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Issues:
Deduction of tax at source under section 195 of the IT Act. Analysis: 1. The Department appealed against the CIT(A)'s order regarding the deduction of tax at source by an Indian company in a payment to a US company. 2. The appeal proceedings involved submissions from both parties, consideration of written synopsis and replies, and examination of the agreements between the companies. 3. The agreements included a know-how license agreement and a supply contract, detailing the technical assistance and services provided by the US company to the Indian company. 4. The AO initially determined a 30% tax deduction rate based on the presence of a permanent establishment of the US company in India, which was contested by the assessee. 5. The CIT(A) ruled in favor of the assessee, stating that the US company did not have a permanent establishment in India, thereby reducing the tax deduction rate to 10%. 6. The Department argued that separate provisions of the Double Tax Avoidance Agreement (DTAA) applied, justifying the 30% tax deduction rate. 7. The Tribunal analyzed relevant articles of the DTAA, concluding that the US company's services did not establish a permanent establishment in India, supporting the CIT(A)'s decision. 8. It was further determined that the tax rate could not be levied at 30% as it would require allowance of business expenses, and the payment was for included services falling under a different article. 9. The Tribunal upheld the CIT(A)'s decision, dismissing the Department's appeal based on the interpretation of the DTAA provisions and the absence of a permanent establishment. This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's decision based on the interpretation of relevant legal provisions and agreements between the parties.
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