical knowledge with TVS Motor, thus making the payments taxable as fees for technical services. Upon reviewing the Project/Purchase Order TS 0102, the tribunal noted that LTC Ltd. was to provide training for TVS Motor's engineering staff and make the ADAMS model available to TVS Motor. This constituted making available technical knowledge and skills, thereby falling under the definition of fees for technical services in the DTAA. Consequently, the payments of Rs. 6,79,794 and Rs. 23,48,526 made by TVS Motor to LTC Ltd. during the relevant years were upheld as fees for technical services. Issue 2: Business Profits The assessee also argued that the payments should be considered as "Business Profits" under Article 7 of the DTAA, which are taxable only in the UK since LTC Ltd. does not have a permanent establishment in India. The tribunal examined the Project/Purchase Order TS 0105 related to the TVS "Rombo" motorcycle. The objective of this project was merely to provide an independent evaluation of the motorcycle prior to its launch, without making available any technical knowledge, experience, skill, or processes to TVS Motor. Therefore, the tribunal concluded that the payment of Rs. 4,53,675 for this project did not constitute fees for technical services and should be considered as business profits, not taxable in India due to the absence of a permanent establishment. Conclusion: For assessment year 2001-02, the appeal was dismissed, confirming the payment as fees for technical services. For assessment year 2002-03, the appeal was partly allowed, reducing the addition from Rs. 28,02,201 to Rs. 23,48,526, as the payment related to Project TS 0105 was considered business profits, not taxable in India.
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