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Issues:
Whether the assessee was justified in holding that tax should be deducted at source under section 195 for a payment made to a nonresident company for credit rating services. Analysis: The central issue in this appeal was whether the CIT(A) was correct in determining that the assessee had an obligation to deduct tax at source under section 195 for a payment of US $72,000 made to a nonresident company for corporate credit rating services. The authorities had previously held that the payment was taxable in India under the India-Australia DTAA. They rejected the argument that the payment should be considered business profits and therefore not taxable under article 7 of the DTAA. The key question was whether the payment for credit rating services could be classified as a payment for the supply of scientific, technical, industrial, or commercial knowledge or information, which would make it taxable under article 12 of the DTAA. The Tribunal analyzed the nature of credit rating services and concluded that they constitute professional services rather than payments for knowledge or information. They emphasized that credit rating involves specialized skills and expertise, falling under the category of professional services. The Tribunal referred to a previous case to support this interpretation. Since the nonresident company did not have a permanent establishment in India, the payment for credit rating services could not be taxed in India under article 7 of the DTAA. Therefore, the Tribunal held that the assessee was not obligated to deduct tax at source for the payment made to the nonresident company for credit rating services. In light of the above analysis, the Tribunal allowed the appeal and vacated the orders of the lower authorities that held the assessee liable to deduct tax at source for the payment. The decision was based on the finding that the payment for credit rating services did not fall under the category of payments for knowledge or information, but rather constituted professional services. Consequently, since the nonresident company did not have a permanent establishment in India, the payment was not taxable in India, and the assessee was not required to deduct tax at source.
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