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TMI Blog2014 (1) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... services rendered as 'Royalties' under Article 12 of the Double Taxation Avoidance Agreement between India and Thailand (hereinafter called 'the DTAA') as against the assessee's claim of 'Business profits'. Briefly stated the facts of the case are that the assessee is a foreign company incorporated in and resident of Thailand. The assessee is part of McKinsey group of entities, the primary business of which is to render strategic consultancy services to their clients, which, inter alia, include the analysis of performance, developments, strengths and weaknesses of their clients, improving their profitability and productivity and similar other parameters. In order to analyze these parameters, the entities in various countries make use of ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee received Rs. 79.99 lakh from its group entity in India. It is further not disputed that the assessee has no PE in India. It is clearly borne out from the facts recorded in the assessment order that the assessee is in the business of rendering strategic consultancy services to their clients. Under such circumstances, the question arises as to whether the said receipt of Rs. 79.99 lakh is covered under Article 22 of the DTAA as held by the DRP or under Article 12 of the DTAA as held by the Assessing Officer in the final order or under Article 7 as claimed by the assessee. 4. Para 1 of Article 12 of the DTAA provides that : 'Royalties arising in a Contracting State and paid to a resident of the other Contacting State may be taxed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of para 7 of Article 7 is that if there is a 'Business income' which is of the nature as covered under separate Articles such as 'Shipping and air transport' under Article 8 or 'Royalties' under Article 12, then such income would move out of Article 7 and be considered only under the specific Articles. The position which conversely follows is that if there is an income from the carrying on of the business by the assessee, which does not fall into any of the specific Articles, then it would remain included under Article 7. 6. Article 22, which has been taken note of by the DRP, provides that : "Items of income of a resident of a Contracting State, wherever arising, not expressly dealt with in the foregoing Articles may be taxed in that Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness in India through a Permanent Establishment (PE) situated in India. As it is not the case of the A.O. that the assessee has a PE in India, the amount of income would fall under Article 7 but cease to be taxable in India because of the absence of the PE. 9. Whichever way we may view the income, the opinion of the authorities below of including it under Article 12 or under Article 22 is not sustainable. The amount falls under Article 7 as 'Business profits' and is hence not chargeable to tax because of the absence of any PE in India. We, therefore, hold that the amount of Rs. 79.99 lakh falls under Article 7 and not under Article 12 or Article 22 of the DTAA. 10. Section 90 deals with the consequences of Agreement with foreign countries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia has entered into a DTAA with Thailand and the nature of receipt is covered under Article 7 but in the present circumstances it is not chargeable to tax in India, patently the consideration of the provisions of the Act is ruled out. We, therefore, overturn the impugned order on this issue and hold that the amount in question is not includible in the total income of the assessee. 11. Last ground about the charging of interest u/s 234B of the Act has now become consequential in view of our decision on the main ground. Resultantly, this ground is allowed. Even otherwise, the issue of charging of interest u/s 234B, is no more res integra in view of the judgment of the Hon'ble jurisdictional High Court in the case of DIT (International Taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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